Insurer American International Group Inc. has agreed to an $11 million settlement with a group of states over its claims settlement practices for life insurance policies on Monday.
AIG is the latest insurer to settle state probes relating to the handling of unclaimed property and the use of the Social Security Administration’s Death Master File (SSDMF) to identify death claims that have not been submitted to the company in the normal course of business. MetLife and Prudential have already reached settlements.
State regulators have alleged that insurers used the list of recently deceased people to stop making annuity payments to dead customers, but, at the same time, did not use the list to check whether any life insurance policy holders had passed away.
AIG had previously disclosed that its life insurance companies had received regulatory inquiries, including a multi-state unclaimed property audit and related market conduct examination.
AIG will pay an $11 million regulatory assessment to the various state insurance departments to defray costs of the examination and monitoring. In addition to reserving for the regulatory assessment, AIG will increase its estimated reserves for policy holder benefit reserve death claims relating to these audits by $55 million in the third quarter for interest and expected acceleration of benefit payments under the settlement, including early payment of policy proceeds under certain older industrial life policies.
The company says it is now taking enhanced measures to, among other things, routinely match policyholder records with the SSDMF to determine if its insureds, annuitants, or retained account holders have died and locate beneficiaries when a claim is payable.
In 2011, prior to receiving any regulatory inquiries, AIG says it began a diligent review of its policyholder records, including matching records against the SSDMF to identify polices where the insured may be deceased but no claim had been submitted to the company. To date, as a result of this effort, AIG has paid more than $100 million to more than 22,000 beneficiaries.
The states listed on the agreement include: Florida, North Dakota, Pennsylvania, California, Illinois, New Hampshire and Texas.