Changes are likely in store for the state’s life insurance industry. Lawmakers are on the verge of approving a measure requiring companies look harder for beneficiaries.
When a family member passes away life insurance policies can help cover things like the funeral and outstanding debts—really anything. But what if the surviving family members don’t know about the policy? Well when that happens the money stays with the insurance company earning interest. Rep. Bill Hager (R-Delray Beach) wants to see insurers getting more proactive about policies. He says just look at annuities.
“As to annuities, these life insurers have routinely searched the social security death database,” he says, “and when they got a hit—a hit meaning one of their annuitants has died—they’ve ceased payments immediately.”
But when it comes to life insurance policies it’s just the opposite. Rather than checking that database to find out when they need to pay beneficiaries, some companies are maintaining a studied ignorance.
“To summarize,” Hager says, “and what this bill addresses, is the following inappropriate behavior by some insurers, and that is, when it is in the insurers vested economic interest to search the database—that is with annuities—they have done so, and when it has not been in their vested economic interest to search the database, they have not searched the database.”
Under Hager’s proposal insurance companies would be required to check their rolls against the Social Security Death Index annually.
Paul Sanford from the Florida Insurance Council opposes the measure. He says the idea of checking the database going forward is fine, but he takes issue with the retroactive provisions in Hager’s bill.
“Only two states have any retroactive application in the new unclaimed property laws,” Sanford says. “New York has an 18 month look back period; Nevada has a two year period. Our bill—this bill—goes back to 1992 which is about 25 years. We think that’s too much.”
Hager has teamed up with Florida’s insurance commissioner Kevin McCarty and CFO Jeff Atwater to craft the bill. Thursday Atwater was on hand to lobby for the measure before a House panel—and he says there’s a lot of money out there.
“Our current run rate estimates there is probably another $700 million to $1 billion of unpaid benefits to go,” Atwater says.
And he put a face to the problem. Atwater’s office helped connect Jackie Bigoney with an insurance policy she didn’t know about.
“We didn’t get a lot a money,” she explains, “we got about a couple thousand dollars. But when you have medical expenses for your mother, and household expenses and our family can’t afford to help support that and when that money came in it was a miracle.”
Despite opposition from some, it’s almost certain the measure will wind up on the governor’s desk. Opposition in the insurance industry is tied to specific provisions rather than the underlying policy, and many companies have voluntarily agreed to institute procedures in line with the bill—to the tune of half a billion dollars.
“Someone may conclude that $500 million of returned life insurance benefits to the people that paid the premium their beneficiary is small money—it’s not small money,” Atwater says. “One hundred and fifty-one thousand of your constituents but for us doing what we did in reaching settlement agreements would still be in the dark would still not know that their loved one made sacrifices for their benefit to go to college keep a house and keep a small business open.”
So far, the bill has gotten exactly zero no votes. It has already passed the Senate, and Thursday’s vote was its final stop before the House floor.