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State says life insurance benefits went unpaid on 30,000 policies; Cites firms' failure to check death lists

A state probe into how well insurance companies tracked life insurance policyholders and paid claims after they died has turned up more than 30,000 policies and $262.2 million in benefits that went unpaid because insurers didn't check to see if their customers had died.

Under an order and heavy pressure from state regulators, life insurers operating in New York State began cross-checking standard federal death data and lists against 89.58 million insurance records, to see if money is owed and to whom.

As a result, insurers have now made 32,715 payments to consumers nationwide, including 7,525 New Yorkers who recovered $95.9 million in life insurance payouts, the state said. Insurers are still investigating more than 445,000 potential matches for additional unpaid claims.

"This investigation makes it perfectly clear that something must be done to make sure families across New York receive the life insurance benefits that they are due," Gov. Andrew M. Cuomo said.

Among the larger payouts:

*A Northport beneficiary on an individual life insurance policy received $344,757. The insured client died in 2007.

*A Rockville Centre beneficiary of two individual annuities for a customer who died in 2006 received $217,031.

*A Queens beneficiary of an individual life insurance policy, whose holder died in 1998, received $138,051.

*A Brooklyn beneficiary of an annuity holder who died in 2005 received $107,399.

The investigation by the state Department of Financial Services found that many insurers regularly received a list of recent deaths from the Social Security Administration -- known as the "Death Master File" -- but were not using it, and were not required to use it, to see if a policyholder had died.

As a result, unless a family member knew there was a policy and remembered to file a claim to it, the policy went unpaid, and the insurers kept the life insurance benefits that were owed to beneficiaries.

Meanwhile, those same insurers often used that same list to check if any of their annuity customers, who were getting regular checks, had died. If so, the insurance company stopped the annuity payments.

"There is simply no reason why insurance companies shouldn't be scrubbing their policy lists with the death index database on a frequent basis," said Superintendent of Financial Services Benjamin M. Lawsky. "Running these computer matches isn't much of a burden and the benefits to consumers are significant."

Following the probe, state regulators ordered insurers to use the master file to look at policies for which no claims have been made and to find beneficiaries who are eligible but have not filed claims. The state will follow up with a regulation requiring such action be standard in the future.

The state has launched a free online service to help find lost or misplaced life insurance policies and annuities: