nnesota Commerce Commissioner Mike Rothman announced today that his department has reached a settlement agreement with a major life insurance company that owed money to Minnesotans for unpaid insurance policies, annuity contracts and retained asset accounts.
The settlement with the American International Group (AIG) represents the latest of 13 agreements that the Commerce Department has secured with life insurance companies over their failure to pay beneficiaries when policyholders died.
To date, these life insurance settlements have resulted in total payments of more than $226 million in overdue benefits.
"We are making sure Minnesota consumers get the unpaid life insurance benefits owed to them," said Rothman, whose agency regulates insurance companies doing business in Minnesota. "When people buy life insurance to help their loved ones, they trust that the insurer will pay the promised benefits. That simply was not happening in thousands of cases. With these settlements, life insurance companies must make good on unpaid benefits from the past and provide timely payments to beneficiaries from now on."
The latest settlement applies to the following AIG affiliates: American General Life Insurance Company, the Variable Annuity Life Insurance Company and the United States Life Insurance Company in the City of New York.
In addition to AIG, settlements have been reached with Allianz, AXA Equitable, John Hancock, Jackson National, Lincoln, MetLife, Minnesota Life, New York Life, Prudential, Riversource, Transamerica and Voya (ING). The Commerce Department also continues to investigate claims and payment practices at several other life insurance companies.
As a result of the agreements and ongoing investigations, at least $226 million in claims owed on Minnesota policies have been paid either directly to beneficiaries or, when they could not be located, to unclaimed property programs in Minnesota and other states, which hold the funds in trust until claimed by the rightful owners or their heirs.
The 13 insurance companies have also made a total of nearly $17.7 million in settlement payments to the State of Minnesota, including $2.4 million from AIG.
The settlements are the result of sweeping "market conduct" examinations by the Commerce Department to identify unpaid life insurance policies and annuities owed to Minnesotans.
These examinations determined that the insurance companies had inadequate information and procedures for identifying policyholders and beneficiaries who may be owed benefit payments. This included failure to regularly match their policy records against the Death Master File, a database of deaths compiled by the Social Security Administration.
As a result of these deficiencies, the insurance companies in many instances failed to pay benefits to beneficiaries after policyholders had died.
Under the terms of the settlements, the insurance companies now must take additional steps to maintain accurate information, use the Death Master File and make timely payments to beneficiaries.
"I encourage Minnesotans to make sure their life insurance companies have up-to-date contact information for themselves as well as their beneficiaries," said Rothman. "Many people are never told they are named as beneficiaries in life insurance policies, so they often have no idea an insurance payment is owed to them."