Barclay Damon
Barclay Damon

Legal Alert

New York Statute Imposes Obligations On Life Insurers To Find Deceased Policyholders

Insurance Law 3213-A, effective June 15, 2013, requires life insurance companies to collect data on their insured and annuity owners and compare it regularly to the Social Security Administration’s Master Death file – or another comparable public record (referred to as a “death index”) to determine if an insured or account owner has died. In the event of a match, the insurer must confirm the death and, if confirmed, locate and notify beneficiaries of their rights under the life insurance policy or annuity contract. This new section is similar to Insurance Regulation 200, which the Superintendent promulgated as an emergency measure in November 2012, but has some significant differences.

Section 3213-A will require insurers to request sufficient information about the owner, insured, and beneficiaries of each life insurance policy “to ensure that all benefits or other monies are distributed to the appropriate persons upon the death of the insured or an account holder.” At a minimum, this information must include the name, address, date of birth, social security number and phone number of such persons. This information must be requested prior to delivery of a life insurance policy, or the establishment of an account, and any time there is a change in the owner, insured, or beneficiary of a life policy or annuity. (When a policy or annuity is provided to an individual through that person’s employment, the insurer may wait to obtain the beneficiary’s information until it has received data about the insured from the insured’s employer.)

At least quarterly, or semiannually, as the Superintendent determines, insurers must cross-check the names, dates of birth, and social security numbers of their insureds and account holders against those categories of data in a death index. If the insurer finds a match, it must, within 90 days, take reasonable efforts to confirm the death and, if confirmed, attempt to locate and notify the beneficiaries of their rights under the policy. If the insurer cannot locate the beneficiaries within 90 days, it must continue to search for beneficiaries until it locates them or the benefits escheat to the State under Abandoned Property Law § 700, et. seq. If the insurer locates the beneficiary, it must provide the beneficiary with the necessary information to make a claim under the terms of the policy or account.

Additionally, when an insurer is notified of the death of an insured, or a match of its insurer data with a death index data, it must search all of its policies and/or annuities to determine if it has issued any other life policies or annuities to the deceased insured. It must also notify its U.S. affiliates and any entities with which it contracts that maintain similar data regarding life insurance policies or annuities, of the match or death, and any such affiliates must then conduct searches of their own life policies and/or annuities to determine if the decedent was insured under or owned any of their annuities. Finally, insurers must “implement reasonable procedures to account for common variations in data” that might prevent a match with the data of a death index, when a match should occur.

The new section will not apply to group life insurance policies, if the insurer does not presently maintain sufficient information to conduct the cross-reference searches. However, because all insurers are required to begin collecting data to facilitate the cross-checks, this exemption will eventually be inapplicable to all insurers. Section 3213-A also makes its mandates inapplicable to policies or certificates issued under an employee benefit, government or church plan subject to, or defined under, ERISA. Finally, they will not apply to lapsed or terminated policies under which no benefits are payable, provided the insurer has cross-checked the relevant data against a death index since June 15, 2013 or “more than 18 months prior to the most recent search conducted by the insurer.”

In order to assist consumers with determining whether they are a beneficiary under a life insurance policy or annuity, the statute directs the Superintendent of Insurance to develop and implement a Lost Policy Finder, which is to be available online and by a toll-free telephone service, among other possible means. When the Superintendent receives a request for information through the Lost Policy Finder service, the Superintendent shall notify those insurers deemed appropriate and request that those insurers search their databases to determine if the decedent was insured under one of their policies or owned one of their annuities. The insurers who are asked for such information must provide their responses to the Superintendent within 30 days of their receipt of the Superintendent’s request.

This amendment addresses the Department’s concerns that a significant amount of life insurance policy benefits went unclaimed each year because the insured’s death remained unreported and the policies ultimately lapsed for nonpayment. It also ensures that unclaimed life insurance benefits will be paid to the State more quickly under N.Y. Abandoned Property Law.

The Superintendent of Insurance is preparing regulations to reconcile differences between Section 3213-A and Insurance Regulation 200. In the meantime, life insurers should consider modifications to their systems and processes to comply with these provisions.

If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact Anthony J. Piazza, Chair of the firm’s Insurance Coverage & Regulation Practice Area, at (585) 295-4420 or apiazza@hblaw.com.