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U.S. insurance regulators are homing in on how life insurers make decisions about how to pay benefits under life insurance policies. Practices that some companies have used for decades are being called into question by regulators in 35 states, many of which have coordinated their efforts over the past several years.

 

The issue is whether many of the largest life insurers are failing to confirm policyholders deaths, aren't paying the beneficiaries in a reasonable timely fashion and aren't turning unclaimed funds over as required by States' unclaimed property laws. Some companies, notably MetLife and John Hancock , are accused to have known about several policyholder deaths but continued to draw-down premium costs from their account until the cash reserves were absconded.

State regulators said that given the number of ongoing investigations in almost three dozen states that focus on industrywide practices, more regulatory actions are likely to follow.

Two states, California and Florida, have slapped major life insurers with subpoenas, ordering companies to appear with regulators and explain their abhorrent payment practices. Florida issued subpoenas to Nationwide Life Insurance Co., requiring company representatives to attend a hearing on May 19. MetLife was hit with subpoenas from the California State Controller's Office and Florida's Office of Insurance Regulation. Tom Leonardi , Connecticut's commissioner, announced that his state will be investigating the death benefits as well.

California stated last week it was one of several states to reach a settlement agreement with John Hancock Life Insurance Co. that mandated the company to make concessions. Terms of the settlement include; John Hancock agreed to restore the full value of more than 6,400 impacted accounts dating back to 1992 and to help reunite more than $20 million of death benefits and matured annuities with their owners or the owners' heirs.

California has audited 21 insurance companies over the past three years. Florida has six active investigations under way.

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