Insurance companies have paid out more than $52 million in delayed death benefits, in response to an investigation of their practices by New York's Department of Financial Services.
Ben Lawsky, Superintendent of DFS, said insurers routinely purchase death records from the federal government in order to know when to stop paying retirement checks such as guaranteed-income annuities contracts. But they ignore the same death notices when it comes to paying out life insurance policies that have no beneficiaries listed.
"These are companies that were using this database to save themselves money by stopping annuity payments but they weren't using it to identify when they should have paid the benefits," Lawsky said.
About 8,000 thousand cases have been processed, but almost one million files remain to be reviewed.
Dozens of insurers are now cooperating with the probe, and making payments when eligible claimants can be found.
The oldest active claim goes back to 1970, and the largest claim paid so far is for $673,485.
Of the $52.6 million paid out so far, $16.9 million has been received by residents of New York State. DFS is requiring insurers to pay interest on the policies. Lawsky anticipates "hundreds and hundreds of millions" will eventually be paid out.
"These are tough economic times and if there are people who have not received this money over a course of years, potentially substantial funds could flow to them. We're busy making sure that happens," Lawsky said.
The Insurance Institute of America, an industry group, has published guidelines for life insurance policyholders to make sure their beneficiaries receive all funds to which they are entitled.