ALTON – Illinois Treasurer Michael Frerichs on Thursday called on Gov. Bruce Rauner to sign into law legislation that requires insurers to use the federal Death Master File to determine if a policy holder has died and the death benefits have not been paid.
The legislation, House Bill 4633 (Unclaimed Life Insurance Benefits Act) passed in the Illinois House and Senate last month. Frerichs said it is needed because not all life insurance companies pay death benefits when they know or should have known the policy holder has passed away.
“It’s a disappointing fact, but some life insurance companies admit that they avoid paying death benefits to increase their profit margins,” Frerichs said. “Gov. Rauner has an opportunity to sign into law a measure to ensure Illinois residents are not victimized by certain life insurance companies.”
Rep. Robert Martwick, D-Norridge, and Sen. William Haine, D- Alton, are the chief sponsors of HB 4633.
Opponents include the Kemper Corp. Three life insurance companies under Kemper’s umbrella have sued Frerichs. The lawsuit is a result of Frerichs’ request to have an auditor determine if the companies are holding life insurance policies that could have been paid but have become unclaimed property under Illinois law. Kemper seeks to block the audit, saying “life insurers such as (Kemper) have no affirmative obligation to take any steps to determine that an insured has died and/or that benefits are payable…” and that they “do not want to… adopt a practice where (Kemper has) an affirmative obligation to identify deceased insureds and escheat policy proceeds five years after the date of a death reported on DMF.” (Kemper Complaint pp 9, 20)
The AARP, Veterans of Foreign Wars, and the Union Labor Life Insurance Company supported the proposal so the final wishes of the deceased could be fulfilled.
The Death Master File, or DMF, is used by the Social Security Administration and other government agencies to fight waste, fraud and abuse. More than 20 life insurance companies representing more than 70 percent of the national market routinely check their policies against the DMF. Since 2011, Illinois has used audits to identify more than $550 million in life insurance proceeds that should have been paid to beneficiaries in Illinois.
In Illinois, the state treasurer is tasked with safeguarding property, such as life insurance benefits, forgotten bank accounts and unused rebate cards. Illinois holds approximately $2 billion in unclaimed property. Individuals can search a database for their name or the name of their business or non-profit at www.illinoistreasurer.gov. Scroll down for the I-Cash button. Frerichs’ office never charges anyone to search the database or return unclaimed property.
HB 4633 requires insurers to periodically match their policies, annuity, contracts, and retained asset accounts against the DMF. If an insurer runs the DMF more frequently to stop annuity payments, it must do the same for death benefits. If a match is found and the beneficiaries do no file a claim within 120 days, the insurer must make a good-faith effort to locate the beneficiaries.
If the insurer locates the beneficiaries, they must provide them with the proper forms to claim the proceeds. If the insurer does not locate the beneficiaries and on one claims the proceeds from the insurer with the statutory five year period, the money must be turned over to the state so the treasurer can continue attempting to locate the beneficiaries.
— From the Illinois Business Journal