TAG | Office of Insurance Regulation
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In an April 26th, 2011, article from InvestmentNews.com, Darla Mercado writes that attorneys have set their sights on life insurers as state regulators investigate the carriers for their failure to pay out death benefits or submit the money to the state in a timely fashion, allegedly while still collecting fees in some cases, and leading the way is California’s controller and insurance regulator, which announced jointly a subpoena and investigative hearing of MetLife Inc.’s practices on paying death benefits.
Ms. Mercado goes on to say that the preliminary findings from a three-year audit by the state revealed that for 20 years, the carrier failed to pay benefits to named beneficiaries or the state after learning that a customer had died. MetLife’s hearing has been set for May 23. That same audit, which covered 21 life insurers, led to a settlement between John Hancock Financial Services Inc. and California on Friday. That day, Florida’s Office of Insurance Regulation announced a May 19 hearing on the same topic. That office also had subpoenaed MetLife and Nationwide Life Insurance Co., asking that the companies bring representatives to discuss the carriers’ practices.
The regulatory activity has garnered the attention of plaintiff’s attorneys, who are watching the drama unfold and expect some litigation fallout as a result. According to the InvestmentNews.com article, the key legal question is what exactly were the insurer’s responsibilities in performing the due diligence to find the beneficiaries. Carriers use the Social Security Administration’s death master list database for reference.
The beneficiaries of these policies are supposed to submit a claim for the death benefits, but if a carrier doesn’t hear from a beneficiary and has information on hand to show that an insured person has died, then at what point does the company escheat the money to the state?
It was noted that aside from following regulatory and statutory requirements, the insurer used its electronic death master file in 2006 and 2007 to identify individual life insurance policies for which a death benefit was due but no claim had been filed to date. The carrier will expand its use of the electronic death master file to identify potentially payable policies this year.
Depending on applicable state law, when beneficaries can’t be located within 3 to 5 years after the company receives notice of a death, the policy proceeds are considered unclaimed and go to the appropriate state. MetLife escheated $51 million to the states in 2010.
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Florida’s Office of Insurance Regulation to Hold Public Hearing on Life Insurance Companies’ Practices
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On Friday, April 22, 2011, on Florida’s Office of Insurance Regulation’s website, the following article appeared: The Office will conduct a public hearing to evaluate a potential industry practice that involves claim settlement practices, use of the U.S. Social Security Administration’s Death Master File and compliance with unclaimed property laws.
It was announced that the Florida Office of Insurance Regulation (Office) delivered investigative subpoenas to Metropolitan Life Insurance Co. and Nationwide Life Insurance Co. requesting that a corporate representative appear in Tallahassee to explain their company’s business practices regarding these issues. Although these are the first companies to receive subpoenas – the Office is examining other companies on this issue because the Office’s information encompasses a substantial part of the life insurance industry.
Call a Securities Arbitration Lawyer for a free consultation on how to recover your investment losses. To speak with an attorney, call 888-760-6552, or visit www.stockmarketlawsuit.com. Soreide Law Group, PLLC., representing investors nationwide before FINRA the Financial Industry Regulatory Authority.
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First District Court of Appeal rules in favor of Florida’s Office of Insurance Regulation Regarding Viaticals
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|Media Notice — 1st DCA Coventry Opinion and Chronology of Litigation|
|Wednesday, June 16, 2010|
On June 9, the First District Court of Appeal ruled in favor of the Office of Insurance Regulation (Office) in its litigation with Coventry First, LLC, Florida (Coventry). The Court issued an opinion which affirmed the Office’s right to review non-Florida related records for viatical settlement providers.
A viatical settlement, also referred to as a life settlement, is the sale of a life insurance policy by the policy owner before the policy matures. Such a sale, at a price discounted from the face amount of the policy but usually in excess of the premiums paid or current cash surrender value, provides the seller an immediate cash settlement. Generally, viatical settlements involve insured individuals with a shorter life expectancy. This is a practical way to pay extremely high health insurance premiums that severely ill people with short life expectancy face. A life settlement is a similar transaction but involves insureds with longer life expectancies. From the viewpoint of the investor, purchasing a viatical settlement is similar to buying a zero coupon bond with an uncertain maturity date. The return depends on the seller’s life expectancy and when he or she dies. The viatical settlements grew in popularity in the United States in the late 1980s, when the AIDS epidemic peaked. Viatical settlements offered a way to extract value from the policy while the policyholder was still alive. At that time, the AIDS mortality rate was very high, and life expectancy after diagnosis was typically short. The investors were reasonably sure that they would collect in a relatively short time. This combination of events caused an increase in viatical settlements as both investors and viators saw an opportunity for mutual benefit. Viatical settlements developed a bad reputation in the investing community. The companies that purchased them from policy holders typically resold them to individual investors. Salespeople were paid large commissions to push the settlements, which were not conventional investments and which were misunderstood by many investors. The government regulatory agencies had little experience and few regulations dealing with viatical settlements, and the industry attracted some unscrupulous dealers.
Attorney Lars Soreide, a Florida based securities lawyer, said recently, “It is of utmost importance that you do your research before investing in viaticals. They can be very risky investments and end up costing you, the investor, a lot of money.” Soreide Law Group represents clients who are victims of investment fraud.
If you feel you’ve been defrauded by a viatical sale that your broker or your insurance agent sold you, contact Soreide Law Group. For more information about our services please visit: www.stockmarketlawsuit.com or call and speak to an attorney at: (888) 760-6552.
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