$20 Million Unclaimed Property Audit finding against John Hancock has Insurance Industry On Alertby Tracey Reid on 04/29/11
Many of you probably saw the widely publicized $20 Audit Assessment handed down, with the help of the third-party bounty-hunter audit firm, Verus Financial LLC, against John Hancock as discussed in the recent Wall Street Journal Article. Verus was contracted to audit John Hancock, plus 2 dozen other life insurers by 36 different states, claiming that life insurance companies were not doing enough to located deceased policy holders to ensure that their beneficiaries got payouts in a timely manner. Besides California, the other states that settled included Georgia, Idaho, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, New Hampshire, New Jersey, North Dakota, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Wisconsin, and the District of Columbia. Several other states participated in the audit, but have not yet handed down their findings, including Arizona, Colorado, Delaware, Florida, Indiana, Mississippi, Missouri, Nebraska, Nevada, Ohio, Rhode Island, Vermont and Washington.
The basis of the audit findings is that the states claimed the life insurance industry is not doing enough to locate beneficiaries after a policyholder dies, and disputing that the companies are complying with state unclaimed property reporting procedures. The states are claiming that life insurance companies must make “reasonable efforts” to locate life insurance beneficiaries after a policyholder dies, BUT the states are also claiming that following THEIR OWN STATE UNCLAIMED PROPERTY DUE DILIGENCE LAWS IS NOT ENOUGH! While state laws only require that companies perform due diligence based upon the last known address of the policyholder, according to their books and records, by sending a letter to the person before escheating, these audit findings are claiming that the state administrators want the insurance companies to DO MORE THAN THE LAW REQUIRES.
This can have FARREACHING affects on the ENTIRE unclaimed property community…especially if following the law for finding true owners of unclaimed property is found, by administrative ruling, to be NOT ENOUGH to meet the compliance standards for reporting unclaimed property under the law. We will be following this issue closely and keeping everyone apprised of developments.