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Unclaimed Property: Promises to Keep

Keeping the promise. It’s a euphemism often used to describe the payment of a life insurance claim.  Because, at the heart of the matter, it’s THE most important thing that life insurers do. Case in point, life insurers paid a record $100 billion to life insurance beneficiaries in 2021.1 But paying claims is also a task that is not without its share of challenges, both regulatory and operational.Father and son discussing life insurance

In the U.S., most states have adopted some form of Unfair Claims Settlement Practices laws, which prescribe standards for prompt claim investigation and payments to beneficiaries, among other provisions.  State Unclaimed Property laws and a number of regulatory settlement agreements also provide an additional layer of requirements, including mandates for deceased searching, as well as timelines and reporting processes for the escheatment of unclaimed policy proceeds to the state.  All of these regulations come with hefty fines for non-compliance, and insurers also are subject to numerous audits at their own expense to ensure compliance. 

At a fundamental level, the task of paying a claim begins with the knowledge that an insured has died. In most cases, beneficiaries notify the insurer of the insured’s death, file a claim for the policy proceeds and the process begins. However, many circumstances exist outside the norm. Some insureds do not notify their beneficiaries of the life insurance coverage, so family members may not know a policy exists. Or the insured may have told the beneficiary when the policy was taken out, but over time, the beneficiary forgot about it. In some cases, a beneficiary may become estranged from the insured and may not know of the insured’s death. Any number of plausible reasons exist for the failure of beneficiaries to file a life insurance claim.  However, none of them relieve the life insurer from the obligation of monitoring their books of business to determine which insureds have died and then proceeding to search for and notify beneficiaries to pay claims. 

For the longest time, the Social Security Administration Death Master File (DMF) was the undisputed benchmark source for deceased and mortality data, and many life insurers purchased this data to perform deceased searches. Then, in November 2011, a series of events began to change that:
  • It was determined that Section 205(r) of the Social Security Act prohibits the Social Security Administration (SSA) from disclosing death records the SSA receives through its contracts with states, except in limited circumstances.2 This change removed approximately 4.2 million records from the SSA DMF in 2011 and has resulted in about 1 million fewer records each year thereafter.3 
  • A few years later, provisions in the Bipartisan Budget Act of 2013 further restricted access to decedent DMF records for a three-year period following the date of death.  The Act provided for a fee-based certification process and prescribed permissible purposes under which the “limited access DMF” could be accessed. It also established penalties up to $250,000 per person per year for improper disclosure or misuse of the information. Finally, the Act also requires entities that access the DMF submit a written attestation from an accredited conformity assessment body (ACAB) certifying that proper information security protocols and policies are in place and being followed.4 
As the administrative hurdles and costs to access the DMF grew, the number of deaths in the database continued to shrink. So, now that we’re nearing a decade since the Bipartisan Budget Act of 2013, what recommendations would we make to life insurers for deceased data searching?
  • Don’t “DIY” your unclaimed property searches.  Buying, aggregating, normalizing and linking data are not core competencies for most life insurers.  Yet, these are precisely the activities that are necessary for successful deceased data monitoring and matching.
  • Understand that the SSA DMF alone is not enough. Whether you are building mortality models, or searching for deceased insureds, it is important to understand that the DMF undercounts the number of deceased individuals. LexisNexis® Risk Solutions has aggressively added new deceased and mortality data sources to its consumer database to help compensate. These supplemental deceased sources now provide more unique deaths each year than does the SSA DMF alone.
  • Leverage deeper insight from the data. Our match codes and confidence scores help provide more precision and minimize false positives and false negatives. We’re also finding unique ways to leverage new insights from data sources like obituary notices to improve matching, increase accuracy and help with beneficiary identification.
  • Cover your compliance bases.  Our data scientists and batch analysts have designed our deceased searches to comply with the most stringent regulatory settlement agreements and state regulations. LexisNexis Risk Solutions also maintains certification from the Accredited Conformity Assessment Body (ACAB) for DMF, relieving our customers from that requirement. Our government affairs team also helps us stay ahead of regulatory changes and provides insight into current legislative activity.

Now more than ever, it’s important to choose a trusted partner who understands both the power and the limitations with leveraging consumer data. At LexisNexis Risk Solutions, we are committed to the responsible use of data to help our customers keep promises—especially those that provide financial security and a better future for those left behind.

 For more insights on LexisNexis Unclaimed Property Solutions and mortality data, please call 1-800-869-0751, Visit Unclaimed Property Services by LexisNexis Risk Solutions or email insurance.sales@lexisnexisrisk.com

1 Life Insurance and Annuity Benefits Reach Record Highs in 2021 (acli.com)

2 SSA - POMS: GN 03315.010 - Disclosing a Deceased Individual’s Information - 11/01/2022

3 Change in Public Death Master File Records (ntis.gov)

4 Federal Register :: Certification Program for Access to the Death Master File