New York Amends Insurance Law to Require Quarterly Searches of Death Master File

Another in the long running sage of unclaimed insurance benefits and the Social Security Administration's "Death Master File" ("DMF").  For those of you who haven't followed this story earlier, here's a brief recap:

Generally, when a person with life insurance dies, the estate or a beneficiary of the policy notifies the insurance company to begin the benefit payment process.  For a variety of reasons, however, this notification may never take place.  Either the policyholder died without a beneficiary, or the beneficiaries did not even know that a policy existed. 

Th current controversy revolves around the insurers' use (or, more to the point, alleged non-use) of the macabre sounding "Social Security Death Master File" to determine whether or not life insurance benefits have become payable.  Though state laws generally do not explicitly require the use of the SSN index, some regulators have complained that insurers search the SSN Index to identified individuals who have dies so they can stop paying annuities (i.e., products that pay out until death), but then don't use that same information with regard to the payment of life insurance benefits (i.e., those products that pay out upon death).

In November of 2011, the New York State Insurance Department issued a directive requiring all 172 life insurers authorized to do business in New York to use the Social Security Administration's Master File to identify death benefit payments that were due as of that date.  The New York state legislature has now joined the fray, and has promulgated a law requiring quarterly searches of the DMF.

Pursuant to Assembly Bill 9845, signed into law by Governor Cuomo on December 17, 2012, each insurer subject to the act is required to cross-check all policies and accounts against the DMF "no less frequently than quarterly" in an effort to determine whether death benefits are payable.  The new law also has an infrastructure or IT component as well, requiring insurers to "implement reasonable procedures to account for common variations in data" that might preclude an exact match (presumably misspellings, transcribed numbers, etc). 

The Act will take effect on June 15, 2013.


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