The Florida Office of Insurance Regulation (OIR) today announced a multi-agency, multi-million-dollar settlement agreement with John Hancock Life Insurance Co. The agreement focuses on the company’s business practices related to unclaimed property for life insurance products and its use of the Death Master File. The Death Master File is a list of everyone who has died as reported to the U.S. Social Security Administration.

“Companies are using the Death Master File to stop company payments for annuities—but do not use this same list to pay beneficiaries of people who have life insurance policies,” said Florida Insurance Commissioner Kevin McCarty. “Unfortunately, this appears to be a pervasive industry practice. The Office appreciates that John Hancock stepped-up and agreed to change its processes before any other company. The agreement with John Hancock will send a strong signal to other companies to audit and modify their practices.”

Investigators said that this selective method of discerning Death Master File information resulted in hundreds of thousands of dollars in lost payments to beneficiaries. The investigation revealed that there are instances when a policyholder died, and years later the company has not paid the rightful beneficiary or remitted the benefits to unclaimed property. OIR believes this practice may affect other insurance companies and insurance companies operating in other states; however, no agreements have been reached with other insurance entities.

While investigators said it is impossible to determine precisely how many John Hancock policyholders and beneficiaries were directly and indirectly affected over the past decade, regulators anticipate Hancock and other companies will ultimately pay tens of millions of dollars to tens of thousands of beneficiaries nationwide as a result of these examinations.

Hancock denied any wrongdoing, and asserted its intention to enter into the agreement is an effort to modify its future business practices. In the agreement, Hancock agreed to: 

• Pay $3 million to the three agencies for settlement—$600,000 of this settlement has been waived due to the company’s ongoing cooperation.
• Return monies to beneficiaries, which includes interest payments owed since the date of death. If a beneficiary cannot be identified, the amount due will be reported to the Unclaimed Property Division of the DFS.
• Establish a $10 million fund to facilitate payment to beneficiaries that cannot be contacted. 
• Provide quarterly reports to the Office, to the DFS and to the Attorney General for the next three years, updating information specific to Hancock’s implementation of the agreement.

OIR conducted the investigation along with the Office of Attorney General Pam Bondi and the Office of Chief Financial Officer Jeff Atwater’s Department of Financial Services (DFS). The DFS has jurisdiction over unclaimed property. The investigation covered all of Hancock’s records during the time it used the Master Death File, which lasted more than a decade. 

“It is inconceivable that such large companies are unaware that their policies are cheating hardworking Floridians out of monies they’ve set aside to prepare for the loss of a loved one,” said CFO Atwater.

“The evidence to date reveals that the inexcusable policies and actions of life insurance companies have kept Floridians from collecting money they are rightfully owed,” Atwater continued. “I believe this settlement sends a clear message that deceptive practices will not be tolerated in our state and prevents further delay in returning these monies to the rightful owners.”

CFO Atwater’s office has set up a Web page for consumers to access information about the settlement, including contact information for the company. 

OIR will conduct a follow-up market conduct review three years after execution of the agreement.

The agreement with Hancock is the result of months of negotiations. California and other states previously reached an agreement pertaining to escheatment laws and unclaimed property. Florida’s agreement with Hancock is the first in the nation to resolve issues related to insurance practices in addition to unclaimed property.

Florida is chair of a multi-state National Association of Insurance Commissioners (NAIC) task force investigating life and annuity claims practices. The primary charge of the task force is to coordinate the activities of state insurance regulators in pursuing investigations/settlements regarding possible unfair claims practices. Other states on the task force include California, Iowa, Louisiana, North Dakota, New Jersey, New Hampshire, Pennsylvania and West Virginia.

In cooperation with the NAIC task force, two state insurance departments have scheduled hearings. The Florida OIR will hold a public hearing May 19 in Tallahassee. Metropolitan Life Insurance Company and Nationwide Life Insurance Company have been subpoenaed to appear. The California Department of Insurance, along with the California Comptroller’s office, will hold a hearing on May 23 in Sacramento, Calif. This hearing will also cover the claims settlement practice of Met Life. NAIC task force members will be attending both hearings.