SACRAMENTO . (AP) — Transamerica, New York Life Insurance Co. and nine other life insurance companies will pay as much as $763 million to settle a multistate probe over unpaid death benefits, of which nearly $87 million will go to California beneficiaries, state Controller John Chiang announced Friday.
The agreement was the result of a five-year investigation into the industry's compliance with California's unclaimed property laws, which requires businesses to send lost or abandoned properties to the state after three years of inactivity.
The state found that life insurance companies failed to notify the state of unclaimed death benefits, annuities and variable life insurance policies. They also failed to notify beneficiaries of life insurance policies even when the companies had knowledge about the policy owner's death.
"Too often, insurers have sidestepped their legal responsibility to make good on insurance policies purchased by their clients to provide peace of mind and financial security to their families," Chiang said in a statement. "I'm pleased that these eleven companies have come forward and agreed to do what is right by their clients."
As part of the settlement, the companies have agreed to change their business practices and pay benefits 3 percent interest as part of the settlement.
California had reached settlements with seven other life insurance companies but added 11 more Friday. Besides Transamerica and New York Life, the latest batch includes Western & Southern, Pacific Life, Genworth, Hartford, ING, Symetra, Northwest Mutual, Midland National, and TIAA-CREF.
A group of six life insurance companies — including Genworth, New York Life, Northwestern Mutual, Pacific Life, Transamerica, and Western & Southern — issued a statement saying the agreement helps ensure beneficiaries will be found and close unclaimed property audits in as many as 45 participating states.
The companies say they have agreed to restore the full value of accounts dating back to 1992 on unclaimed policies.
"Our companies have a shared goal with these states of ensuring that life insurance beneficiaries receive their benefits as promptly as possible," the companies said. "Even the tiny fraction of benefits that may go unclaimed among the tens of billions of dollars paid to survivors each year is too much."
Genworth's spokesman Al Orendorff added that Friday's announcement "will result in no material financial impact" because the company previously accounted for the settlement.
California's investigation found that companies would not cross check the owners of dormant account with government databases listing the deceased. In other cases, the state said companies had direct knowledge of a policy owner's death but still did not notify beneficiaries.