MetLife Inc, the largest life insurer in the United States, will pay nearly $500 million to settle a multi-state investigation into unpaid claims for dead policy holders, state regulators and the company said on Monday.
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The investigation related to the use of the Social Security "Death Master" file, which lists people who have recently died. A number of states have accused insurers of using the list to stop making annuity payments to dead customers, but at the same time not using the list to check whether any life insurance policy holders had passed away.
A MetLife spokesman said the deal contemplates $438 million in payments to policyholders and beneficiaries, plus $40 million in settlement costs, for a total of nearly $500 million.
In a statement, MetLife said $188 million in payments will be made this year and the rest over the next 17 years. The company is fully reserved for the deal, having topped up the reserve in the first quarter of this year.
"The company has been working with regulators to develop industry best practices and is pleased to announce new processes that will provide an even stronger safety net for the limited number of beneficiaries who do not submit a claim to the company in the normal course of business," the company said.
The deal requires MetLife to restore the full value of any account that was improperly drawn down, comply with state unclaimed property laws and pay 3 percent compounded interest on amounts that had been held back, starting with either the date of the policy owner's death or Jan. 1, 1995, whichever came later.
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The company said it has set up an online system to help people track down policies. It also said it is contacting older policyholders, many of whom took out their insurance without providing a Social Security number or date of birth, and in some cases will offer them an accelerated payout on the policy.
MetLife shares were up 0.7 percent at $35.23 in afternoon trading.
Besides California and North Dakota, the other lead states on the deal were Florida, Illinois, New Hampshire and Pennsylvania. There was some confusion initially about the size of the settlement, with differing figures coming from California, North Dakota and the company.
There was also some confusion about California's share of the deal, with the state controller's office and the state's insurance department citing two different numbers entirely. A spokesman for the insurance department was not immediately available to comment.
Separately from the MetLife deal, earlier on Monday New York officials said their own probe into Death Master abuses had led insurers to make more than $260 million in payments to policy beneficiaries who may not have been aware they had money due to them.