THE EXAMINATION OF THE POLICIES of life insurance companies in turning over unclaimed property to state trea- suries is apparently just the beginning of an effort that has no end in sight, and it is already creating a cottage industry for the purpose of generating revenue for state governments, as well as de- livering handsome commissions to the
financial services firms running the unclaimed property investigations themselves.
The decision in July of the New York state insurance department to get involved in the probe has turned up evidence that
the examinations are being expanded to cover perhaps as many
as 22 large insurance companies, foreign and domestic, that do
business in the state.
This was confirmed in securities filings last month by MetLife,
Prudential and American International Group.
MetLife said in its filing that more than 30 U. S. jurisdictions are
exmaining its policies, and that in addition to payments to states,
the examinations may lead to more payments to beneficiaries,
administrative penalties or changes in procedures.
“The company is not currently able to estimate the reasonably
possible amount of any such additional payments or the reason-
ably possible cost of any such changes in procedures,” MetLife
said. “It is possible that such costs may be substantial.”
Prudential said it was being probed by 33 states.
And, AIG said in its regulatory filing that it added $100 million
to its reserves for death claims at its life insurance subsidiaries for
the second quarter.
There is also evidence that examinations are also being con-
ducted of companies in the Southeast. But a spokesman for the
“Florida continues to work with the other
state regulators of insurance and unclaimed
property departments to conclude examinations
and require insurance companies to investigate
claims and remit to unclaimed property units
as required by law.” said a Florida department
of insurance official, adding that the exams are
progressing, but findings are confidential until
the exams are completed.”
In May, John Hancock Life Insurance Com-
pany, Boston, agreed to an unclaimed life in-
surance settlement with 29 states. Separately,
Hancock agreed to a $12.4 million settlement with Florida.
LOOKING BEYOND INSURANCE
Although National Underwriter was unable to determine specific instances where examinations of other financial firms are
being conducted to determine their policies into turning over
unclaimed accounts to states, the Securities and Exchange Commission issued a notice in August saying it is putting the process
used to record efforts to locate missing security holders up for a
routine paperwork review.
According to “Unclaimed Property Audits: No Laughing Matter,” an alert issued in August by Miami-based law firm Greenberg
Traurig, the success of the probe at life insurers is serving as incentive for states to expand their recovery efforts.
“In light of success with life insurers,” Greenberg Traurig’s
lawyers wrote, “recent legislative changes and continued state
budget crunches, it is reasonable to expect an expansion of audits
to other industries.”
The Greenberg Traurig lawyers said that a
significant percentage of companies are likely
not in full compliance with unclaimed prop-
erty laws. Moreover, in most jurisdictions, there
is no statute of limitations when it comes to
unclaimed property. As a result, the look-back
period can be fairly lengthy and cover periods
for which the company no longer has adequate
“The auditor may estimate the unclaimed
property liability for such periods, which can
lead to a company paying more than it would
have otherwise owed,” the lawyers noted. This
is significant because interest and penalties on
such payments could be severe. In California,
to the state