To ensure that they get the life insurance proceeds entitled to them, the onus has historically been on the beneficiaries of deceased family members. But producers and agents are increasingly offering a helping hand, to the point where many are now obligated to seek out recipients when loved ones pass away. Illinois is the latest to make the move.
In August, Illinois became the latest state in the U.S. mandating life insurers reach out to beneficiaries when policy proceeds go unclaimed, the announcement made by Governor Bruce Rauner and Acting Director of the Illinois Department of Insurance Anne Melissa Dowling. Producers will have the help of modern-day technology, as the state recently launched its Life Policy Locator Service, which also serves as an internet tool that consumers can use.
"I applaud Director Dowling and her staff for their efforts to make it easier for Illinoisans to access life insurance policy information, ensuring they can more quickly receive the benefits they are owed," Rauner said in a press release. "Updating our antiquated technology to increase employee efficiency and provide better customer service to the taxpayers that interact with state government has been one of my top priorities since coming into office, and our administration will continue to pursue efforts like the Life Policy Locator Service to bring state government into the 21st Century."
Other potential users of online locator service
In addition to beneficiaries and life insurance professionals, other potential users of the free locator services include executors, legal representatives and immediate family members of the person who took out the life insurance policy and has since passed away, the governor's office stated in the press release. Professionals' involvement in the matter was made possible through the signing of House Bill 4633, or what's known as the Unclaimed Life Insurance Benefits Act. Going into effect officially in January 2017, life insurers will be required to initiate regular reviews to see if policyholders have passed away, and if so, whether benefits have been claimed.
"Many times finding life insurance policies can be difficult and time consuming after a loved one's death," Dowling explained. "But with this new free service, consumers can request help from the Illinois Department of Insurance to simplify the process of locating lost life insurance policies."
She added that at the very least, this new free service should help set the record straight by providing beneficiaries with another resource they can tap into 24 hours a day, seven days a week, so long as they have internet access or WiFi capability.
"20 states have unpaid benefit laws on the books."
$7.4 billion in benefits nationwide unclaimed
Unpaid benefits have been an issue for a long time. In Illinois alone, at least $550 million in proceeds hasn't been distributed to family members of the deceased, according to Illinois' treasurer Michael Frerichs, The Associated Press reported. Nationwide, unpaid benefits total an estimated $7.4 billion.
As an industry, producers have generally been supportive of the measures taken by Illinois and approximately 20 other states. In April, the American Council of Life Insurers called for a national unclaimed benefits standard, where companies have to compare records with the Social Security Administration to see what benefits are outstanding.
"In a small percentage of cases, life insurance benefits go unclaimed because family members are unaware that they are listed as beneficiaries in existing policies," said ACLI President and CEO Dirk Kempthorne. "Life insurers want everyone to receive the benefits to which they are entitled rather than paying unpaid benefits to state governments. That is why the ACLI has advocated since 2012 for state legislatures to adopt a national standard on the issue."
Other organizations who've supported the national standard include the National Conference of Insurance Legislators and the Center for Insurance Research.