The North Carolina General Assembly ratified Senate Bill 665 in August 2015, clarifying the circumstances under which life insurers must compare their records against the death master file maintained by the Social Security Administration (or some other database that is substantially as inclusive). The legislation, entitled "Unclaimed Life Insurance Benefits Act" ("The Act"), became effective October 1, 2015.
The Act requires insurers authorized to transact life insurance business in North Carolina to perform a comparison of in-force policies, annuities, and account owners against the death master file, on a semi-annual basis, to identify potential death master file matches. N.C.G.S. § 58-58-390(a). This general requirement is subject to certain exceptions.
First, to the extent an insurer's records are not available electronically, an insurer is only obligated to use "the records most easily accessible by the insurer" when performing its search. N.C.G.S. § 58-58-390(a). This exception provides some relief to those insurers who have decades-old policy information recorded on index cards or paper.
Second, an insurer has no obligation to compare its records to the death master file for those policies or annuities for which the insurer has received an active premium payment within 18 months before the comparison. N.C.G.S. § 58-58-390(b)(1).
Third, an insurer does not have to make a comparison for policies, annuities, or retained asset accounts issued or delivered before October 1, 2015, if the insurer attests in a sworn statement that it (i) has not engaged in asymmetric conduct; (ii) has complied historically with North Carolina's claims settlement practice requirements; and (iii) has monitored the limiting age of insureds and turned over unclaimed property to the state when insureds reach the limiting age. N.C.G.S. § 58-58-390(b)(2).
Asymmetric conduct is defined as "an insurer's selective use of information from the death master file ... to identify whether certain persons are deceased, in order to terminate benefits, but not to determine whether insureds under the insurer's insurance policies in a non-active premium paying status are deceased for the purpose of paying benefits." Thus, an insurer cannot avail itself to this exception if it has been using the death master file only for the purpose of terminating annuities or other benefits.
Fourth, the legislation expressly provides that certain policies are exempt from the comparison. Group life insurance policies for which the insurer does not perform record-keeping services, policies governed by ERISA, federal employee benefit programs, and policies or certificates of credit life insurance are exempt. N.C.G.S. §§ 58-58-390(10) & 58-58-390(b)(3).
Within 90 days of learning of the possible death of an insured or annuity owner, an insurer must make efforts to determine whether benefits are due and to locate beneficiaries. N.C.G.S. § 58-58-390(e).
A pattern of failure to meet the requirements of the Act may constitute an unfair claims settlement practice. N.C.G.S. § 58-58-400. The Act provides, however, that "[n]othing [herein] shall be construed to create or imply a private cause of action." N.C.G.S. § 58-58-400. These provisions leave open the question of whether anyone other than the North Carolina Insurance Commissioner has standing to sue an insurer for an unfair claims settlement practice based on a violation of the Act.
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