Life insurance giant MetLife Inc. will shell out nearly $500 million to settle a multi-state probe into its alleged failure to pay death benefits to beneficiaries.
The company said it will pay out about $438 million over the next 17 years, with $188 million going out to beneficiaries this year. Insurance regulators from dozens of states have accused the company of delaying or withholding life insurance payments to many of its policyholders.
About $40 million of that will likely end up in California, said State Controller John Chiang. The funds will either be sent on to beneficiaries of deceased MetLife policyholders or stored in state coffers as unclaimed property.
More than 30,000 California-based MetLife policies are affected, each with an average cash value of $1,200, Chiang said in a statement. MetLife will also cover states’ costs of finding beneficiaries and sending them the benefits overdue to them.
The agreement will "make it clear that if the industry isn't willing to make the payments legally required, we will take action, including lawsuits, to compel them to do right by their customers," Chiang said in a statement.
MetLife failed to properly use the Social Security Administration’s database of deceased individuals, known as the “Death Master File,” according to a joint investigative hearing held by Chiang and California Insurance Commissioner Dave Jones in May.
Regulators concluded that when MetLife was aware of policyholders who passed away, it often didn’t make payments to beneficiaries. And when benefits went unclaimed after several years, Chaing’s office said, MetLife did not forward on the funds to the State Controller’s office as required by law.
As part of Monday’s settlement, the company has also agreed to reform its benefits payment process, promising to conduct a thorough search for beneficiaries while also attempting to reconnect with policyholders over age 90.
MetLife said in a statement that it paid out about $12 billion in life insurance claims last year, with 99% of claims submitted by beneficiaries. The company said that policyholder deaths that don’t involve a claim are a “small proportion” of the total.
It also said it launched a website to help customers find their policies.
Last year, Chiang struck similar settlements totaling more than $40 million with Manulife Financial Corp.’s John Hancock business and Prudential Financial Inc. Monday’s settlement includes states such as Illinois, Florida, New Hampshire, North Dakota and Pennsylvania.