via Wall Street Journal
Some life insurers are fighting back against state officials who insist it is the companies’ job to check for dead customers.
The battle, led by small and midsize insurers, is reviving a touchy debate: When a policyholder dies, is it up to the insurance company or the beneficiary to make sure the benefit gets paid?
Historically, the burden has been on beneficiaries to file a claim after a death. Although that is still the typical way death benefits get paid, state authorities in the late 2000s began to compel insurers to turn over policyholder rosters so they could be checked against death databases.
Most large insurers agreed to the audits even though they believed the law didn’t require such extensive efforts. They decided that it wasn’t worth the reputational risk to fight the matter, and that new computer software made the change a logical one. Many were, in fact, already using similar checks to identify dead annuity owners in order to discontinue these customers’ payments.