Insurance Industry Unclaimed Property Compliance Update€¦ · Accounts payable Retirement assets...
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www.KeaneUP.com Insurance Industry Unclaimed Property Compliance Update July 11, 2012 Presenters: Valerie Jundt, National Managing Director Guest Speaker: Walter Graham, Florida Director of Unclaimed Property
Transcript of Insurance Industry Unclaimed Property Compliance Update€¦ · Accounts payable Retirement assets...
www.KeaneUP.com
Insurance Industry
Unclaimed Property Compliance Update
July 11, 2012
Presenters: Valerie Jundt, National Managing Director
Guest Speaker: Walter Graham, Florida Director of Unclaimed Property
www.KeaneUP.com
Definition– Intangible personal property that has gone unclaimed by the rightful owner after a specified period of time
Roots are in English common law:
Escheat vs. Custodial
Governed and enforced at the state level
Fifty-four (54) reporting jurisdictions including, DC, Puerto Rico, Guam and U.S. Virgin Islands:
No two laws are exactly the same
Foreign countries, including three Canadian provinces have unclaimed property laws
Fast Facts - What is Unclaimed Property?
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Texas v. New Jersey 379 U.S. 674 (1965)
State of owner’s last known address
State of holder’s incorporation or domicile if address not known
State of holder’s incorporation or domicile if address of apparent owner is in a foreign country and if holder is incorporated or domiciled in the U.S.*
*Provision added in the 1981 Uniform Act
Note – after nearly 40 years this remains the law of the land today
Rules of Jurisdiction
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Annual Filing Obligations
Properly Tracking the Dormancy Periods
Negative Reports
Due Diligence Efforts
Aggregate Amounts
Records Retention
Holder’s Responsibilities
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Un-cashed checks
Unidentified Deposits
Customer credits
Refunds
Unapplied payments
Dormant accounts
Benefit payments
Proceeds due beneficiaries
Accounts receivable
Accounts payable
Retirement assets
Workers’ Comp
In General - Relevant Property Types
Travelers’ checks
Matured bonds
Un-exchanged shares
Unpaid dividends
Underlying stock
Other general ledger items
Tangible property
Commissions
Rebates
Un-cashed payroll
Unidentified cash/credits
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Individual and Group Policy Benefits
Proceeds from Matured Policies, Endowments or Annuities
Retained Asset Accounts (RAAs)
Demutualization Proceeds
Proceeds Due Beneficiaries
Policy Dividend Payments
Agent Credit Balances
Premium Refunds
Other Amounts Due Under Policy Terms
Unidentified Remittances
Other (Shares of Stock, Dividends, etc.)
Industry Specific Reporting Requirements - Insurance
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MetLife - $500 million multi-state settlement
Prudential – multi-million dollar settlement with 19 states
Negotiating similar agreements with other states
John Hancock – settlement with Florida
Global resolution agreement with at least 29 states
Settlements include ongoing reviews for minimum of three years
Revise unclaimed property policies and procedures (use DMF)
Review claims practices
Market Conduct Exams
Recent Settlement Agreements
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RECENT REGULATORY DEVELOPMENTS
INSURANCE INDUSTRY SPECIFIC
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Unclaimed Property Responsibility by State
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Executive vs. Legislative branches
Insurance Regulators
Unclaimed Property Officials
Office of Attorney General
Governor’s Office
Other…
Multiple Regulatory Authorities
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Insurance Commissioner
Regulatory oversight and consumer protection responsibilities
Market Conduct Studies
Unclaimed Property Agency Head
Responsible for administering and enforcing the Unclaimed Property Statute
Varies by state
o Some States the Agency Head is “elected” – others “appointed”
Office of Attorney General
Governor
Rarely if ever interact on Unclaimed Property issues – until now!
Executive Branch Roles & Responsibilities Defined
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VERUS Financial LLC
Kelmar Associates
Xerox Unclaimed Property Services
Audit Services
Use of Third Party Auditors
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Legislative Branch/Trade Associations:
National Conference of Insurance Legislators (NCOIL)
National Association of Insurance Commissioners (NAIC)
National Association of State Treasurers (NAST)
National Association of Unclaimed Property Administrators (NAUPA)
o Industry Practices
o Statutory Guidance
oConsumer protection/expected best practices
Other Interested/Related Parties
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Regulatory Hearings
Florida
California
Subpoenas and other outreach
New York
Minnesota
States Taking Action
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Florida – October 1, 2011 – Adopt revised policies and procedures.
Social Security Death Master File (DMF) to be used quarterly to identify matches of insured's and annuitants:
o Death Benefits
o Annuity Benefits
o Retained Asset Accounts
Provide quarterly reports to the Florida agencies for the next 36 months:
o Progress of implementation and execution of the requirements.
A targeted market conduct exam will be performed 39 months after the execution of the agreement:
o Focus will be on compliance with the settlement agreement
Industry Specific Property Requirements – Insurance
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New laws passed based on the Unclaimed Life Insurance Benefits Act.
April 11, 2012 – Kentucky HB 135 effective 1/1/2013
May 2, 2012 – Maryland SB 77 effective 10/1/2012
Alabama, and New York proposed similar legislation based on the NCOIL Unclaimed Life Insurance Benefits Act.
Industry Specific Property Requirements – Insurance (Cont.)
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New York State Insurance Department – 308 Letter
308 Letter was issued in July, 2011:
o A request for information to which insurers are legally required to respond.
Investigating allegations of unfair claims and trade practices:
o 172 life insurers and fraternal benefit societies licensed in New York are to make payments based on the DMF data and report on the results for six months beginning in September, 2011.
o Insurers are to cross-check all policy administrative systems as far back as their records permit to identify any death benefits that may be due.
Industry Specific Property Requirements – Insurance (Cont.)
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Audit Triggers
State registration and payment of other taxes with no unclaimed property compliance history
Filing only negative unclaimed property reports
Failing to file all property types
Claiming property without being compliant
Merger & acquisition history
Transient workforce
State of incorporation
Media event / publicity
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FLORIDA-SPECIFIC
OVERVIEW
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Relationship between the company and their customer
Selling financial security
Relationship driven
Consumer expectations
Regulations may be mandated by a different agency – but impact the Unclaimed
Property Requirements.
Spirit, Intent of the Law and Expectations by the State
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30 Active Audits specific to Insurance
Assigned to Contract Auditors
Florida Fast Facts
FY 2011-2012 Lifetime
Total UP Receipts $376,728,139 $4,237,871,532
No. of Claims paid 296,520 2,872,304
Total Paid in Claims $211, 433,311 $1,873,893,001
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Compare the insureds of all in-force life insurance policies and holders of all RAAs against the DMF.
Compare using all available data (i.e. S.S.#, name, address, date of birth, etc.) for highest level of accurate results.
Confirm the death and determine if benefits are due, which can be attained by obtaining a death certificate.
Mail the appropriate claim forms to the beneficiary in order to process and pay the death claim.
If the beneficiary can’t be located then document good faith efforts in attempting to locate the beneficiary.
If unable to locate beneficiaries, then escheat death benefits after the applicable dormancy period has expired.
Proactively Identify Death Proceeds Due Beneficiaries
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Florida Unclaimed Property Statutes Relating to Life Insurance
717.101 Definitions
717.107 Funds owed under life insurance policies
717.1071 Lost owners of unclaimed demutualization, rehabilitation, or related reorganization proceeds
717.117 Report of unclaimed property
717.119 Payment or delivery of unclaimed property
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(1) Funds held or owing under any life or endowment insurance policy or annuity contract which
has matured or terminated are presumed unclaimed if unclaimed for more than 5 years after the
funds became due and payable as established from the records of the insurance company holding
or owing the funds, but property described in paragraph (3)(b) is presumed unclaimed if such
property is not claimed for more than 2 years. The amount presumed unclaimed shall include any
amount due and payable under s. 627.4615.
627.4615 Interest payable on death claim payments.—When a policy provides for payment of its
proceeds in a lump sum upon the death of the insured, the payment must include interest, at an
annual rate equal to or greater than the Moody’s Corporate Bond Yield Average-Monthly Average
Corporate as of the day the claim was received, from the date the insurer receives written due
proof of death of the insured.
717.107 Funds owing under life insurance policies—
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(2) If a person other than the insured or annuitant is entitled to the funds and no address of the
person is known to the company or it is not definite and certain from the records of the company
who is entitled to the funds, it is presumed that the last known address of the person entitled to
the funds is the same as the last known address of the insured or annuitant according to the
records of the company.
717.107 Funds owing under life insurance policies—
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(3) For purposes of this chapter, a life or endowment insurance policy or annuity contract not
matured by actual proof of the death of the insured or annuitant according to the records of the
company is deemed matured and the proceeds due and payable if:
(a) The company knows that the insured or annuitant has died; or
(b) 1. The insured has attained, or would have attained if he or she were living, the
limiting age under the mortality table on which the reserve is based;
2. The policy was in force at the time the insured attained, or would have attained,
the limiting age specified in subparagraph 1.; and
3. Neither the insured nor any other person appearing to have an interest in the
policy within the preceding 2 years, according to the records of the company, has assigned,
readjusted, or paid premiums on the policy; subjected the policy to a loan; corresponded in
writing with the company concerning the policy; or otherwise indicated an interest as evidenced
by a memorandum or other record on file prepared by an employee of the company.
717.107 Funds owing under life insurance policies—
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(4) For purposes of this chapter, the application of an automatic premium loan provision or
other nonforfeiture provision contained in an insurance policy does not prevent the policy from
being matured or terminated under subsection (1) if the insured has died or the insured or the
beneficiaries of the policy otherwise have become entitled to the proceeds thereof before the
depletion of the cash surrender value of a policy by the application of those provisions.
(5) If the laws of this state or the terms of the life insurance policy require the company to give
notice to the insured or owner that an automatic premium loan provision or other nonforfeiture
provision has been exercised and the notice, given to an insured or owner whose last known
address according to the records of the company is in this state, is undeliverable, the company
shall make a reasonable search to ascertain the policyholder’s correct address to which the notice
must be mailed.
717.107 Funds owing under life insurance policies—
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A policy owner is entitled to receive the accrued cash value in the policy at any time.
Cash Surrender Option - Payment is take in cash based on the table of cash values included with the policy. Insurance companies are required to make cash surrender values available for ordinary life insurance after the first three years (five years for industrial policies) Any outstanding debts will be deducted.
Reduced-Paid Up Insurance Option - The cash value is used as the premium for a single-premium whole life policy at a lesser face value.
Extended Term Insurance Option - Cash value is used to purchase term insurance for as long as there is money to pay the premiums.
Non-Forfeiture Options
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(6) Notwithstanding any other provision of law, if the company learns of the death of
the insured or annuitant and the beneficiary has not communicated with the insurer
within 4 months after the death, the company shall take reasonable steps to pay the
proceeds to the beneficiary.
717.107 Funds owing under life insurance policies—
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(b) For unclaimed funds which have a value of $50 or more held or owing under any life or
endowment insurance policy or annuity contract, the full name, taxpayer identification number or
social security number, date of birth, if known, and last known address of the insured or annuitant
and of the beneficiary according to records of the insurance company holding or owing the funds.
Very Important: This is in addition to the first and foremost item of information –
The name of the person who is the owner of the unclaimed funds being reported/remitted
(this person should be provided as the owner of record of the unclaimed property)
Generally, if the beneficiary predeceased the insured, and there is no “contingent” beneficiary, or
a new beneficiary has not be designated, the proceeds go to the estate of the insured.
If both are deceased, but the insured predeceased the beneficiary, the proceeds go to the estate of the beneficiary.
717.117 Report of unclaimed property—
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Incorrect owner name of the Unclaimed Property funds
Report the UP owner(s) name (the name of the person who owns these funds)
In addition, report the name of the insured and the name of the beneficiary
Reporting property too early
Learn and keep updated on due dates, report cycles and dormancy period
Incorrect unclaimed property report format
Paper report – use only for < 25 properties
Electronic file not in NAUPA format
Invalid property type codes
Invalid date of last transaction
Invalid joint owners/relationship codes
Lack of social security number
Not following state specific requirements
Common Reporting Errors
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Lessons learned from an audit
Length and scope of an unclaimed property audit
Resource strain
Fragmented procedures and controls
Destroyed, lost or incomplete records
Juggling multiple priorities and failure to focus/delegate
Taking Control of Your Destiny
If not already notified of an audit – Florida
(and other states) offer voluntary compliance initiatives!
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Determine your company’s current processes & filing status
Establish a “Compliance Committee” within your company
Identify all potential areas of exposure (risk assessment)
Quantify your potential exposure
Consider voluntary compliance programs in jurisdictions where exposure exists
Implement comprehensive policies, procedures and mechanisms through which to report
Review your record retention policy and ensure all applicable records and documentation are readily available
Begin your compliance program today!!
Are You Ready to Respond?
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www.keaneup.com
www.myfloridacfo.org
www.uppo.org
www.unclaimed.org
Unclaimed Property Website Resources
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For questions about today’s webinar, please contact us at [email protected]
Questions
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Valerie Jundt National Managing Director
Keane Consulting & Advisory Services
701-224-1224
Walter Graham Florida Bureau Chief
Division of Unclaimed Property
Contact Information
