Illinois Treasurer Michael Frerichs said some life insurance companies are stiffing their policyholders when it comes time to pay benefits.
Frerichs is leading a charge to make life insurance companies that issue policies to Illinoisans check their portfolios against the Social Security death master file to ensure the companies are not wrongfully withholding death benefits from beneficiaries of people who have died. Frerichs said policyholders who have died didn’t pay premiums just to have a company withhold benefits.
“Someone made those payments not because they love life insurance companies, but because they love someone in their life and they want to take care of them after they pass away.”
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Legislation awaiting the governor’s signature would force life insurance companies to reference the death master file as a way to ensure beneficiaries are getting payouts they’re owed. A spokeswoman for Chicago-based Kemper Life Insurance calls the proposed law an overreaction to the behavior of other insurance companies that knowingly failed to pay claims after confirming policyholders’ deaths. Kemper sued the treasurer’s office after the treasurer’s office requested records to determine whether payouts were being wrongfully withheld. That case is pending.
Frerichs said Kemper and its subsidiaries make money when they don’t have to pay out claims. “They admit that there are some people whose policies don’t get claimed. They got to hold on to that money and invest it. That’s part of their profits,” the treasurer said. “When someone faithfully pays their premiums and they die, we maintain that the money no longer belongs to Kemper or other insurance companies that do this. The money belongs to the family members.”
The treasurer’s office is responsible for safeguarding unclaimed property. That includes unclaimed life insurance policies.