RIP-OFF ALERT: The nation’s largest life insurer has agreed to a multistate settlement because it did not pay claims for policy holders it knew to be deceased.
Met Life and other insurers who issue disability insurance and other policies that cease at the time of someone’s death subscribe to databases that tell them when policyholders die. They use this database to identify people they can stop paying living benefits to. But they were also using it to not pay death benefits to survivors on life insurance policies.
Even worse, when Met Life knew people had died, they would continue to collect premiums against the cash value of the policy until they took the policy down to zero, leaving no money for heirs.
Met Life must now pay nearly $500 million, including costs to forensically figure out who the heirs were on policies that they did not pay out on where they have no more paper trail. Prudential and John Hancock are involved in this scandal too, and I believe there will be more.
The real shame of this is that nobody is going to prison. The penalties alone are not sufficient to stop this kind of bad behavior among insurers. And the embarrassment fades quickly out of headlines too.
It is no way for these companies to behave. Where is the moral and ethical compass of the insurance industry?
If you have a life insurance policy, make sure that your heirs know so they can follow up on survivor benefits.