John Hancock Unpaid Life Insurance Benefits Reaches Settlement
John HancockÂ has agreed to settle with six states over unpaidÂ life insuranceÂ benefits, New Hampshire’s insurance commissioner announced this week. The insurance company is the latest of many that have agreed to pay a disclosed amount to cover payments never made to beneficiaries over the span of years or decades.
John Hancock Life Insurance Fails to Pay Benefits
John Hancock Life InsuranceÂ is one of a string of companies that has agreed to settle with state officials over unpaid life insurance benefits.
Like other companies, including AIG, Prudential,Â MetLife Life Insurance, Nationwide Life Insurance and Forethought Group Inc., John Hancock reportedly failed to pay a number of life insurance beneficiaries their death benefits, despite having access to federal records that share when a policyholder has died, as well as having the ability to confirm a death with relatives of the deceased.
Insurance companies have been accused for years of failure to pay premiums to beneficiaries, instead choosing to hold on to the money for their own benefit. The money is reportedly held in a retained asset account (RAA) that accrues interest over time.
According to the U.S. Government Accountability Office, an overwhelming majority of beneficiaries opt not to save money in RAAs when given the option, preferring instead to receive a lump sum payment. Recently, California addressed the issue by passing a law that took effect on January 1, 2012, disallowing insurers from storing funds in RAAs without first receiving permission from beneficiaries.
John Hancock Agrees to Pay $13.3 Million
To settle accusations with state officials, John Hancock has reportedly agreed to pay $13.3 million to six states: New Hampshire, California, Illinois, Michigan, North Dakota and Pennsylvania.
Roger Sevigny, New Hampshire’s insurance commissioner, said this week that John Hancock Life Insurance selectively used the Social Security Administration’s Death Master File data base to end life insurance benefits payments, but failed to use the same database to find deceased policyholders or their beneficiaries.
He stated that that agreed-upon settlement will mostly be paid to beneficiaries and expects “many millions of dollars more per year” to go to consumers.