Prudential to Pay Families $20 Million in Life Settlements
Prudential Life Insurance has agreed to pay up to $20 million to beneficiaries of life insurance policies under the terms of a new settlement deal. The agreement, announced on Friday by the California Controller’s Office, will ensure families are compensated by the insurer after itÂ failed to make benefits payments under an appropriate time frame.
California Death Benefits Law Requires Insurers to Pay
Lawmakers in California announced earlier this month that the state had enacted a death-benefit law that would require insurance companies, including Prudential, to check with beneficiaries of life policies before storing money into retained-asset accounts (RAAs).
This requirement was a response to discovering the companies had not been paying beneficiaries of life insurance policyholders and instead storing the money in these RAA accounts where they could grow interest that translated into profits.
As a part of the new death-benefit law, insurers are now required to contact beneficiaries to determine whether they would like to have their money stored in these accounts to receive their benefits in spread-out payments, or in one lump sum.
According to the U.S. Government Accountability Office, “the overwhelming majority choose lump-sum check payments.”
Life Settlement Payments Due after 15 Years
With the new law enacted, the state is holding insurers accountable for past-due life settlement payments to beneficiaries. In its investigation, the state Controller’s Office identified more than 1,000 unpaidÂ Prudential accounts of California policyholdersÂ who had been dead for at least 15 years.
Prudential will be required to restore the accounts to full value asÂ well as pay 3 percent interest to beneficiaries. On average, the cash value for the accounts are $2,000.
The settlement is the second of an ongoing audit of life insurance companies initiated by state Controller John Chiang in 2008. An additional 17 states are involved in the national probe.
While the Controller’s Office says it is sending letters to beneficiaries who have been impacted by the insurers’ actions, individuals who want more information are encouraged to contact a Prudential office or California’s unclaimed property office at 1-800-992-4647.