An investigation into unpaid life insurance benefits will cost MetLife (NYSE:MET) almost $500 million.
Regulators from California, North Dakota, Florida, Illinois, New Hampshire and Pennsylvania alleged that MetLife used the Social Security “Death Master” index to identify deceased customers of its annuity plans, and thus stop making annuity payments, but failed to use the index to confirm the demise of life insurance policyholders, Reuters reported.
The Death Master index lists all deaths reported to the Social Security Administration.
MetLife said that it will make $438 million in payments to the family members of deceased policyholders due unclaimed benefits, plus an additional $40 million in unspecified costs, under terms of the settlement.
This includes paying the full value of policies that were improperly written down, with 3% interest per year for unpaid benefits dating back to 1995. The nearly $500 million settlement will be fulfilled over the course of 17 years, with $188 million paid in 2012.
Additionally, MetLife has created a website to help heirs of deceased policyholders track unclaimed benefits.
MetLife said it had sufficient reserves to make the settlement payments, Reuters noted. It also said it would work with regulators to implement industry best practices to address situations in which heirs fail to submit claims after policyholders die.
Reuters noted that a separate Death Master investigation by New York state had led to a $260 million settlement with other insurers.