Durbin Calls on Chicago-Based Life Insurance Company to Disavow Practice of Withholding Funds to Rightful Beneficiaries
Last night, a 60 Minutes investigation identified Kemper Corporation as a roadblock to meaningful reforms
[WASHINGTON, D.C.] – In response to a 60 Minutes investigation that identified Chicago-based Kemper Corporation as the “main” insurance company fighting reform efforts, U.S. Senator Dick Durbin (D-IL) today called on the company to disavow the practice of withholding life insurance payouts to beneficiaries that do not directly file claims with the insurance company.
Beneficiaries do not always know that they have been named under a life insurance policy and accordingly do not always file claims. The 60 Minutes report described how some insurance companies that have become aware of policyholder deaths have failed to notify beneficiaries and have cancelled the policies or even taken accumulated cash from the policies to pay themselves for the premiums.
“It is outrageous to think that insurance companies could use tactics like this to deprive widows, orphans, and other beneficiaries of money that is rightfully owed to them,” wrote Durbin. “It is my hope that your answers will make clear to Illinois consumers that Kemper disavows the troubling practices described in the 60 Minutes report. Americans who buy life insurance to provide for their loved ones deserve to have their purchase honored, not undermined, by their insurance company. It is important to get to the bottom of the practices that 60 Minutes identified and make sure that they are swiftly corrected.”
The 60 Minutes report noted that so far 25 life insurance companies have negotiated with states and agreed to pay over $7.5 billion to compensate beneficiaries who had not received money owed to them. However, several dozen insurance companies including Kemper have resisted reaching agreements with states on this issue. As Kemper’s 2015 annual report states, “Kemper’s life insurance subsidiaries (the ‘Life Companies’) have thus far resisted attempts by certain state officials and their designated audit firms to effect changes to the Life Companies’ claims handling and unclaimed property practices….and have challenged through multiple legal proceedings the authority of such officials to require such changes.”
Text of today’s letter is below.
April 18, 2016
Joseph P. Lacher, Jr.
President and Chief Executive Officer
Kemper Corporation
One East Wacker Drive
Chicago, IL 60601
Dear Mr. Lacher,
On April 17, 60 Minutes aired a troubling report on insurance companies that have failed to pay named beneficiaries of life insurance policies in instances where the company is aware that the policyholder has died. As the report noted, beneficiaries do not always know that they have been named under a life insurance policy and accordingly do not always file claims. However, the 60 Minutes report described how some insurance companies that have become aware of policyholder deaths have failed to notify beneficiaries and have cancelled the policies or even taken accumulated cash from the policies to pay themselves for the premiums. It is outrageous to think that insurance companies could use tactics like this to deprive widows, orphans, and other beneficiaries of money that is rightfully owed to them.
The 60 Minutes report noted that so far 25 life insurance companies have negotiated with states and agreed to pay over $7.5 billion to compensate beneficiaries who had not received money owed to them. Kemper’s 2015 Annual Report[1] notes that the insurers who have settled with state treasurers or controllers “typically agree to establish a practice of periodically searching for deceased insureds, even prior to the receipt of a claim, by comparing their in-force policy records against a database of reported deaths maintained by the Social Security Administration or a comparable database.” This is a reasonable practice. However, the 60 Minutes report noted that several dozen insurance companies have not reached agreement with states on this issue, and the report highlighted Kemper Corporation as the “main” insurance company that is currently fighting efforts to reform life insurance reporting and payment practices. As Kemper’s 2015 annual report continues, “Kemper’s life insurance subsidiaries (the ‘Life Companies’) have thus far resisted attempts by certain state officials and their designated audit firms to effect changes to the Life Companies’ claims handling and unclaimed property practices….and have challenged through multiple legal proceedings the authority of such officials to require such changes.”
Many Illinoisans watch 60 Minutes, and in light of the April 17 report I believe it is important for Kemper to make clear to its policyholders, its beneficiaries and to prospective customers in Illinois and elsewhere exactly what Kemper will do with life insurance policies when a policyholder dies. While I recognize there may be limits in discussing matters that may be under active litigation, I request that, to the extent you are able, you provide prompt responses to the following questions:
- Does Kemper (hereinafter intended to refer to Kemper Corporation and to its life insurance subsidiaries) make an effort to become aware when individuals who have purchased Kemper life insurance policyholders or annuities have died? If so, how often? If not, why not?
- When Kemper becomes aware that a life insurance policyholder has died, does Kemper notify the person(s) named as beneficiaries in that life insurance policy that the person(s) have been so named? If so, how? If not, why not?
- Has Kemper cancelled any life insurance policies after becoming aware of the death of the policyholder? If so, did Kemper contact or attempt to contact the beneficiaries of those policies before cancelling the policies?
- Has Kemper deducted money from any life insurance policies after becoming aware of the death of the policyholder? If so, did Kemper contact or attempt to contact the beneficiaries before deducting money from the policy?
- Has Kemper ever checked the Death Master File maintained by the Social Security Administration or a comparable database when determining whether to cancel a Kemper policyholder’s annuity or other retirement payments? If so, did Kemper cross-reference the deceased policyholder to determine if he or she had any life insurance policies with Kemper? If not, why not?
- Can Kemper publicly commit to its life insurance policyholders, their loved ones, and prospective customers that Kemper will strive to notify beneficiaries and ensure that they are able to claim the benefits they are owed before any cancellation of the policy or deduction of money from the policy is undertaken?
It is my hope that your answers will make clear to Illinois consumers that Kemper disavows the troubling practices described in the 60 Minutes report. Americans who buy life insurance to provide for their loved ones deserve to have their purchase honored, not undermined, by their insurance company. It is important to get to the bottom of the practices that 60 Minutes identified and make sure that they are swiftly corrected. I look forward to your responses and to working with you to ensure that Illinoisans and Americans have life insurance they can trust to be there for their loved ones.
Sincerely,
[1] http://www.snl.com/Cache/1500081117.PDF?Y=&O=PDF&D=&fid=1500081117&T=&iid=103308