What will Florida’s new law mean for life insurance companies?

With everything that has been taking place on the political stage at both the state and federal level over the last few weeks, it can be relatively easy to lose track of the myriad bills currently sitting on the desk of Governor Rick Scott awaiting either a signature or a veto.

Indeed, many people might have missed Governor Scott’s signing a new bill into law this week that was hailed by Florida Insurance Commissioner Kevin McCarty as a “monumental win” and which will fundamentally change the way life insurance companies do business in the Sunshine State. 

What exactly does this new law address?

The bill was drafted in response to what lawmakers identified as inequitable practices by insurance companies regarding life insurance policies.

Specifically, insurance companies have been accused of neglecting to conduct proper searches of death records for the names of policyholders in order to keep interest-collecting policy proceeds in their coffers while at the same time actively searching the death records for annuity recipients as these benefits can stop being paid out upon death.

Does this have anything to do with the settlement the state reached back in 2011?

Back in 2011, the state reached a settlement with the insurance industry in which carriers who fit certain criteria would be required to search the Social Security Death Master File all the way back to 1992 and make the necessary payments to any beneficiaries they discovered. Since that time, over $500 million has been secured for 151,000 beneficiaries from more than 20 insurance companies.

The bill signed into law by Governor Scott essentially applies the terms of the settlement to all insurance companies selling life insurance in the state.

What exactly does the new law require of insurance companies going forward?

The law, which is already in effect, is actually more about going backward. Indeed, all insurance companies will be required to search the Social Security Death Master File for the names of life insurance policyholders starting in 1992 and every year thereafter. In the event of a match, they will have to contact the beneficiaries and, if none are found within a span of five years, the policy proceeds will have to be turned over to the Florida Bureau of Unclaimed Property.

Once deposited here, the search for the beneficiaries would continue in earnest for another three years and, in the event none are located, the unclaimed policy proceeds would be transferred to the Education Trust Fund. It’s important to note that the funds would still remain listed on the bureau’s website and can be claimed by beneficiaries in perpetuity.

It will be interesting to see the impact that this new law will have. The state’s CFO has estimated that it might result in anywhere from $700 million to $1 billion being paid out by insurance companies.

If you have questions or concerns regarding any insurance law matter, consider speaking with an experienced legal professional.