Statewide Hearings Scheduled on Delays in Death Benefit Payments

Statewide hearings begin this week to better understand how life insurance companies avoid paying death benefits and what Illinois families can do to prevent themselves from being victimized after the death of a loved one, Illinois State Treasurer Michael Frerichs said today.

Since 2011, the Illinois State Treasurer’s office has identified more than $550 million in death benefits that were not paid to grieving families in Illinois. Nationally, $7.4 billion has been identified.

Frerichs established a task force that includes members of the General Assembly, Citizen Action Illinois, AARP, and the NAACP.

Also invited to be a member of the task force and explain this little-known practice is Chicago-based Kemper Corp. Frerichs said Kemper tells federal officials that requiring them to pay benefits in a more timely manner “could have a material adverse effect on the Company’s profitability, financial position and cash flows.” Three life insurance companies under Kemper’s umbrella sued Frerichs to block an audit that would show if they are holding onto insurance benefits where the insured died years before and the funds are owed to beneficiaries.

“I’ve never met a man or a woman who purchased life insurance with the expectation that the death benefits would be kept by the insurance company rather than paid to their family,” Frerichs said. “Families need to know how to protect themselves from insurance companies who manipulate the rules to avoid paying death benefits.”

Frerichs called for the hearings to educate the public on the practice, to allow other insurance industry members to explain best practices in the timely payment of benefits, and to identify what additional steps might be warranted. The first hearing is August 17 in Normal.

The hearings dovetail with legislation Frerichs prompted that now awaits Governor Bruce Rauner’s signature. The legislation would require life insurers to use the federal Death Master File to identify deceased policy holders whose life insurance proceeds have not been paid.