SPRINGFIELD – A law has recently cleared the Illinois legislature that is designed to protect families from loopholes in life insurance policies that let companies that provide life insurance get away with not paying the beneficiaries in some cases.
On Aug. 26, the Illinois Treasurer's Office hailed the new law, called the Unclaimed Life Insurance Benefits Act. Illinois Treasurer Michael Frerichs helped push for the change in law.
Frerichs said his office had received many complaints about these types of activities going on in the private life insurance markets in Illinois and it is his office that typically deals with unclaimed property from rebates, lost safety deposit boxes and other items belonging to people that have been unclaimed.
Ill. Treasurer Michael Frerichs
"Often, insurance companies never bother to take a look at what we call a 'master death list' and check it against their life insurance policies on file on behalf of their policyholders, and they get away with not paying the beneficiaries, who may know nothing about what they had coming to them from those policies," Frerichs told the Cook County Record in a telephone interview.
Frerichs said the insurance companies had no incentive to push them to even look at the list, and that is where the fight to change the law started.
"We just knew that something had to be done about this issue in the state of Illinois," Frerichs said. "In fact, many of these companies relied on that to continue making profits."
The treasurer's office has identified more than $550 million in proceeds from life insurance policies that should have been paid to their proper beneficiaries, but weren't, since 2011. That didn't sit well with the treasurer's office, Frerichs or Gov. Bruce Rauner, who signed the legislation.
Frerichs told the media in a release that he never met anyone who purchased life insurance who expected the insurance company to keep the money rather than pay their family. He said the result of the legislation will be that grieving families, who may have had financial struggles of their own, won't be victims of such abuse any longer.
The Unclaimed Life Insurance Benefits Act in Illinois will require these life insurance companies to periodically use the Death Master File list to check to see if any of their policyholders have died. They must check this against their records to see if payments were disbursed to the beneficiaries outlined in those policies. The Social Security Administration is also involved because it manages the list to ensure there is no waste, fraud and abuse in the program for Social Security in the U.S.
According to Frerichs' office, not everyone was happy with the decision or the proposed legislation. One opponent, according to a release, was Kemper Corp. Three of its subsidiaries have sued Frerichs, stemming from his attempt to empower an auditor to determine if those companies are engaging in payout avoidance with unclaimed payments.