Solving the problem of unclaimed life insurance benefits

Every year, around the world, including the Philippines, billions of dollars in life insurance benefits are left unclaimed by beneficiaries. There is no escheatment legislation for unclaimed life insurance benefits in the Philippines. In Singapore, proceeds of over 8,000 policies were left unclaimed as of September 2015. In the US, it is estimated that every year over $1 billion in insurance benefits are unclaimed. It was estimated that the average unclaimed life insurance benefit is $2,000, although it could be as high as $300,000.

This is unfortunate for both the beneficiaries and the insurers. There are several reasons these insurance benefits go unclaimed under two trigger points: a) when an insurance policy has matured, or b) where the insured has died (death claims). Foremost of these are: a) the insurer and the insured have lost contact from each other; b) the death of the insured is unknown to the insurer; c) the beneficiaries could not be located; d) the existence of the insurance is unknown to the beneficiaries; and, although very rare, d) the insurance company could not be located.

Lost contact

Losing contact between the insurer and the insured is a totally avoidable situation. If the insured moves from one address to another, it is his obligation to inform the insurer where he can be reached. Giving the  mailing address and contact numbers is essential. With the widespread use now of the e-mail address, losing contact should be a thing of the past.

Death unknown

The death of the insured should be communicated promptly by the beneficiaries to the insurer. They are responsible for notifying the insurers and claiming the benefits. The insurer would never know of the death unless communicated to them. In this respect, the insurers are passive. They only wait. There is no law or regulation in the Philippines obligating insurers to check death records (for example, going through the death certificates with the Philippine Statistics Authority). There is no proactive duty to determine whether an insured had died. Death could not be presumed from circumstances. By implication, it is advisable that the beneficiaries or at least someone, such as the lawyer or accountant, be informed about the insurance.

Missing beneficiaries and insurer

As years or decades would pass from the time an insurance policy is taken, the location or identity of the beneficiaries could become an issue. A beneficiary would have no obligation to inform the insurer of his or her current location or even in instances of change of name. And more common is that the beneficiaries would not even know that they are insurance beneficiaries. The insured may desire to keep the matter a secret from the intended beneficiary in the meantime. The ideal is for the insured to let the intended beneficiary know. In case of maturing policies, the insurers, by obligation, do their best to contact the beneficiaries. In rare instances in the Philippines, the insurer could not be located.  

Finding a solution: Singaporean approach

In Singapore, if the beneficiaries could not be located within 12 months from the death or maturity, the details of the policyholders are published on the Register of unclaimed insurance proceeds. This register was launched in January 2016. The register is maintained by the Life Insurance Association, and refreshed twice a year. Through this register system, SGD $10 million were paid out in 2017.

United States approach

Most states in the US, by state law, require insurers to regularly compare company records of in-force policies against the Social Security Administration’s Death Master File, which is the nearest thing to a national death database in the US. This is known in several states as the Unclaimed Life Insurance Benefits Act which was initiated by the National Conference of Insurance Legislators as a Model Act in 2011. A study in 2009 found that insurers were not doing enough to pay life policies where the insured had died and the beneficiaries could not be located. In 2011, as a result of a New York State investigation, more than $665 million in benefits were paid to more than 89,000 people across the United States. As of April 2019, seven years from its inception as an NCOIL Model Act, 34 states have passed unclaimed life insurance benefits legislation.

French approach

A January 1, 2016, law limits the time period within which a claim can be made to 10 years from the time the insurer becomes aware of the death of the insured or after the policy has expired. The insurer must transfer any unclaimed amounts to a French Public Body called the Caisee des depots et consignations  within one month after the 10-year time limit. Once transferred, any claims will have to be made through the CDC with the help of its online search tool. The CDC will hold the amounts for 20 years after the transfer from the insurer. After that the CDC will pass the amounts to the French government which will then forfeit it.