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Insurance bigs sat on $52M cash owed grieving New Yorkers

Insurance companies will pay out a total of $52.6 million in overdue life insurance benefits to nearly 8,000 beneficiaries after the government ordered the insurers to do their homework.

The payments come after state investigators found that many life insurers were sitting on millions of dollars they were supposed to have shelled out to the families of long-deceased policy-holders — some of whom had been dead for up to 40 years.

Insurance kingpins failed to consult a so-called “Death Master File” run by the Social Security Administration to determine if their policy-holders were still alive, New York State’s Dept. of Financial Services charged on Monday.

When the state agency, which regulates the big insurers, ordered 172 of them to cross-check their policies with the death index, the companies uncovered a windfall in benefits that had never paid.

The oldest of the 7,934 outstanding cases involved a policy-holder who died in 1970, officials said. The largest overdue benefit payment was $673,485, plus interest. The average payment to beneficiaries was $6,994.

“This is just the beginning,” said Benjamin Lawsky, superintendent of the Department of Financial Services.

Officials said 27,889 other old claims are being processed and could result in millions more in outstanding benefits being forked over to beneficiaries. Up to 950,000 other policies are under review, and beneficiaries could eventually rack up hundreds of million in overdue payments.

“Matching life insurance policies against a comprehensive list of recent deaths is essential to ensure that all beneficiaries receive the benefits they are owed,” Lawsky said.

Under state law and the terms of life insurance contracts, death benefits are not due until claims have been filed, says Thomas Workman, president of the Life Insurance Council of New York, the leading industry trade group.

“We’re cooperating fully with our regulators’ request that we cross-check with the Social Security death list, and in doing so, we’re going beyond what is required by law and by contract,” he added.

Of the $52.6 million paid out in overdue death benefits, New Yorkers received $16.9 million. Workman said the figure is minuscule compared to the $4.5 billion the industry pays out in annual death benefits.

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