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More than $665.7 million in life insurance benefits has been paid to beneficiaries nationwide who were unaware they were entitled to it, after state regulators launched an investigation in July 2011 that found life insurers failed to follow through with paying claims unless consumers contacted them first.

The investigation by the state Department of Financial Services found that insurers did not regularly seek out beneficiaries to pay death benefits but rather waited until a claim was submitted. Many people, however, don’t realize they are named as a beneficiary on a relative’s policy, so they don’t file a claim and never get paid.

The probe also found that insurers checked the Social Security Administration’s “death master file” so they would know when to stop making annuity payments if a customer died. But they didn’t use the same list to know when to start making insurance payments. So regulators directed the companies to start searching that list and cross-checking it against their customer list of active and terminated policies.

“Most of these lost policies belonged to middle-class and working people whose family members will clearly benefit from the payment of funds intended for them,” said Benjamin M. Lawsky, the state’s superintendent of financial services.

Regulators then adopted an emergency regulation that required insurers to conduct searches at least quarterly, and Gov. Andrew M. Cuomo signed legislation in December that made such regular searches of records permanent.

The law also requires insurers to search for multiple policies a customer may have purchased and notify the parent company, subsidiaries and affiliates of a death so those entities can find policies where no claims have been filed. And they have to respond to consumer requests, through the state’s new “Lost Policy Finder,” to find lost or unclaimed policies.

“It is only fair for families and individuals who lost loved ones to receive the life insurance benefits to which they are entitled,” Cuomo said. “Life insurers are now responsible for proactively identifying policyholder deaths and are making good-faith efforts to find people so hundreds of millions of dollars in unclaimed benefits can be paid.”

In all, the investigation and new rules have resulted in insurers making 89,171 payments, including 18,597 payments for $206.2 million to New Yorkers.

email: jepstein@buffnews.com