March 7, 2017
Contact: Richard Loconte, 212-709-1691
DFS ANNOUNCES LINCOLN FINANCIAL GROUP HAS PAID $50.7 MILLION TO BENEFICIARIES OF NEW YORK POLICYHOLDERS FOR LOST INSURANCE CLAIMS
Settlement with DFS Includes $1.5 Million Fine for Unfair Claims Settlement Practices in Violation of New York Insurance Law
Financial Services Superintendent Maria T. Vullo today announced that Lincoln Financial Group has paid $50.7 million in restitution to policyholders of beneficiaries and a $1.5 million fine for lost insurance claims and for unfair claims settlement practices, as part of a consent order entered into with the Department of Financial Services (DFS). The agreement between Lincoln National Corporation and its New York-licensed Lincoln Life & Annuity Company of New York, stems from the company’s merger with Jefferson-Pilot Corporation. Lincoln self-reported that the company had lost track of thousands of policies after merging claims-processing systems with Jefferson-Pilot, which was followed by a DFS investigation that found that the company failed to adequately address early red flags related to the issue. As part of the settlement, Lincoln will also continue to identify beneficiaries and pay claims, with interest, in accordance with New York Insurance Law.
“Life insurers have a duty to policyholders and their beneficiaries to keep track of claims and make necessary payments in a timely fashion,” said Superintendent Vullo. “While we appreciate the steps that Lincoln has taken towards making beneficiaries whole, we stress the importance of keeping consumers from falling through the cracks during mergers and other types of business interruptions. Consumers must be confident that their insurers are taking the necessary steps to maintain records, communicate claims processes, and make payments to beneficiaries.”
The DFS investigation found that the merger of Lincoln with Jefferson-Pilot led to technical issues that caused Lincoln to lose track of a large number of life insurance policies nationwide. Thousands of beneficiaries of New York policyholders experienced delays in receiving communications from Lincoln about their claims, with some waiting weeks, months, or even years before receiving compensation. Lincoln had performed an internal audit shortly after the merger that highlighted claims processing issues, but did not take adequate steps to uncover and address the underlying problem. The company failed to self-report the issue to DFS in a timely manner and only did so months after initially uncovering the problem, during which time it performed its own internal investigation. After reporting the discovered issues, the company cooperated with DFS’s investigation.
To prevent similar harm to consumers in the future, DFS is requiring that Lincoln, in addition to paying the fine and restitution, enhance its policies and procedures to ensure that future mergers provide for claims-processing systems compatibility before merging any such systems, and follow up more carefully with any audits that highlight potential violations of New York Insurance Law.
CONSUMER TIPS FOR LIFE INSURANCE
- Make sure you keep records of life insurance policies in a safe location and inform any beneficiaries of the policies to ensure benefits are properly paid.
- Should you change your address, or should your life insurance company change names or merge with another company, be sure to contact them and ensure that your information is up-to-date.
- New York law requires insurers, upon receiving a claim and related claims documents, to respond to you within 15 business days. If a claim remains unsettled the insurer must contact you at least every 90 days thereafter.
- DFS offers a free-of-charge service to assist families in locating unclaimed benefits on life insurance policies and annuity contracts insuring the life of, or owned by, a deceased immediate family member.
Consumers can make a request to run an unclaimed benefits search, or receive assistance with any other financial products and services issues, including life insurance, by visiting the DFS website at www.dfs.ny.gov or calling (800) 342-3736.
A copy of the consent order can be found here.