Metropolitan Life insurance companies will pay nearly $500 million in benefits on small-value life insurance policies –often sold door-to-door in the 1900s – under an agreement reached between Florida and 29 other states.
Without admitting guilt, MetLife entered an agreement with the states to settle claims that the company sold “industrial life” policies to customers, who in some cases paid more in premiums than the policy was worth or who died without receiving the benefits they were promised.
In all, state officials estimate the company will pay up to $467 million to policyholders. If beneficiaries can’t be found, the money would be remitted to unclaimed property agencies in each of the states that are part of the agreement. In all, roughly 708,000 such policies were sold, said Joel Haber, Illinois Department of Insurance examiner, who took a lead in the case.
The company expects to pay out about $188 million during the first year and pay off addition claims over the next 17 years.
Nearly 15,000 Floridians purchased industrial insurance policies worth $9 million.
“This agreement represents another milestone in the ongoing, coordinated multi-state, multi-agency investigation that changed industry practices,” Florida Insurance Commission Kevin McCarty said in a statement.
Along with the payments, MetLife has agreed to a series of business practices aimed at improving its ability to properly compensate policyholders or their heirs. The changes included more frequent searches to determine policyholder deaths and a more concerted effort to find policyholders who took out insurance years ago and who were never paid a benefit.
“These measures are in keeping with the company’s longstanding efforts to keep its promises to customers and their families, and pay benefits to those who are entitled to them,” the company said in a statement.
MetLife is the latest insurer to come to agreement over the sale of industrial policies, which targeted low income customers who would often pay weekly or monthly for policies worth less than $1,000. The line of coverage is often referred to as “burial insurance.”
The coalition of states, led by the National Association of Insurance Commissioners, is continuing to investigate at least eight additional insurers that also sold industrial policies. Prudential Insurance Co. of America and John Hancock Life Insurance Co. had already reached similar agreements.
Along with the payouts, MetLife agreed to reimburse states nearly $40 million to offset costs incurred investigating the charges. The company is also expected pay up to $200 million to policyholders of non-industrial life insurance and annuities.
In general the companies came under fire for not being diligent in determining when death benefits are warranted. The same companies, insurance commissioners charged, were far more diligent in determining when a policyholder died to ensure that annuity payments would no longer be made.
“This settlement with MetLife is another important step in correcting a long-standing practice within the life insurance companies that was not in the best interest of their customers,” Florida Chief Financial Officer Jeff Atwater said in a statement.
By Michael Peltier
