A $60 million rip-off

by Rob Schofield, NC Policy Watch, July 21, 2015.

The state Treasurer combats a stunning money grab by the insurance industry

If there’s a single most maddening and nonsensical argument regularly advanced by the far right, so-called “free market” think tanks funded by the Art Popes and Koch Brothers of the world, it’s probably this: the ideology-over-common sense contention that the “genius of the market” makes most consumer protection laws unnecessary.

Whether it’s airplane pilot rest, meat inspections or 400% “payday” loans, it’s generally the position of the market fundamentalists that “the market” and “consumer choice” will pretty much take care of everything. Put bluntly, once a cut rate airliner or two goes down (or a few hundred folks contract salmonella or Mad Cow Disease) consumers will wise up and take their business elsewhere.

This is actually not an exaggeration; the ideologues in the “pro-freedom” groups regularly advance such arguments. Recently, many made this argument on the question of discrimination in the provision of public accommodations to LGBT Americans (just as they once did when it came to serving African-Americans). As they solemnly intoned, we don’t need laws forcing businesses to serve people they don’t like because “the market” will quickly adjust and punish any businesses that fail to meet the needs of the consuming public.

A new example to make you shake your head

Of course, corporate funded ideologues aren’t the only ones to advance this extreme, caveat emptor vision of society; often big corporations do it themselves. Take for example the life insurance companies that are currently attempting to force legislation through the General Assembly that would insulate them from the “burden” of paying people entitled to receive payoffs from policies.

As with the “free market” ideologues that would leave airliner safety to the power of “consumer choice,” we are not making this up.

As reporter Dan Kane of Raleigh’s News & Observer explained in a front page story this past Sunday, thousands of North Carolinians have not received (and may well not receive) millions of dollars to which they are entitled:

“That’s because a little-known practice within the life insurance industry allows many companies to hold onto unclaimed policies until the policyholder would have reached 100 years old, so long as those insurers have not been notified of the policyholder’s death. As a result, beneficiaries may not find out about policies that would have helped them cover burial services or other expenses until decades later – if they are still alive by then.”

You got that? It’s the position of the companies that if no one asks for the money – even if the person who took out the policy has stopped paying premiums (thus giving rise to the at least plausible assumption that they may have died) — they don’t have to pay.

What’s more, at least two of these companies (Kemper being the driving force) are aggressively pushing a bill (already rushed through the state Senate, not surprisingly) that would protect them from efforts to force audits that would identify dead policyholders.

Again, here’s Kane:

“In recent years, roughly 20 life insurance companies, in national agreements with states, have promised to identify dead policyholders and pay out their policies or turn the money over to the states as unclaimed property. But other companies are petitioning state lawmakers across the country to pass a law that would shield them from having to do the same thing.

The legislation [here in North Carolina] – Senate Bill 665 – would require these companies to begin regular death checks of policyholders for policies written after July 1, 2015. But the companies would not have to go through the tens of thousands of policies sold decades ago, which would mean they would only pay benefits on those policies if a beneficiary contacted them, or when the policy holder would have reached 100.”

In other words, the position of the companies is this: “Hey, the policyholders should have read the fine print and informed their loved ones. Can we help it if they didn’t? Why should we be bothered to bear any burden when it comes to paying off life insurance policies for dead people?”

Never mind, of course, the capacity of modern corporations in our hyper-connected society to track virtually our every move. Keeping up with all the policies the companies have written would cause them “burdensome” paperwork.

A public watchdog fights back

Fortunately, for North Carolina consumers, state Treasurer Janet Cowell (whose official duties include connecting North Carolinians with unclaimed property and making sure that companies do right by the consumers to whom they owe such funds) is having none of this nonsense.

In a memorandum to legislators on the subject, Cowell said the companies are under an obligation to “search the Social Security Administration Death Master File (DMF) for all new and previously existing life insurance policies to determine if any of those they have insured have died.” (Emphasis is Cowell’s).

The memo continued:

“SB 665 is an attempt by one insurance company, to greatly limit the Department’s ability to audit by excluding whole categories of policies from the audit requirement. Specifically the legislation would exclude policies called “industrial life policies” which comprise the great majority of benefits that have gone unpaid by these companies. This exclusion will result in tens of thousands of loved ones never receiving the death benefits their parent, grandparent, or spouse has already paid for. 

This legislation is little more than a money grab. Other companies in the industry have had no problem complying with statutory audit requirements. This legislation would allow some insurance companies to hold onto policies until a “limiting age” of 100 years was reached before escheating them to the state! These policies are worth millions of dollars and are owed to North Carolina citizens. Over the last four years, Department audits have resulted in over $60 million in death benefits being turned over to the Escheat Fund. We anticipate that if this legislation passes an amount equal to this sum or greater will not go to the escheats fund, furthering the deterioration of the fund and undermining the fund’s ability to pay for scholarships for deserving and needy students. 

The Department is sensitive to industry concerns about cost and profit and have offered to work with them and craft language that both addresses their concerns and preserves our current statutory authority to audit these companies. Our efforts have been rebuffed at every turn.

We ask you, the members of the General Assembly to protect the Department’s ability to conduct audits and reunite over 123,000 North Carolina citizens with the money their loved ones intended them to have.” (Emphasis in the original).

Going forward

According to Kane’s article, the fate of the legislation already approved by the Senate is unclear. In a somewhat hopeful sign, the chair of the House committee to which the measure was assigned, veteran Smithfield lawmaker Leo Daughtry, has some concerns. He told Kane he is “apprehensive” about the bill.

Such a statement, however, is no guarantee that the measure won’t proceed. Daughtry, who two decades ago was seen as a hardline conservative, is now viewed as a relative moderate in the ever-more-reactionary General Assembly.

Add to this the fact that numerous lawmakers are about to jet off to San Diego tomorrow for a gathering of the corporate-funded American Legislative Exchange Council (ALEC) and it becomes easy to envision them returning with new marching orders to do industry’s bidding and enforce yet another component of market fundamentalist, “buyer beware” economics.

One can only wonder, however, if they would embrace such an ideology if it were made applicable to the airliners that will carry them across the country.

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