On April 26, 2013, the Governor of North Dakota signed HB 1171, enacting a new law relating to unclaimed life insurance benefits. In addition to the new unclaimed life insurance law being signed into law, the enacted version of the bill amends the life insurance provisions contained within the North Dakota Unclaimed Property Act to be more congruent with the new regulations.
Changes to North Dakota’s Unclaimed Property Law
Specifically, the dormancy period for “funds held or owing under any matured or terminated life or endowment insurance policy or annuity contract” has been reduced from three (3) years to one (1) year. Presently, North Dakota is the only state with a one-year dormancy period for such property.
Also under the new amended law, the criteria has changed for when a life or endowment insurance policy or annuity contract not matured by actual proof of the death of the insured or annuitant is considered matured. Under the previous law, the carrier had to know that the insured or annuitant had died. Under the new law, benefits are considered matured if “the company knows of the potential death of the insured or annuitant.”
North Dakota’s unclaimed property law was also amended to include the requirements detailed below to confirm the death, determine if benefits are due, and then locate any beneficiaries.
North Dakota’s Unclaimed Life Insurance Benefits Law
Similar to legislation passed in other states, insurers must perform a comparison of their in-force life insurance policies and retained asset accounts against a Death Master File (DMF) in order to identify potential matches of its insureds. Specifically, North Dakota’s law requires this comparison to be conducted on a semiannual basis and the first comparison must take place before November 1, 2014.
For any potential matches identified as a result of the DMF comparison, the insurer must complete a good faith effort to confirm the death, determine if the decedent had purchased additional products from the insurer, and if benefits are due in accordance with the applicable policy or contract. This good faith effort must be documented and conducted within twelve months of the DMF comparison.
In the event benefits are due, the insurer must use good faith efforts to locate the beneficiaries and provide the appropriate claims forms in order to make a claim. If the insurer is unable to locate the beneficiaries, the benefits from the unclaimed life insurance policy or retained asset account, plus any applicable interest, will escheat to the state as unclaimed property. The insurer is also required to notify the North Dakota abandoned property office within twelve months of confirming a potential match that a beneficiary has not come forward to claim the proceeds and that they have complied with the good faith efforts to locate any possible beneficiaries. This law becomes effective August 1, 2013.
A total of seven states have now passed legislation similar to the NCOIL Model Unclaimed Life Insurance Benefits Act. Four additional states have legislation pending. You can view a full map and matrix of these states here.