Keane's Unclaimed Property Blog

Texas Beneficiary Location Law Enacted

A Texas beneficiary location law will require life insurance companies operating in Texas to take additional measures to identify deceased insureds and seek out beneficiaries when payments are due. Passed on May 19, 2017, TX S 561 amends Chapter 1109 of the Texas Insurance code by adding requirements for unclaimed life insurance benefits. The bill is effective on September 1, 2017, giving Texas life insurance carriers roughly 90 days to prepare themselves for the upcoming deadline.

Texas Beneficiary Location Law & Unclaimed Life Insurance Benefits Act

Texas S 561 amends Chapter 1109 of the Texas Insurance Code and requires that all insurers operating in Texas or with policyholders in Texas must compare their in-force life insurance policies, annuity contracts and retained asset accounts against a death master file (DMF), on at least a semi-annual basis, to identify potential matches.

Within 90 days of identifying a potential match through a DMF search, insurers must complete and document a good faith effort to confirm death and determine whether benefits may be due. Should benefits be due, insurers are required to complete a documented good faith effort to locate beneficiaries and provide them with the appropriate forms and instructions.  If the insurer is unable to confirm death or if a beneficiary cannot be located, proceeds or benefits from the insurance policy, annuity contract, or retained asset account are considered unclaimed three years after the date that the insurer completed a good faith effort which failed to locate a beneficiary.

The Texas commissioner is authorized to issue an order to limit the number of DMF comparisons, exempt an insurer from the requirement to complete the DMF comparisons, or permit the insurer to phase in compliance in accordance with an approved plan or timeline.

Good Faith Efforts and Potential Audit

While the statute states that a “good faith effort” must be completed within 90 days, there is no standard definition given within the Texas beneficiary location law, or within any state law for that matter, for what constitutes a good faith effort.

Many states delineate a good faith effort as those actions made by an insurer that demonstrate that it has gone above and beyond searching its books and records to identify potential matches. This may include the use of commercial databases or the use of third-party firms that specialize in locating lost or missing beneficiaries as well as compliance with state laws and regulations.

Since minimum standards for compliance are not set, insurers must be sure to document each effort and ensure compliance with each state’s requirements to the best of their ability.

Texas has become the 27th state to have now passed legislation regarding unclaimed life insurance benefits with the enactment of TX S 561.

The impact of this bill is significant as a substantial population of policyholders resides in the Lone Star State. Insurance carriers of all sizes should take action to ensure compliance with Texas laws and with those of other states, if they have not already done so.

Being proactive can help insurers avoid the risk of an unclaimed property audit. Even if an insurer was previously audited, auditors can open another audit on behalf of states that have recently passed unclaimed life insurance benefits legislation.

Current Unclaimed Life Insurance Benefits Legislation

Unclaimed Life Insurance Benefits LegislationThe number of states that have pending legislation that would require death master file searches and early beneficiary location measures has increased to eight with the recent introduction of Wisconsin Assembly Bill 334, and its companion bill, Senate Bill 274. The Wisconsin bills seek to implement the Model Unclaimed Life Insurance Benefits Act.

Keane will be sure to provide the latest updates on unclaimed life insurance benefits legislation on our Unclaimed Property Blog. Please check back from time to time for addition news on pending legislation regarding this topic or to gain access to our other Unclaimed Property Resources. You can also subscribe to our Unclaimed Property Compliance Portal to stay up to date on all legislation along with access to various escheat compliance resources.

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