All states require insurance providers comply with unclaimed property laws. Multiple states have proposed/adopted the National Conference of Insurance Regulators (“NCOIL”) model law or a similar requirement that requires insurers to compare their life and annuity contracts up against the Social Security Administrations Death Master file.
A truly healthy unclaimed property operational process focuses on five key areas. Here some questions you should ask yourself to ensure you're secure in each area.
“How am I handling regulatory requirements?”
A cross-functional team is key to addressing new regulatory requirements. Connectivity and communication among all businesses, corporate functions, and control groups will create a more efficient and compliant organization.
“Is my Unclaimed Property approach flexible, scalable and sustainable?”
Regulatory activity should be monitored, tracked and communicated appropriately throughout the organization. Consider a periodic mock audit, a refresh of quality review procedures and other controls to ensure compliance for your Operations and IT infrastructure.
“Is my process accounting for and providing accurate data?”
A review of all in-scope administrative platforms (e.g.: Life Insurance, Annuity, Retained Asset) and other electronically available company records for accuracy, completeness, and limitations is necessary to ensure regulatory requirements are met. The source data should be inventoried, assessed and stored in such a way that it can be easily analyzed and used.
“Is the SSA’s Death Master File (DMF) a sufficient data source?”
The Bipartisan Budget Act of 2013 aims to restrict access to a decedent’s DMF records for a three-year period following the date of death. The National Technical Information Service recently implemented a certification process requiring users of the DMF to state their business purpose and show a fraud prevention, law, regulation, or fiduciary duty requiring DMF access.
In November of 2011 the SSA removed 4.2 million state protected records and will continue to remove roughly one million state protected records annually. As a contingency an investment in alternate death sources (individual states' Vital Files, for example) often accessed via a third-party provider should be considered.
“Am I using the Death Master File data properly?”
Insurers and their counsel should have a firm grasp on external factors, resources, and legal implications when using the DMF. An approach should be established to determine and document how the DMF files are obtained, stored, organized, and updated.
“Can I use the internal data to make informed decisions?”
Additional policy level data can be used to help evaluate the accuracy of DMF matches and identify policies that may not require payment or action. Key data fields may be able to show whether a benefit is due payable.
“Have I developed an efficient and effective matching process?”
An efficient matching engine must be flexible to allow for future adaptation, logic and regulatory changes to meet expectations and deadlines. An effective and transparent matching process takes the in-scope data and matches it to the DMF providing results that can be analyzed and evaluated based on the quality of the match (relative strength).
[Previously from Navigant: 7 places life insurers can optimize]
“Does my matching process meet regulatory requirements?”
Whether a company has developed a proprietary engine or outsourced the matching process to a third party, companies should consider a periodic check of this process. Engaging a third party to perform independent tests can help determine if there are gaps in your engine or unclaimed property compliance process. It could also give you piece of mind that your process meets industry standards.
“Do I have a well-defined operational process?”
A well-defined operational process incorporates sufficient research of the match results and provides information for management to answer the questions: Can existing operations staff handle the incremental claims volume in addition to normal volume? Is supplemental training necessary to handle the research required to validate the match results?
“Am I planning for the future?”
The organization must be equipped to handle changes, like new or modified regulations. An efficient operational response leverages data and analytics, establishes a clear path for false positives / research items, and determines if contracts are due and payable.
“Do I have the right technology in place?”
Changes often cut across multiple lines of business and administrative, claims, and workflow platforms resulting in long implementation cycles. When facing the decision to build an automated solution, an insurance company should evaluate the cost of buying versus building. Evaluating the health and well-being of your unclaimed property operations will determine whether your organization is prepared to meet the new regulatory requirements.
About the author: Jonathan Berry is a Managing Director and Leader of the Insurance sub-team in Navigant’s Financial Services practice, where he assists large financial institutions navigate the complex regulatory and economic environment. He also leads Navigant’s unclaimed property solutions group, specializing in operational and technology transformation efforts.