The Illinois Department of Insurance has implemented new rules governing life and annuity insurer conduct upon receipt of a death notice, and for interaction with its Lost Policy Finder service for consumers (50 Ill. Adm. Code 920 et seq.). These rules were drafted in response to requirements in the Illinois Unclaimed Life Insurance Benefits Act, which went into effect in 2017 in the aftermath of the national controversy related to how some life and annuity carriers were making use of the Social Security Administration’s Death Master File. In the interest of full disclosure, the author of this post was involved in the initial drafting and review of these rules while serving at the Department in 2018.

Section 920.30 of the new rules governs insurer conduct upon receipt of a death notice of an insured. It sets forth requirements as to how insurers are to check their records to determine whether they have any policies, annuities, or retained asset accounts for that insured across all lines and affiliated companies, and the procedures by which they are to attempt to identify and to contact beneficiaries if necessary.

The State of Illinois has a mandatory Lost Policy Finder for life insurance policies administered by the Illinois Department of Insurance. This differs from many other states, which either have locators in their states or through the National Association of Insurance Commissioners in which participation by insurers is voluntary. Illinois’ service, implemented in mid-2016, allows consumers to submit requests to the Department for searches for policies in the name of loved ones. The Department then acts as a pass-through for life insurers to search their records and to respond to the requests if policies are found.

The newly implemented rules in Section 920.40 require that insurers register for the Lost Policy Finder and designate a search coordinator to respond to requests from the Department. Insurers receiving requests through the Finder are to use all reasonable efforts to search for any in-force policies, annuity contracts, or retained asset accounts for which the deceased person identified in the request is an insured. Within 30 days after the disposition of a request, the insurer shall report to the Department whether or not a claim was paid on a policy, contract, or retained asset account pursuant to the request.

The new rules do include some protection for both the Department and insurers, as the Department in Section 920.60 is given sole discretion to reject any requests from the public it deems incomplete, frivolous, or unduly burdensome.

Failure by insurers to respond timely to requests, or to comply with the provisions of the rule with such frequency as to constitute a general business practice will be considered unfair methods of competition and unfair or deceptive trade practices, and may result in disciplinary action by the Department. The rules went into effect July 30, 2019. Compliance with both these rules and the underlying act are likely to be components of the Department’s market regulation activity going forward.