American International Group has agreed to pay over $300m to settle dispute with states over death benefits payments which remained unclaimed.
California State Controller’s office spokesman Jacob Roper said that the underwriter will reimburse the aforesaid amount, which will be distributed among 39 states and the District of Columbia.
California’s share will be between $25m and $30m, while the share of other states is yet to be finalized.
The agreement is a significant step to eliminate the century-old insurance industry practice in which the underwriters expected that they will pay benefits to the concerned beneficiaries, when it will be claimed, in the event of the death of the policyholders.
In a separate settlement, the insurance company agreed to pay $11m to insurance regulators, to settle a multistate case of death benefits.
Under the settlement plan inked, the insurer has also consented to employ a verification system to routinely check lists of policyholders against a Social Security Administration death database, and hand over the claim benefit by tracing the nominees.
Florida’s insurance commissioner Kevin McCarty told The Associated Press, "Momentum is building within the industry to change their practices, pay beneficiaries, and reach agreements with the appropriate regulatory jurisdictions to resolve issues surrounding past practices."