GAO: Fixes Needed for Social Security Administration’s Death Master File
January 2, 2014 by Jeff Jeffrey
WASHINGTON – A federal watchdog agency has recommended the Social Security Administration make a series of fixes to its database of deceased Americans to ensure the Death Master File does not include inaccurate information.
The Death Master File has been at the center of a nationwide crackdown on life insurance practices that state regulators have alleged were designed to get insurers out of paying benefits to policyholders’ families. Regulators in dozens of states have accused several large life insurers of using the Death Master File to stop making annuity payments but did not search for beneficiaries of a life insurance policy who may be due benefits.
In a recent report, the Government Accountability Office said the SSA does not have written guidance on which federal agencies have access to the full database and is insufficiently transparent about the cost of providing the database to agencies.
The GAO report is primarily focused on how the full database, which includes more information than the Death Master File used by life insurers, is used by federal agencies. But it does say the SSA may be providing inaccurate information about which Social Security number holders have actually died.
“Certain procedures that SSA uses for collecting, verifying, and maintaining death reports could result in erroneous or untimely death information,” the GAO report said.
For example, SSA does not independently verify all reports before including them in its death records. The report said the agency only verifies death reports for Social Security beneficiaries in order to stop benefit payments, and then, verifies only those reports from sources it considers less accurate, such as other federal agencies.
“GAO identified instances where this approach led to inaccurate data,” the report said.
The report recommended the SSA assess risks associated with inaccuracies; develop and publicize guidance it will use to determine agency access under the Act; and share detailed reimbursement estimates.
The GAO said the SSA partially agreed with the recommendations to assess risks and share detailed reimbursement estimates. But the agency did not agree to develop and publicize guidance, stating each request is unique.
“GAO believes that the recommendation remains valid as discussed in the report,” the report said.
The Death Master File garnered headlines earlier this month when three life insurance companies of Lincoln National Corp. reached a $12.6 million multistate life claim settlement agreement over their improper use of the file.
The companies involved in the settlement were Lincoln National Life Insurance Co., Lincoln Life and Annuity Company of New York and First Penn Pacific Life Insurance Co. (Best’s News Service, Dec. 10, 2013).
In 2011, regulators began to investigate companies’ use of the Death Master File. Several companies have reached settlements with states involved in the various investigations (Best’s News Service, Nov. 12, 2013). Among them: New York Life Insurance Co. in October agreed to pay $15 million to state regulators over its use of the database but called for state regulators to craft uniform national standards for companies to follow when conducting searches on unclaimed property using the file and other tools.
A National Association of Insurance Commissioners’ panel is considering whether to conduct a study that would determine if the NAIC should develop guidelines to provide insurers with consistency in handling unclaimed death benefits. Its Life Insurance and Annuity Committee voted during a recent meeting to consider performing the study. The American Council of Life Insurers has been pressuring the panel to begin a process that would result in guidelines insurers can use and offered its own set of standards that expand on the National Conference of Insurance Legislators’ Unclaimed Life Insurance Benefits Model Act as a model.
(By Jeff Jeffrey, Washington Bureau manager: jeff.jeffrey@ambest.com)
