A Pennsylvania-based life insurer, Lincoln National Corp, has paid out a $52 million settlement after it was said to have lost track of thousands of policies during a merger deal with a competitor.
Lincoln paid $50.7 million to beneficiaries of policyholders for lost insurance claims, and a $1.5 million fine for unfair claims settlement practices.
The agreement was made as part of a consent order entered into with the New York Department of Financial Services, according to Reuters.
Lincoln self-reported that it had lost track of thousands of policies when it merged claims-processing systems with North-Carolina based Jefferson-Pilot Corp., which it merged with in April 2006.
Thousands of beneficiaries “received interrupted or no communication from Lincoln or received payments that were weeks, months or even years late,” according to the regulator.
A subsequent regulatory investigation found that the company had failed to adequately address early red flags surrounding the problem, the Philadelphia Business Journal reported.
“Life insurers have a duty to policyholders and their beneficiaries to keep track of claims and make necessary payments in a timely fashion,” New York Financial Services Superintendent Maria T. Vullo said in a statement.
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“While we appreciate the steps that Lincoln has taken towards making beneficiaries whole, we stress the importance of keeping consumers from falling through the cracks during mergers and other types of business
interruptions.
“Consumers must be confident that their insurers are taking the necessary steps to maintain records, communicate claims processes, and make payments to beneficiaries.”
As part of the settlement, Lincoln, which markets itself as Lincoln Financial, will also continue to identify beneficiaries and pay claims, with interest.
In a statement, the company acknowledged that it had entered into a consent agreement addressing “issues related to the untimely payment of certain death claims.”
It continued: “Lincoln self-reported the issues to the New York Department of Financial Services, and all claims related to this matter have since been resolved.
“Paying all legitimate claims is of utmost importance to us, and we have taken additional steps to ensure that similar issues will not arise in the future.”
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