AICP MID-ATLANTIC CHAPTERFEBRUARY 28, 2013 WEBINAR

KATHLEEN H. MOYER, MANAGING PARTNER – COMPLIANCE SERVICES, MOYER & OSIBODU

KATHLEEN M. DONOVAN, SENIOR COMPLIANCE COUNSEL, WOLTERS KLUWER FINANCIAL SERVICES

UNCLAIMED PROPERTY:ARE YOU READY FOR THE

FILING DEADLINES?

CONTENTS

Unclaimed Property Myths vs. Reality

History and Background of Unclaimed Property

Appropriate Jurisdiction for Reporting

Examples of Reportable Property

Holder Responsibilities

What Should I Report?

When Should I Report?

What Due Diligence is Required?

When should due diligence be Performed?

Document Retention

State Enforcement on the Rise

Regulatory Developments

Impact on Life Insurers

Market Conduct Activity

2

UNCLAIMED PROPERTY MYTHS VS. REALITY

3

HISTORY AND BACKGROUND

Origins in British Common Law• Lands reverted to the King

Escheat• Traditional• Custodial

Uniform Unclaimed Property Acts• 1954 Uniform Act• 1966 Uniform Act• 1981 Uniform Act• 1995 Uniform Act

4

APPROPRIATE JURISDICTION FOR REPORTING

54 jurisdictions have unclaimed property laws• 50 states plus the District of Columbia, Puerto

Rico, Guam and US Virgin Island• Some states have adopted versions of the

Uniform Unclaimed Property Acts while others have not; laws are constantly changing.

5

APPROPRIATE JURISDICTION FOR REPORTING (CONT’D)

Supreme Court Case Law – priority rules for reporting• Texas v. New Jersey (1965)• Pennsylvania v. New York (1972)• Delaware v. New York (1993)

1.State of owner’s last known address2.State of holder’s incorporation or domicile if address is not known3.State of holder’s incorporation or domicile if address of apparent owner is in a foreign country and the holder is incorporated or domiciled in the U.S.*

* Provision language added in the 1981 Uniform Act

6

EXAMPLES OF REPORTABLE PROPERTY

Uncashed checks (payroll, accounts payable, commissions, rebates, etc.)

Accounts receivable credit balances and refunds

Accounts payable credit balancesInsurance proceeds (including due and

unpaid)Securities and related property

7

HOLDER RESPONSIBILITIES

Duty to perform due diligenceDuty to file a reportDuty to remit the propertyDuty to maintain copies of the reports

and supporting documentationDuty to protect the funds until reported

and transferred to the state

8

WHAT SHOULD I REPORT?

Property due and payable after due diligence has been performed • Internal due diligence • State required due diligence

Identify potential exemptions and exclusions• Get your legal department involved with the

determination

of applicable exemptions

Report all property types generated by the Holder’s operations

9

WHEN SHOULD I REPORT?

Corporations – Oct 31, Nov 1 filing deadline

Life Insurance – Non-Life may not have the same filing deadline within a state EX: DE Life Insurance due Dec 20, Non-Life

due March 1

10

WHEN SHOULD I REPORT? (CONT’D)

11

March 1 Non-Life = DE

March 10 Life & Non-Life = NY

March 28 Life & Non-Life = CT

April 15, Life & Non-Life = PA

April 30, Life = AR and WV Life and Non-Life = FL and MD Life Preliminary = CA

May 1, Life = AZ, CO, DC, IL, IN, KS, MA, ME, MO, MT, NC, ND, NE, NJ, NM, OH, OK, and SD Life & Non-Life = GA, NH, NV, TN, VA, and VT,

WHAT DUE DILIGENCE IS REQUIRED?

States have increased interest in performance of due diligence. Many have modified the requirements and processes: • Previously encouraged, Texas now requires due

diligence for records of $250 or more• California due diligence efforts require payees

to contact the holder for reimbursement before the state takes custody of the property

• Indemnification for securities related property is not provided by the states unless due diligence is performed

12

WHEN SHOULD DUE DILIGENCE BE PERFORMED?

Typically a first class letter must be sent to the last known address on company record no more than 120 days or less than 60 days prior to escheat

Pennsylvania and Delaware does not require due diligence letters but encourages it

Due diligence letters must be specific• Include amount, date, property type, check

number or other identifier• Include contact information for the claimant• Some states require a self-addressed return

envelope be included

13

WHEN SHOULD DUE DILIGENCE BE PERFORMED? (CONT’D)

Some states require a second mailing by certified letters for amounts over a certain threshold, if the first mailing was not returned as ‘undeliverable’ by the post office

NY requires insurance companies to ‘publish a notice’

Retain proof of certified mailings and publication

A signature is required to remove an item from the unclaimed records (fax copy is sufficient)

Document removals resulting from the due diligence process

14

DOCUMENT RETENTION

● Maintain copies and supporting documentation of unclaimed property reports

● Maintain proof of payment● Maintain copies of documentation supporting

the removal of items from the unclaimed property process

● Maintain copies of all unclaimed property audit reports and settlement agreements

● Recommend that the records be maintained for at least 10 years after submitting the report

15

STATE ENFORCEMENT ON THE RISE

Unclaimed Property is viewed as a means to generate revenue by many states

Although held in a custodial capacity for the true owner, less than 10% is ever claimed

States engage third-party contract auditors to perform audits on their behalf

Contract auditors are usually compensated based on “percentage of findings”

16

Unclaimed Property: The Regulatory Impacts

Regulatory Impacts

Increase in legislative and regulatory activity

Life insurance company audits Increased scrutiny by DOI’s

Discussion Areas

Legislative & regulatory developments – the TRAIN has left the station

What do the life insurance company settlements tell us?

Keeping on Track…

Legislative Update - 2012

Alabama Delaware Kentucky Maryland New York

Alabama’s Legislative Update

Within 90 days of a death master file match: Complete a commercially reasonable effort

to confirm the death of the insured, annuitant or retained asset account holder

Determine whether a policy or contract insuring the insured or annuitant is in force or a retained asset account exists

Determine whether benefits are due Document steps/results

HB 126 (2012) - Effective January 1, 2014

Alabama’s “Search Service”

Access the “Life/Annuity Policy Search Service” link on the DOI’s website to establish an account Designate the insurer’s Policy Search

Coordinator Create the Coordinator’s user ID Participate in monthly process

Kentucky’s Legislative Update

Requires insurers to compare in-force life insurance policies against the Death Master File to determine potential matches of their insureds

Requires escheat of policy proceeds after the expiration of the fee statutory time period only if no claim for the policy's proceeds has been made and if good faith efforts to contact the retained asset holder and any beneficiary are unsuccessful

HB 135 (2012) - Effective January 1, 2013

Maryland’s Legislative Update

Requires an insurer that issues or delivers a policy of life insurance or an annuity contract to: Perform a cross-check of the insurer's in-

force life insurance policies, annuity contracts, and retained asset accounts against a specified death master file to identify any death benefit payments that may be due

SB 77 (2012) - Effective October 1, 2013

New York’s Regulation 200

Cross check their policies at least every 3 months with recent deaths using SSA’s Master File of deaths or another database

Search for multiple policies on the same person in the files of all insurers owned by a holding company

Cross-check policies with consumer requests received through the State’s new “Lost Policy Finder”

Annually submit data on the number of policies for which a death occurred but for which the insurers were unable to find the beneficiary to the Office of the State Comptroller

Regulation 200 – Effective June 14, 2012

New York’s Underwriting Impact

New York Regulation 200 Insurers must request more detailed

beneficiary information when a policy is sold (i.e. SSN and address)

Facilitates locating and making payments to beneficiaries when a death occurs

Revision of applications Possible “adoption” by other states Possible best practices option

New York’s Legislative Update

A 9845 Effective date of June 15, 2013 Insurers to perform a comparison of life

insurance policies against the federal Death Master File to identify potential matches of its insureds or account holders and to complete a good faith effort to confirm the death of the insured and locate beneficiaries

Codifies many of the requirements established in Regulation 200, which became effective on June 14, 2012

Delaware’s VDA

Regulations assist in the implementation of SB 258

Criteria set for unclaimed property holders eligible to resolve claims before the SOS

Limits the look-back period to 1996 or 1993, depending on whether the holder has indicated in writing its intent to enter into a VDA before June 30, 2013, or after June 30, 2013 but before June 30, 2014

VDA program www.DelawareVDA.com

Legislative Update – Introduced in 2013

Alabama HB 192 Delaware HB 2 Massachusetts HB 20 Mississippi HB 249 Montana SB 34 New Mexico SB 312 North Dakota HB 1171 Vermont HB 95

Impact on Life Insurers

New claims requirements New underwriting requirements Reporting Audits

State Market Regulation

General Examination Process Check on insurer’s processes Does insurer make reasonable attempts to

locate beneficiaries, policyholders and recipients of unclaimed properties

Multistate Settlements: Life Insurers

Overhaul of computer system Revision of business practices to better utilize

the Death Master File to identify life insurance beneficiaries

Return of monies promptly to beneficiaries when located through revised search efforts

Reporting to the appropriate state agencies Retained asset account procedures Increased regulatory oversight Re-exams

Questions & Thank you

Kathy Moyer Phone: (609) 412-0866 cell; (813) 986-7192 officeEmail: kathy@moyerosibodu.comWebsite: www.moyerosibodu.com

Kathy DonovanPhone: (781) 907-6689Email: kathy.donovan@wolterskluwer.comwww.InsuranceComplianceCorner.com