Insurance companies deal with a variety of challenges when managing their policyholders (life, long term care, PRT, structured settlements, annuities), with inaccurate or missing participant data being the most impactful. Incorrect information affects how insurance companies communicate with policyholders, accurate forecasting of risk, overfunding reserves, interest penalties, and overpayments. Plus, providing accurate data when the inevitable Department of Labor (DOL) or state audit takes place.
More than $1 billion in overpayments now occur annually by organizations who unknowingly send payments to deceased participants.
Missed deaths are leading to overpayments for insurance companies in their Pension Risk Transfer (PRT) and Structured Settlements lines of business. In Long Term Care (LTC), missed decedents are causing companies unnecessary and significant reserves, fraud, and several other issues. In life insurance, if a death is not reported and not discovered by the insurer, it puts them at risk of failing their fiduciary duties, interest penalties and not providing important benefits due to beneficiaries.
How did this happen?
For years, the Social Security Administration (SSA) has published the Death Master File (DMF), which was considered a comprehensive source of information. However, the DMF has declined over privacy concerns and now reports less than 20% of deaths, creating a significant gap in the data – making it hard to identify unreported decedents in a timely manner.
The SSA first made the DMF available in 1980. Originally, the file was updated quarterly and contained the name, date of birth, date of death, zip code, and social security number of decedents across the nation.
Starting in 2011, the SSA has dramatically decreased the amount of data available via the DMF. The rise in identity theft resulted in a law that prohibited death records reported by the states via the Electronic Death Registration (EDR) system to be released in the DMF. Over the years, more states began using the EDR system which further reduced the SSA reported records. Today, the SSA DMF only has information on about 16% of the total death occurrences. In addition to reporting fewer deaths, the details provided on individual decedents has also declined – removing zip code information for the decedent and beneficiaries.
The chart above shows the decline in DMF death records in comparison of the Centers for Disease Control and Prevention (CDC) reported deaths.
What options do insurance companies have?
The decline in the data available via the SSA DMF has introduced two issues that make identifying deceased policyholders much more difficult: data source proliferation and data complexity. Insurance companies are now forced to look for additional data sources including state records, local records, and obituaries.
Without the single comprehensive data source that was once available, accurate decedent identification is nearly impossible for individual organizations without access to significant human resources and/or data. While some have tried to compensate with more internal resources, it’s inevitable that these efforts reach limits in accuracy and efficiency and create headaches down the road without strong documentation for audit preparedness.
Administrators are very limited when it comes to solving for inaccurate and proliferated data. There are only two options: 1) implement an internal process, or 2) work with a service provider.
Implementing an internal process
Implementing an internal process reduces the number of individuals/organizations that have access to policyholder’s confidential information. However, this requires substantial time and resources. Additional staff will need to continuously monitor and research the status of each individual participant. This will likely involve also purchasing access to databases to aid in the search. This comes with a significant increase in human error, resulting in false positives and missed deaths.
An internal process also relies heavily on self-reporting by a policyholder’s beneficiaries. The beneficiaries may or may not know about the participant’s plan. Even when working with companies with a relatively robust internal process, a significant portion of deaths are still missed.
Working with a service provider
CertiDeath death audit is the only solution on the market that has helped bridge the missed deaths gap. Using integrated databases, over 26,000 data sources, and human expertise, CertiDeath provides validated results, identifying 96.5% of deaths with 99.9% accuracy to minimize overfunded reserves, interest penalties, overpayments, fraud, time, and meet fiduciary responsibilities. Plus, CertiDeath has one false positive for every 3,000 deaths identified vs. one false positive for every 211 deaths identified via DMF.
Whether you have a robust internal process or work with another service provider, when we run your data for the first time, we will identify a missed death – it happens 100% of the time. Try to prove us wrong by having us run a free CertiDeath analysis for your participant population.
A CertiDeath Analysis costs nothing. Unreported deaths could cost you everything.
Contact us today for your free CertiDeath analysis.
