Nearly two dozen states have reached an agreement with John Hancock Life Insurance Co. to settle a dispute over how the Boston insurer pays life insurance policies and annuities.
John Hancock executive vice president and general counsel, Jonathan Chiel, said Friday that the company would improve its claims practices under the agreement with 22 states and the District of Columbia. He said the settlement was reached Thursday.
The move comes after an audit by 35 states and the District of Columbia alleged abuses with life insurance policies and annuity contracts. The California controller's office revealed the settlement in a statement released on Friday.
In one case, John Hancock used the cash value of a life insurance policy to pay an individual's premium for seven years after that person died in 1999, according to the controller's office. The controller said the company has not paid the beneficiaries or sent any benefits due under the policy to the controller's office for safekeeping. California has an unclaimed property program that provides that businesses send lost or abandoned financial accounts to the state after three years of inactivity to safeguard them from being lost or spent.
Under the agreement, the company will now do a better job of identifying deceased policy holders and notifying their beneficiaries, according to the controller, John Chiang. He said the values of more than 6,400 California accounts dating back to 1992 will also be restored.
Chiang said that he hoped the settlement will pave the way for reforms for the entire industry. Besides John Hancock, 20 other companies were audited by the states.
"While John Hancock is the first to be held accountable, it will not be the last," Chiang said in the statement. "I am prepared to pursue all necessary actions _ including litigation _ to bring the rest of the industry into compliance."
John Hancock, a subsidiary of Manulife Financial Corp., denies any allegations or characterizations of wrongdoing under the settlement. The company said it was outraged by Chiang's allegations and characterizations of the company's practices.
"We're disappointed that our willingness to behave in a consumer-friendly way is being repaid by having our reputation besmirched," Chiel said.
The company issued a statement saying it has a long history of keeping promises to its customers and agreed to improve its procedures beyond those required by law.
The total value of the settlement is unclear, but California's controller said the change should reunite more than $20 million of death benefits and matured annuities with the owners or, in many cases, the owners' heirs.
Besides California, the controller's office said the other states that settled included Georgia, Idaho, Illinois, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, New Hampshire, New Jersey, North Dakota, Oregon, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Wisconsin, and the District of Columbia.
The other states that participated in the audit include Arizona, Colorado, Delaware, Florida, Indiana, Mississippi, Missouri, Nebraska, Nevada, Ohio, Rhode Island, Vermont and Washington.