The late Treasurer Judy Baar Topinka used to say that there was the Democratic Party, the Republican Party, and the Judy Party. She didn’t mean that she wasn’t a Republican. Instead, she meant that she didn’t let partisanship or politics get in the way of doing the right thing.
Unfortunately, Gov. Rauner’s veto of House Bill 302, the Life Insurance Reform Act, put politics and profit ahead of doing the right thing.
Let me explain.
Among the duties of the state treasurer is to safeguard unclaimed property. Think items forgotten in a safe deposit box, or a lost rebate check, or misplaced stock dividends. Eventually, these are reported to the treasurer’s office to be returned to Illinois residents. Last year, we returned a record-breaking $159 million.
Included in unclaimed property are unpaid life insurance policies. There are many reasons why insurance benefits go unpaid. A person dies without telling their spouse about the policy. A single parent dies and the surviving children are too young to understand. A senior citizen whose mind is ravaged from Alzheimer’s is unable to completely identify her financial plans.
Many insurance companies know this. These companies review their policies periodically, identify benefits that should have been paid years ago, and report those dollars to the treasurer’s office when they can’t find the beneficiaries.
These companies follow the rules, treat their customers with respect, and want to help the survivors.
For the other companies, we have audits.
However, Gov. Rauner’s veto of House Bill 302 would cripple the treasurer’s ability to hire outside auditors.
Gov. Rauner attempts to strip away the only effective enforcement tool the treasurer has to make sure that businesses, including life insurance companies, follow the rules. Starting with Treasurer Judy Baar Topinka every state treasurer – Democratic and Republican – has utilized contract auditors. If the Governor’s veto were accepted, Illinois would be the only state in the nation to completely prohibit these types of outside audits.
The numbers show why auditors are needed. Of the life insurance benefits reported to the treasurer’s office over a five year period, 80 percent came from audits while only 20 percent was reported voluntarily. Our outside auditors found more than $550 million owed to Illinois residents. Nationwide, the Wall Street Journal reports the figure is more than $7.5 billion.
Insurance companies hired expensive law firms to file lawsuits to stop our audit requests. Insurance companies also hired expensive lobbyists in an effort to defeat House Bill 302.
Each did so because there is big profit in not paying death benefits. Some life insurance companies tell securities regulators that their profits would shrink if they were required to review their records to find unpaid beneficiaries.
The Life Insurance Reform Act also required life insurance companies to review their electronic records from the year 2000 forward to identify any unpaid benefits. Gov. Rauner’s veto would eliminate this requirement and limit searches to the last five years.
Meanwhile, the insurance companies that already agreed to audits look back to 1992.
Gov. Rauner’s veto would allow businesses, including life insurance companies, to hold onto millions of dollars that belong to Illinois residents. That’s not right. That’s obscene. Lawmakers can correct this and override Gov. Rauner’s veto of the Life Insurance Reform Act.
This legislation isn’t about Democrats or Republicans. It’s about right and wrong.
Michael W. Frerichs is the Illinois State Treasurer