About Insurance Companies that dont pay out Life Insurance policies, even when they know their customer has died. And this mans investigation found that it is more widespread than you can imagine. When you found that, what went on inside of you . Unleash the hounds of hell. Lets go after them and expose them for the unconscionable, indefensible behavior. Bill whitaker Rikers Island holds about 10,000 inmates on 400 acres in the shadow of manhattan skyline. It is known as one of the worst jails in america, with a history of violence. What happened in the case captured on this video is a vivid and horrible example of how bad it can get. They watched him languish for seven days as he died. And they did nothing. It was the functional equivalent they killed him. Sharyn alfonsi youve probably been warned to be careful about what you say and do on your phone. Do i need to connect this . Yes. Alfonsi okay. But after you see what we found, you wont need to be warned again. So, are you connected . Alfonsi i am. And i have your email. And more importantly i have all the credit cards associated with that account. The president of the United States called me on my cell phone. So if the hackers were listening in, they would know that phone conversation. And that is immensely troubling. Alfonsi is everything hackable . Yes. We live in a world where we cant trust the technology that we use. Im steve kroft. Im lesley stahl. Im bill whitaker. Im Sharyn Alfonsi. Im scott pelley. Those stories tonight on 60 minutes. Another day, and im still struggling with my diabetes. I do my best to manage. Your body and your diabetes change over time. Your treatment plan may too. Know your options. Oncedaily toujeo is a longacting insulin from the makers of lantus. It releases slowly to provide consistent insulin levels for a full 24 hours. Toujeo also provides proven full 24hour blood sugar control and significant a1c reduction. 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However, about 35 Insurance Companies have not settled and remain under investigation for not paying when the beneficiary is unaware there was a policy, something that is not at all uncommon. Kevin mccarty the beneficiary never comes forward, because he or she doesnt know the policy exists. Stahl but the companies know, says Kevin Mccarty, the insurance commissioner of florida, who led the National Task force investigating the industry. And the companies dont pay, he says, unless a beneficiary makes a claim. Mccarty and what we found is knowledge in their files that people have died, yet they have neglected to initiate an investigation and pay the claim. Stahl so in other words, life Insurance Companies are failing to pay out death benefits when they know the person is dead, and theyre claiming they dont know. Mccarty in many cases, that has been exactly what we have found. Stahl when you found that, what went on inside you . Mccarty my first instinct was, of course, is unleash the hounds of hell. Lets go after them, and expose them for the unconscionable, indefensible behavior that was going on. Stahl he says some of the policies are worth more than a million dollars. But most are valued at less than 10,000. Joseph bigony morning, joe stahl as a result of the audits, Joseph Bigony of West Virginia recently got a long overdue payment of more than 5,000 from his sisters policy. Administrator of her estate when she died in june of 1990, and we didnt know anything about this at all. Jeff atwater youre talking about millions of policies. Stahl millions . Atwater hundreds of thousands of policies that were dealing with just here in florida. Stahl jeff atwater is the chief Financial Officer of florida in charge of regulating the states Insurance Industry. Atwater you can assume from what we have found that the policies that should have paid out in the 60s, in the 70s, in the 80s, in the 90s were never paid. Stahl and youre saying its part of their plan . Atwater after all weve looked at, lesley, it would be this is not a small dollar amount. These are billions of dollars that now stay in the investment accounts of these Insurance Companies rather than return money to those families. Stahl tell us some of the big names. Atwater it would be all the large brand names that youre familiar with john hancock, metlife, prudential. Many of these companies have sat down with us and made right. Stahl no one disputes that the insurers pay out on policies when the beneficiary files a but says Kevin Mccarty of florida, many of the companies routinely and deliberately disregarded evidence in their own files that the policyholders had died. Unless someone filed a claim, he says, the companies would cancel the policy and keep the death benefit for themselves. Mccarty heres a Life Insurance policy thats issued in florida in january 2002. The insurer died in april of 2008. We actually have in the Insurance Companys file, a copy, a scanned copy, of the death certificate. And the accompanying envelope which displayed the spouses return address. Stahl with the spouses address on it. Mccarty its right here. Stahl let me see. Mccarty less than one month after the death the policy was terminated for nonpayment. Stahl industry lobbyists, like this one at a recent hearing in florida, argue that the burden falls on the beneficiaries. Contracts every day and if you sign that contract, youre obligated to know whats in it. Stahl the Companies Argue that in the policies that these people signed, it says, black and white, that they have to make the claim and show up with a copy or the policy itself. And if they dont do that, we dont have an obligation. Mccarty but florida law says something too. And you have to look at it not just in terms of the contract, but to your responsibilities under the florida insurance code. And im here to say that you have a responsibility to investigate a claim if you know someone has died. And if you have a letter that says youre deceased, you have actual knowledge the person has died. Stahl Insurance Companies are regulated separately by each state and he says similar laws are on the books across the country. You see right there . Stahl state regulators first got wind of the Insurance Industry practice from jim hartley and jeff drubner who run Company Called verus financial. Based on an insider tip in 2006, drubner, employing techniques he had used as an f. B. I. Agent, combed through Insurance Company data and discovered that the insurers were routinely using the Social Security death master file, which is a constantly updated list of people who have died in the United States. What was the significance to you that they were using the death master file for something . Jeff drubner i knew at that point that they knew because if you have stahl they knew who was alive and dead, is what youre saying . Drubner yeah, because they know who theyve insured and if they have a list of everybody thats passed away, i knew that they knew. Stahl what was the next step . Jim hartley the next step was to speak to the states. There wasnt one treasurer, one controller or one attorney general who didnt have a reaction that this shouldnt be allowed to happen and we have to fix it. Stahl drubner went on to discover that most Insurance Companies used the death master advantage to cut off annuity, or retirement payments once the policyholder died. But they didnt then notify the Life Insurance side of the company. Mccarty we have actual cases, lesley, where a policyholder had both an annuity and a life policy. And they terminated the annuity, and of course they knew the person was dead, so they so stahl claimed over here that they didnt know he was dead . Mccarty lesley, when we went in and looked at the memos, the right side told the left side and the other side said stahl and you saw it in the audits . You would just see it mccarty we saw it in the audits. Stahl Something Else they saw in the audits related to whole Life Insurance policies, that in addition to a death benefit build up a cash nest egg, like a 401k. What they found is that when a beneficiary did not come forward, the company continued to pay themselves premiums out of the dead persons nest egg. Instance, the nest egg was drained down more than 9,000 to zero after the person had died. California controller betty yee says that kind of siphoning off was widespread in cases where beneficiaries did not come forward. Betty yee how can you not be outraged by this . Stahl she says that in about a third of the cases, there was evidence of death in the file. Yee here we have a policyholder. Stahl is this the actual file that you saw with the word deceased in large, large unmistakable letters . Yee yes, yes. Deceased with the date of death. Stahl and still they didnt they didnt stop paying themselves. Yee no, no. And you wouldve thought with that kind of indication, a next step would be to confirm that by looking at the death master file and beginning the claims process with the family member. Stahl and they didnt. Yee they didnt. Stahl when the cash was all used up, the companies cancelled the policy. Under the law, theyre allowed to pay themselves premiums using cash while theyre alive. Floridas mccarty says the law was originally intended as a way to protect consumers. Mccarty for instance, if you have a life policy and you lose your job and you cant make your premium payment, they will take some of the cash value thats built up in your policy and pay the premium. Which is great for consumer protection. Stahl but in this situation, after they died. Mccarty i think its tantamount to stealing when you know in your books and records the person is dead and you drain the policy. Now if you think about that, if you would have explained that trying to sell that policy at the beginning stahl at the beginning. Mccarty youre sitting in your kitchen and saying, you know, youve got all these symbols of security and Financial Stability and were going to be there for you with your family in their grief, but they say, oh, by the way. If you stick that policy in a closet, not only are we not going to look for you, but were gonna to take all the cash value in it, and stahl give it back to the company. Mccarty give it back to the company. And leave your beneficiary with nothing. Here, sign here. Stahl the 25 Insurance Companies that have settled with the states admitted no wrongdoing, but agreed to pay out more than 7. 5 billion, either directly to the unpaid beneficiaries or to the states, which then try to find the beneficiaries by phone. We have received some funds from an Insurance Company thats in your name. Stahl or online. Thousands of oklahomans are owed money from Life Insurance policies. Stahl none of the life Insurance Companies we contacted would give us an interview, but speaking on their behalf, the Industry Trade association, the American Council of life insurers, told us quote most life insurers are going well beyond what the law requires to identify policy unclaimed benefits. Ken miller, the treasurer of oklahoma, says there are still about 35 Insurance Companies that have not settled and some are fighting tooth and nail. At stake, he says, is up to 3 billion more in unclaimed benefits nationwide. Whos fighting the hardest . Ken miller kemper is the main one. Stahl kemper, a chicago based Insurance Company, has been pushing for legislation around the country that would bar the states from forcing kemper to go back and search for unpaid beneficiaries. When we called kemper, they referred us to Steve Weisbart of the Insurance Information institute, who says making Companies Like kemper pay now would be unfair. Steve weisbart if we can say, do something today that you didnt expect to do and didnt plan to do and didnt collect money to do 30 years ago, what else can we say today retroactively. Its potentially an open door. Stahl a slippery slope is what youre saying . Weisbart a slippery slope. Stahl kemper has argued in Court Filings that its never used the death master file to identify deceased policyholders and that finding and paying their beneficiaries now would result in a substantial financial loss and require the company to. Substanially alter its business practices. Miller if your model is built upon the fact that youre not going to pay a dead persons loved ones for a policy that theyve completely paid in full, to me thats just a bad policy. Stahl an oklahoma woman, sherry sanders, didnt know about her husbands policy until about a year ago when, because of a settlement, she got a check worth 22,000. We asked oklahoma treasurer miller how much an Insurance Company can make by holding on to the 22,000. Miller well, lesley, now youve hit on something thats and thats the time value of money. Because thats what this is all about. This is about money. That 22,000 invested for 50 years at an 8 return becomes 1. 2 million. Stahl that the company gets because it sat there . Miller and thats just one small policy. If you expand that over all the policies thats just due to my of money, billions and billions of dollars. Stahl the American Council of life insurers says that the industry has paid out more than 600 billion in death benefits over the last ten years, so the companies are doing a good job. Miller i dont think we should pat them on the back for doing what theyre supposed to do. Stahl but the Companies Say that this is only 1 of the Life Insurance policies. Miller then why fight it . If its so inconsequential, if its such a small amount, then why be spending your reputation them . Cbs money watch update sponsored by glor good evening. The i. R. S. Has already processed nearly 105 million tax returns. The deadline to file is the end of monday. A plan to Freeze Oil Production fell apart today after iran skipped a meeting of 18 countries in qatar. And the west coast retailer sports chalet is going out of im jeff glor, cbs news. gasp shark diving xerox personalized employee portals help Companies Make benefits simple and accessible. From anywhere. Hula dancing . Cliff jumping Human Resources can work better. With xerox. Which allergy . Eees. Bees . Eese. Trees . Eese. Xerox helps hospitals use Electronic Health records cheese . Cheese patient care can work better. With xerox. Thats it. Bill whitaker there has been a lot of talk about criminal Justice Reform in america, and it would be hard to find a place Rikers Island, the most important jail in new york city. Located in the middle of the east river, rikers holds about 10,000 inmates. Its a volatile mix. Some have been convicted of minor crimes; but as many as 80 are awaiting trial. Many are there because they cant make bail. And, in a trend that reflects a growing national problem, rikers holds a rising number of mentally ill inmates. The mentally ill now make up more than 40 of the po