Hearing on Social Security Death Master File and the Effect on Life Insurers

February 7, 2012

On February 2, 2012, US Congressman Sam Johnson (R-TX), Chairman of the House Committee on Ways and Means, Subcommittee on Social Security, held a hearing to address the accuracy and identity theft issues of the Social Security Administration's Death Master File ("DMF") information which is made available to the public. The Social Security Administration ("SSA") makes the DMF available to the public through the National Technical Information Service ("NTIS") of the Department of Commerce. The NTIS sells the DMF to private and public sector customers, including government agencies, financial institutions, credit reporting organizations, genealogical researchers and insurance companies. The insurance industry uses the DMF to detect improper payments sent to those who are deceased. According to the Social Security Administration ("SSA"), approximately 14,000 individuals are incorrectly listed as deceased on the DMF. Those affected have experienced termination of benefits and other devastating consequences while their inaccurate personal and private information is publicly exposed. Also, the DMF reportedly has become a source for thieves to capitalize on the identities of children and others who have died.

The focus on the hearing was to discuss the identity theft abuses and other violations being perpetrated against individuals and their families based on public access to the DMF and to determine if HR 3475, the 'Keeping IDs Safe Act of 2011'¹ have included sufficient safeguard provisions to limit these abuses with minimal intrusion on businesses' legitimate use of the DMF information.

Background

The SSA collects death information from several sources including funeral homes, hospitals, financial institutions and state governments in order to compile the data needed to administer its programs. Currently, the DMF has 84 million listed individuals and approximately 2.5 million new individuals are added each year. A 1980 Freedom of Information Act ("FOIA") court mandated settlement required the SSA to make publicly available the surname, Social Security Number ("SSN") and date of death of deceased SSN holders. As a result of this settlement, the SSA created the DMF, a file of all deaths reported to the SSA since 1936 from sources other than state governments. In 1983, Congress amended the Social Security Act to require the SSA to enter into contractual agreements to obtain death records from states and exempt death reports the SSA receives from the States from disclosure to the public under FOIA. The SSA is working with States to provide more accurate death information by requesting they participate in a streamlined electronic death registration process known as Electronic Death Registration ("EDR"). Following a recent review of the EDR, the SSA determined that as of November 1, 2011, all death records received through the EDR will be removed from the publicly available DMF. As more states compiled the vital statistics of their citizens through the EDR, the number of records received by the SSA from other sources that may be entered on the DMF will be further reduced.

Hearing Summary

The hearing had two panels with Panel 1 being the Honorable Michael J. Astrue, Commissioner for the Social Security Administration. Panel 2 had five participants including Jonathan Agin, an attorney from Virginia, whose young daughter's personal information became victim to identity theft after her death; and the Honorable Patrick P. O'Carroll, the Inspector General of the Social Security Administration who discussed how the SSA is working to eliminate the misuse of DMF information. The other three panelists on Panel 2: Stuart K. Pratt, Chief Executive Officer of Consumer Data Industry Association; John Breyault, Vice President of Public Policy, Telecommunications and Fraud for the National Consumers League; and Dr. Patricia Potrzebowski, Executive Director, National Association for Public Health Statistics and Information Systems represented organizations that received DMF information.

The comments of Commissioner Astrue centered on the DMF and how the SSA is working to approve the accuracy of the DMF information. Commissioner Astrue also discussed his support for Bill HR 3475, which he felt strikes a balance between transparency and protecting DMF information from identity theft. He also mentioned he looked forward to working with Congress, the Administration and other parties relative to this bill.

Commissioner Astrue was asked by the Congressmen if it is possible for the SSA to limit the amount of information, such as date of birth and zip codes, that it makes public. Commissioner Astrue stated that elimination of any of the specific data elements currently being made available to the public through the DMF has to be done through Congressional legislation.

The second panel focused their remarks on how the associations and members they represent use the DMF information and how they attempt to protect the information from unscrupulous customers. They all concurred that the information provided in the DMF should be protected as much as possible but access to the DMF information should not be limited only to governmental agencies.

Mr. Pratt, one of the members on Panel 2, testified that his association provides DMF information to banks, employers, insurance companies, and the healthcare industry in order to identify and ultimately prevent fraudulent transactions. Pratt mentioned that life insurance companies need access to reliable, comprehensive records identifying individuals who have died. In the past, the life insurance industry waited until being contacted by the policy or contract holder before processing benefits for their beneficiaries. He mentioned that identity thieves are not obtaining access to the DMF through their members because his members vet their customers carefully.

The Death Master File and the Life Insurance Industry

In recent months, state insurance regulatory agencies and state treasurers have been requesting that life insurance companies use the DMF to determine if an insured has died and their beneficiaries are due benefits or the state should receive the benefits under Unclaimed Property laws. On October 14, 2011, the state of New York issued a letter pursuant to Section 308 of the New York Insurance Law, advising all authorized life insurance companies to cross check their in-force life and annuity business against the DMF. Further, the market conduct examinations recently completed on Prudential Financial and John Hancock has required these companies as part of the settlement to develop better search procedures for cross checking against the DMF to determine the death status of their insureds.

The hearing discussed two important issues that should be considered by insurance regulators when requiring insurance companies to reconcile their insured database to the DMF: the information included in the DMF can sometimes be inaccurate, and with the increase of states providing death information to the SSA using the EDR, access to death statistics to the public through a robust DMF database may provide only limited benefit. If the DMF is not made available at the same level of information as it is currently, states should reconsider requesting life insurance companies to perform periodic cross-checks.

Based on the comments made at the hearing, it appears that it is more important to protect the identity of citizens and minimize improper payments by the SSA and other government agencies that pay benefits, than to make the death statistics available to the public. The key issue is whether Bill HR 3475 will be enacted by Congress with similar provisions to the format introduced by Chairman Johnson.

This legislation is a document the insurance industry will definitely follow.