Unclaimed Property and the Insurance Industry

Cornel Lupu
February 1, 2021

Insurance companies, like all “holders,” are required to comply with the unclaimed property laws for each state or jurisdiction within the United States and its territories. Although there are some similarities, many states have different reporting requirements and dormancy periods. As of late, there have been many legislative changes affecting the unclaimed property laws. Therefore, keeping abreast of these changes and complying with these laws can be extremely challenging. In order to ensure compliance, there should be a robust set of policies and procedures that must be followed in order to research, identify, record and report unclaimed property to the appropriate state. In addition, effective internal controls must be in place for each area of the company responsible for any part of compliance with unclaimed property laws. It is essential that these controls be designed and implemented specifically for the effective adherence to the policies and procedures.

Every insurance company, at a minimum, should be asking themselves the following questions:

  1. Has our company ever failed to file unclaimed property reports to the appropriate jurisdiction?
  2. Has our company ever filed inaccurately or failed to include all applicable property types?
  3. Has our company ever filed unclaimed property reports that were late?
  4. Has our company ever applied an inappropriate dormancy period to property that is due to be or has been escheated?   
  5. Do our policy administrative systems’ records need to be updated with the most current policyholder and beneficiary data?
  6. Have we over-reported or incorrectly reported to the wrong jurisdiction? 
  7. Are we potentially holding past due unclaimed property (suspense accounts)?
  8. Do we have any subsidiaries within the corporate structure that have never filed an unclaimed property report?  

If the answer to one or more of these questions is “yes”, then it is likely that your company may be at high risk for an audit; and it is imperative to reevaluate your internal controls, policies and procedures for compliance with the unclaimed property laws. There are a number of best practices that an insurance company should follow that would decrease their risk of an unclaimed property audit and would also position the company to attain a strong and effective governance structure. Here are some suggested best practices that will help attain these results:

  • Establish an unclaimed property committee that is responsible for compliance.
  • Centralize the governance over the unclaimed property policies and procedures.
  • Incorporate the use of the Social Security Death Master File to determine if a policy holder is deceased.
  • Conduct internal audits of unclaimed property policies and procedures.
  • Ensure all Third Party Administrator agreements clearly define who is responsible for identifying and reporting unclaimed property to the states.
  • Establish and reconcile an unclaimed property liability account on the general ledger.
  • Account for unclaimed property liabilities in accordance with Statement of Financial Accounting Standards (FASB) No. 5 – Accounting for Contingencies.
  • Conduct system reviews to ensure that all relevant owner data and dates are captured and updated effectively and timely.
  • Engage an independent specialist to confirm current procedures and offer suggestions for improvement and enhancements.
  • Consider filing a Voluntary Disclosure Agreement (VDA) with states which may either eliminate or significantly decrease penalties and interest for past due property. 

Unclaimed property laws are forever changing and can be very difficult to follow and interpret.  With state enforcement on the rise, there is no better time than the present to proactively review and address your current compliance process. If these best practices are followed, your risk for non-compliance with the unclaimed property laws can be reduced significantly.

Take Action

Looking for more information? Watch our On Demand Webinar, Insurance Industry Insights into Unclaimed Property.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Cornel Lupu

Cornel Lupu is a Senior Consulting Manager at Sovos. He has served as an advocate for holders undergoing unclaimed property audits and advises his clients on unclaimed property best practices to mitigate risk and ensure compliance. With over 20 years of diverse and extensive experience in the insurance industry, he possesses the knowledge of the functionality of insurance-related general ledger accounts, and he has also been involved in managing numerous general ledger conversions.
Share This Post
Share on facebook
Share on twitter
Share on linkedin
Share on email

North America Sales & Use Tax
May 7, 2021
How to File Sales Tax as a Multi-Level Marketing (MLM) Business

Direct selling companies and multi-level marketing (MLM) businesses have numerous complexities to consider when it comes to sales tax calculation and reporting requirements. Along with an expansive physical nexus footprint, direct sellers must know how their products and services are taxed around the country. It’s a daunting task when facing it alone.  Where are you […]

E-Invoicing Compliance EMEA Italy VAT & Fiscal Reporting
May 6, 2021
Italy: Understanding the New E-Document Legislation Requirements

In September 2020, the Agency for Digital Italy (AGID) introduced new requirements for the creation and preservation of electronic documents, which will be enforced from 7 June 2021. This blog discusses the requirements and how they affect the issuance and storage of e-invoices. Electronic Documents in Italy The AGID is responsible for the Italian digital […]

North America Sales & Use Tax
May 6, 2021
What to Expect with New Sales Tax Software Implementation

Change is rarely easy, but when it comes to implementing new sales tax software it doesn’t have to be a constant struggle. Organizations want to know that the implementation process includes hands-on assistance and a timeline that makes sense – for all parties involved.  Our Sovos implementation is designed to deliver value quickly and to […]

North America Unclaimed Property
May 6, 2021
New York Unclaimed Property Self-Directed Compliance Program

Continuing the trend in 2021, New York unclaimed property recently introduced the NY Self-Directed Compliance Program  geared towards identifying both non-reporters and companies that reported in 2021, but failed to report property types expected to be seen. Due to negative economic impact resulting from COVID-19, Sovos’ consulting, reporting and regulatory teams have been preparing for […]

May 5, 2021
What’s on the horizon for Insurance Premium Tax in Europe?

Europe has seen relatively few changes to insurance premium tax (IPT) rates recently. The most notable recent change was the 33% increase in IPT rate in Spain (up from 6% to 8%) at the beginning of 2021. Brexit became official on 1 January 2021, following the end of the transition period. This means UK based […]