Pandemic Rebate Checks Are Becoming Unclaimed Property Liabilities

More than three years have passed since the COVID-19 pandemic began, disrupting normal day-to-day activities for nearly everyone. Today, businesses and individuals are still experiencing the pandemic’s impact in various, sometimes surprising ways. At least one industry – auto insurance – is beginning to see the ramifications of pandemic-era policies affecting their unclaimed property.

Government-mandated stay-at-home orders and shutdowns of schools and businesses not considered “essential” substantially reduced driving activity nationwide. Employees who typically commuted to the office each day worked from home. Kids who usually needed transportation to and from school, soccer practice and other activities were home-bound. Vacationers who would otherwise be road-tripping to fun destinations had nowhere to go.

With drivers suddenly putting fewer miles on their vehicles, auto insurance companies unexpectedly decided to refund a percentage of their customers’ insurance premiums for a few months – April through June for many insurers – in the spring of 2020. The Insurance Information Institute estimated that these refunds totaled as much as $14 billion.

As inevitably occurs when a company issues many checks – especially without a concerted remediation effort – some remain uncashed. Whether a check recipient has moved to a new address before receiving the check, mistook the check for junk mail and discarded it or has passed away, the payment becomes an unclaimed property issue when uncashed beyond the statutory dormancy period – usually three to five years, depending on the state.

Ideally, insurers should address uncashed checks before they reach the dormancy period. Proactive customer outreach by email, phone, or mail as early as 90 to 180 days after a check has been issued and researching updated contact information for mail returned as undeliverable can resolve many uncashed checks before they reach the dormancy period.

However, as three years have passed since insurers issued pandemic-related checks, some of these checks are approaching, or may  have already become unclaimed property liabilities (in those states with a three year dormancy period for uncashed checks), and statutory due diligence requirements come into play.

A due diligence mailing serves as a final notice from a property holder to its owner that the failure to act within a specific amount of time will require that the insurer report the property to the state as unclaimed property. Most states require precise timing for due diligence mailings – often between 60 and 120 days before the reporting deadline – for any property valued at $50 or more. However, requirements vary by state.

States often specify the contents of the due diligence letters, including property description, notification that the owner must claim the property to avoid its transfer to the state, steps to claim the property and the reporting date if it remains unclaimed. Again, requirements vary.

Most states require due diligence mailings to be sent by first-class mail, but some mandate certified mail for some property types and values. Some states even have specific font requirements. Because of so much variety from state to state, checking the appropriate state requirements is essential for proper compliance.

Insurers should maintain and follow established procedures for resolving uncashed checks and other potential unclaimed property liabilities. Such policies should include documentation requirements, due diligence procedures and reporting requirements to ensure property is reported in accordance with the unclaimed property laws of the proper state.

Proper handling of unclaimed property is vital to reduce the risk of a lengthy, costly and labor-intensive audit that could result from failing to comply with the state unclaimed property laws and can also lead to substantial penalties and interest.

If your organization is concerned about unclaimed property challenges, contact MarketSphere to learn how to improve efficiency and effectiveness, and reduce the risk of noncompliance.

*Content contained in this article is considered accurate as of the publish date.