Over the past two years, states have undertaken various initiatives – including audits, exams, regulations, and legislation – intended to require insurers to compare their life insurance policy records with the record of deaths included in the Social Security Administration Death Master File (DMF) to identify possible unpaid death benefits. The Obama Administration is now proposing to limit immediate access to the DMF to those users who legitimately need the information for fraud prevention purposes and to delay the release of the DMF for three years to all other users. This proposal is contained in the Treasury Department’s “Green Book” issued earlier this month to explain the revenue proposals that accompany the Administration’s proposed budget.

The Treasury Department offers the following explanation for the proposal:

Refund-fraud related identity theft has grown exponentially in recent years. Fraudulent tax returns using a decedent’s identifying information are difficult to detect before improper refunds are paid, because the Internal Revenue Service may not discover that identity theft has occurred until a surviving family member files an income tax return claiming the decedent as a dependent or files the decedent’s final income tax return.

Accordingly, the Administration is proposing to make DMF information available immediately only to those “who legitimately need the information for fraud prevention purposes,” while delaying access to others for three years. The Treasury Department does not explain in any detail who would be viewed as having a “legitimate need” for immediate access, or by what process individuals may obtain approval for such access, so it is unclear how the proposal would impact insurers’ use of the DMF with respect to life insurance policies.