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Tuesday, October 27

When a Cyberattack Freezes a Life Insurance Payout

Worried widow on hold on a landline phone in her kitchen at night

Stephanie McWoods did what a beneficiary is supposed to do. Her 64-year-old father died in July, and on July 25 she called his life insurer, TruStage, to start the claim. What she got, she told CBS News Chicago, was a recording.

“It basically informed you that they were going through a cyberattack, and that they don’t have access to any records, and there’s no one that you can talk to,” she said.

She kept sending information and calling. Meanwhile, she said, TruStage kept withdrawing premiums on her late father’s policy. She didn’t get a claim number until October 1, and more than 80 days after she first reached out, the money still hadn’t arrived, according to the station’s October 15 report.

Then the CBS News Chicago Investigators contacted the company. Within less than 48 hours, McWoods said, TruStage called to tell her a check would be mailed within two business days. The company also said it would reimburse the premiums withdrawn after her father’s death.

What happened at TruStage

TruStage, headquartered in Madison, Wisconsin, says it identified a cybersecurity attack on July 11. In a July 31 update, the company called it “a particularly broad attack on our network and systems” and said it had rebuilt parts of its infrastructure so systems “can be brought back safely, rather than simply turned back on.” On its October 13 status update, claims submission, claims processing, and claims payout were all still listed as “partially available.”

A TruStage spokesperson told CBS News Chicago the attack “significantly disrupted our digital systems, impacting our normal ability to process claims and communicate with customers,” and said the company is expanding its customer service team and creating new processes.

McWoods isn’t alone. WBTV in Charlotte reported on October 5 that a family who filed a TruStage claim on September 28 was told the proceeds might not come until about October 15 or 16, while their funeral home prepared to charge $130 a day. The claim was resolved within 24 hours after the station went to TruStage’s communications department.

The Illinois Department of Insurance told CBS News Chicago it has received 14 consumer complaints about TruStage claims issues since July 11, plus 17 complaints about unrelated issues. Asked whether a cyberattack excuses an insurer from claims-handling rules, the department was direct: “There have been no extensions to statutory or regulatory requirements due to the cybersecurity event.”

Why this is a claims problem, not just an IT problem

A life insurer sells a promise to pay. That promise gets tested at the death claim, when a grieving family often has a funeral bill on the table.

Mark Friedlander of the Insurance Information Institute told CBS News Chicago that a cyberattack is not a typical reason for a death benefit to go unpaid. Under Illinois regulations, he said, an insurer normally has 15 business days to acknowledge a claim and, in straightforward cases, must pay within 30 to 60 days of receiving all necessary documents.

The regulatory clock keeps running while the servers are down. For carriers and their administrators, being able to look up a policy, confirm a beneficiary, and cut a check by hand is part of the product. A recovery plan that doesn’t put the claims desk first has its priorities backward.

There’s a money angle, too. Illinois law (215 ILCS 5/224) says interest accrues on individual life insurance death proceeds at 10% a year from the date of death unless the insurer pays within 31 days of the latest of three dates: when it receives due proof of death, when it has enough information to determine its liability and the right payee, or when outside legal impediments are resolved. The insurer is supposed to tell the beneficiary about that provision when the claim is filed. Whether it applies depends on the policy type and the facts, so ask.

What beneficiaries can do

If a payout stalls, for any reason:

  • Get the claim number in writing. It’s your proof the claim exists and a reference point for every follow-up.
  • Keep a log. Date, time, who you spoke with, what they said. Save every email and upload confirmation.
  • Send documents in a trackable way and keep copies of everything you submit.
  • Stop the premium drafts. Notify the insurer in writing of the death, tell the bank if premiums are drafting from your loved one’s account, and request a refund of anything taken after the date of death.
  • Ask about interest. In Illinois, ask whether the 10% interest provision applies. Elsewhere, ask your state insurance department what the rules are.
  • File a complaint with your state insurance department. Illinois told CBS News Chicago that consumers can file one if they believe a company isn’t honoring the terms of the policy.

Both families got answers after reporters called. Nobody should need a TV station to collect a death benefit, but escalation clearly works, and a documented complaint to a regulator is escalation every family can use.

Where this leaves families

A cyberattack can freeze a payout. It doesn’t freeze an insurer’s obligations. For carriers, claims continuity deserves the same planning as data security. For families, the playbook is plain: document everything, put requests in writing, and bring in the state regulator early.

Sources and Further Reading

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