MNeagle
14th August 2010, 03:17 PM
Kentucky’s insurance regulator has prohibited life insurers in the state from automatically retaining death benefits in their corporate general funds and issuing so-called checkbooks to the survivors.
“We believe in consumers having choices,†said Kentucky Insurance Commissioner Sharon Clark in an interview at the National Association of Insurance Commissioners meeting in Seattle today. “We’re trying to be as pro-active as we can.â€
Regulators are under pressure to change industry practices after Bloomberg Markets magazine reported in July that carriers profit by holding and investing $28 billion owed to beneficiaries. Retained asset accounts allow insurers to keep the proceeds of a life insurance policy in their general corporate accounts, earning investment income, while providing the beneficiary with a “checkbook†account that’s not insured by the Federal Deposit Insurance Corp.
Clark issued the advisory opinion in Kentucky yesterday. Under it, insurance companies also are required to provide a new contract with complete disclosure on retained asset accounts. Unless beneficiaries agree to that contract, payment must be made by check, rather than by setting up a retained asset account, she said.
Clark said her office will consider it to be an “unfair claims settlement practice†for an insurer to place life insurance proceeds in a retained asset account without a beneficiary’s consent. Bloomberg reported this is a common practice among life insurers, including the nation’s largest, MetLife Inc. and Prudential Financial Inc.
The NAIC on Aug. 6 formed a special task force to consider retained asset accounts. The joint working group, which includes representatives of the NAIC’s life insurance and annuities committee and the market regulation and consumer affairs committee, will meet tomorrow.
http://www.bloomberg.com/news/2010-08-14/kentucky-prohibits-insurers-from-retaining-survivors-cash-without-consent.html
“We believe in consumers having choices,†said Kentucky Insurance Commissioner Sharon Clark in an interview at the National Association of Insurance Commissioners meeting in Seattle today. “We’re trying to be as pro-active as we can.â€
Regulators are under pressure to change industry practices after Bloomberg Markets magazine reported in July that carriers profit by holding and investing $28 billion owed to beneficiaries. Retained asset accounts allow insurers to keep the proceeds of a life insurance policy in their general corporate accounts, earning investment income, while providing the beneficiary with a “checkbook†account that’s not insured by the Federal Deposit Insurance Corp.
Clark issued the advisory opinion in Kentucky yesterday. Under it, insurance companies also are required to provide a new contract with complete disclosure on retained asset accounts. Unless beneficiaries agree to that contract, payment must be made by check, rather than by setting up a retained asset account, she said.
Clark said her office will consider it to be an “unfair claims settlement practice†for an insurer to place life insurance proceeds in a retained asset account without a beneficiary’s consent. Bloomberg reported this is a common practice among life insurers, including the nation’s largest, MetLife Inc. and Prudential Financial Inc.
The NAIC on Aug. 6 formed a special task force to consider retained asset accounts. The joint working group, which includes representatives of the NAIC’s life insurance and annuities committee and the market regulation and consumer affairs committee, will meet tomorrow.
http://www.bloomberg.com/news/2010-08-14/kentucky-prohibits-insurers-from-retaining-survivors-cash-without-consent.html