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Regulation and Compliance > Federal Regulation

Multiple Policies Raise Cost Concerns

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A draft regulation addressing treatment of beneficiaries of multiple policies is drawing comments concerning cost and potential legal liability.

The issue will be examined this week during the summer meeting of the National Association of Insurance Commissioners.

The concern is that there are small policies in which beneficiaries are not aware they have a right to claims.

Among the issues that are being discussed are the range of dates that should be examined to see if there are multiple policies under which a beneficiary is entitled to a benefit and whether it should be the birth date plus or minus three years.

There was also concern that if future legislation makes it illegal to use Social Security numbers, then insurers would have difficulty conforming to the regulation.

Another concern that insurers have is that a person could match as a beneficiary and at a later date the actual beneficiary would make a claim. Related to this, insurers say, is that the criteria to determine potential beneficiaries is not spelled out in the regulation and the general nature of the search could produce a number of beneficiaries. The criteria for the search could then be challenged by a trial attorney.

NAIC Secretary-Treasurer and Illinois Insurance Director Nat Shapo says a more specific standard would leave insurers less vulnerable to class actions than more general requirements.

Based on what staff at the Illinois department is seeing, the broader time frame is appropriate, Shapo adds.

Reproduced from National Underwriter Life & Health/Financial Services Edition, June 10, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.