NU Online News Service, July 24, 5:16 p.m. – State insurance regulators are about to take a new look at corporate-owned life insurance because of the recent public outcry about the product.
Regulators who belong to the COLI working group at the National Association of Insurance Commissioners, Kansas City, Mo., will start by reviewing and possibly revising Model 602, the NAIC’s 10-year-old model law for COLI, but working group members could also end up developing an entirely new model law.
North Dakota Insurance Commissioner Jim Poolman, chair of the COLI working group, says one top priority should be making sure that employers must get “affirmative consent” from employees before buying COLI on employees’ lives.
Today, fewer than half of the states require affirmative consent from the employees, according to the NAIC.
Fifteen states do require affirmative consent, and five states have opt-out provisions that let employees block employers’ efforts to buy COLI on their lives.
Most states require that an employer have an insurable interest at the time coverage becomes effective, but half let employers maintain COLI coverage on retirees and nonmanagement employees, the NAIC found.