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COLI Guidelines Move Ahead At NAIC

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New Orleans

Guidelines designed to give employees more control over corporate-owned life insurance were advanced during the fall meeting of the National Association of Insurance Commissioners here.

Key points of the guideline developed by the NAICs COLI working group under the direction of North Dakota Insurance Commissioner Jim Poolman include an affirmative consent provision and a no-retaliation provision.

The affirmative consent provision or opt-in would require companies to inform employees of an intention to take out a life insurance policy as well as receive permission to do so.

The no-retaliation clause would prevent retaliation against an employee who did not allow an employer to take out a policy on his or her life.

Poolman commented on the draft after it was moved out of the working group. “I am pleased that the industry saw the need for affirmative consent. It strengthens our guidelines enormously.”

The guidelines were later adopted by the working groups parent “A” committee and will be reviewed by the executive committee and potentially, the plenary at the winter meeting in December.

COLI can be used by an employer for a number of reasons, including protecting against costs associated with an employees disability or death. It can also be used to finance employee benefits.

A separate consumer effort is being developed by a subgroup of the small face amount working group under the direction of South Carolina regulator Leslie Jones. The group is trying to determine how companies search for multiple policies upon the death of an insured.

Toward that end, surveys have been conducted by The American Council of Life Insurers, Washington; The Life Insurers Council, Atlanta; and The National Alliance of Life Companies, Rosemont, Ill.

In general, according to Jones, the vast majority of companies are conducting searches by computer, and the majority are searching on parameters including first and last name, Social Security number and date of birth.

Another survey is being readied that will seek to integrate individual search criteria so that regulators can better understand a companys full search process. The survey includes an illustrative response developed by Illinois regulator Larry Gorski.

Illinois has just passed its own measure for addressing the multiple policies issue.

Texas is also addressing the issue, explained Mike Boerner, who detailed a series of surveys designed to provide information on premiums paid on small face amount policies, defined as policies with face amounts of less than $15,000. A report to the Texas legislature is scheduled for year-end, he said.

During the small face amount working group session, Brenda Cude, a NAIC funded consumer representative from the University of Georgia, asked what the goal of the work on the surveys is.

South Carolina Director Ernst Csiszar said the goal was to establish best practices to be followed.

In a September 11 letter from the Center for Economic Justice, Austin, Texas, Birny Birnbaum, executive director, recommended modifying financial statements to identify small face amount life insurance policy information.

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 16, 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.