Debating The Next Step On Multiple Policies
Amid a charge by a consumer advocate that state insurance regulators are “inept” in how they are handling regulation of payment of small face amount policies and multiple policies, regulators continue to weigh different approaches to the issue.
The issue will receive further discussion during the spring meeting of the National Association of Insurance Commissioners, Kansas City, Mo.
For over a year the NAIC has been trying to create regulatory guideposts to ensure that policyholders of small face amount policies, those with face amounts of $15,000 or under, receive a reasonable benefit for premiums paid.
The issue of payment of multiple policies was partly raised because of findings by the Illinois insurance department that companies had not conducted proper searches for owners of multiple small policies to make sure benefits were paid. Consequently, the Illinois department instituted a regulation to address this issue that becomes effective July 1.
In a NAIC model regulation currently being exposed–the Life Insurance Multiple Policy model regulation–a safe harbor provision is offered as an alternative to requirements in the model. It is modeled after the Illinois regulation.
The issue, insurers say, is that they do not want to be held to specific criteria that could be referenced by plaintiffs attorneys. They add that they are willing to address problems where they exist. However, they say they want a broader standard of reasonableness that would allow them to use existing systems to search for policyowners.
Toward that end, three trade groups–the American Council of Life Insurers, Washington; the Life Insurers Council, Atlanta; and the National Alliance of Life Companies, Rosemont, Ill.–signed a proposal that would draw from the idea of reasonableness as well as from a circular letter issued by the New York insurance department in 2001.