NAIC Model On Multiple Policy Searches Moves Ahead
A guideline for searching for multiple policies of deceased contract holders advanced two steps toward full approval by the National Association of Insurance Commissioners at its spring meeting earlier this month.
The proposed Life Insurance Multiple Policy model regulation has been debated for about two years. It could be adopted by the NAIC executive committee and plenary during the summer NAIC meeting.
The issue is a subset of attempts by regulators to establish guidelines for the sale of small face amount policies, those identified as $15,000 or less. During those efforts, it was determined by regulators that searches to see if deceased contract holders held more than one contract were not being properly pursued by some companies.
Consequently, an effort was begun to make sure that all policies that belong to a policy owner are identified.
The model had become mired in debate over a provision that would have provided a safe harbor for companies that followed its requirements.
Oklahoma Insurance Commissioner Carroll Fisher made a successful motion to advance the model by removing the safe harbor provision and have the NAIC market conduct working group establish standards that would be incorporated into a handbook used by examiners when they go out into the field and examine a company. The model itself would focus on a more general concept of requiring a company to conduct a reasonable search for multiple policies.
The deleted safe harbor provision included required and optional search criteria. The required search criterion included an electronic or manual search of combinations involving first, middle and last names and initials. Optional criteria included date of birth and every date prior to and after the date of birth, plus or minus two years, sex and gender, and Social Security number.
The safe harbor requirements would have been one way for an insurer to satisfy the requirements of the model. They were based on legislation enacted in Illinois that requires specific conditions to be met when conducting a search.
Insurers repeated their concerns that the safe harbor provision would in fact become a minimum standard that could be used against the industry by trial lawyers.
“The dynamic today is unfortunately, a recurring event,” said Birny Birnbaum, an NAIC-funded consumer representative and executive director of The Center for Economic Justice, Austin, Texas. “There is a shift of gears, projects are dropped and the bottom line is that nothing of substance is done to help consumers.”
There has been no factual demonstration by insurers that the safe harbor would indeed become a de facto minimum standard, he added. If a safe harbor is not going to be included, then a numerical standard rather than a more general reasonable standard is needed, he argued.
Reproduced from National Underwriter Edition, March 31, 2003. Copyright 2003 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.