Wisconsin Insurance Commissioner Sean Dilweg has ordered a review of the state’s disclosure guidelines regarding retained asset accounts.
Dilweg ordered the review in response to news reports indicating that some life insurers, including providers of life insurance coverage for military personnel, may be improperly profiting from the accounts.
Dilweg says his office will be exploring the possibility that Wisconsin may need new administrative rules to protect insurance policy beneficiaries.
“My main concern is that the beneficiary receives adequate information about all their available options during this time of crisis in their lives,” Dilweg says in a statement. “With full disclosure about how retained asset accounts function, along with information about other claims settlement options available to them, consumers will be better served by the industry.”
In another response to the reports, Keller Rohrback L.L.P, Seattle, a law firm that handles claims relating to the Employee Retirement Income Security Act, says it is looking into the allegations. Keller Rohrback is asking retained asset account holders to contact its attorneys and paralegal.
“We are committed to helping individuals protect their savings and other benefits,” the firm says. “Keller Rohrback has successfully provided class-action representation for over a decade. Its litigators have obtained judgments and settlements on behalf of clients in excess of seven billion dollars.”
Rep. Deborah Halvorson, D-Ill., the stepmother of a soldier who was injured in Afghanistan, has introduced a bill, H.R. 5993, that would require providers of military life coverage to provide financial counseling and disclosure information to family members of fallen soldiers. The bill also would require the Veterans Affairs Department to report to Congress each year on how responsive insurers are beingto military families.
Sen. Charles Schumer, D-N.Y., is drafting a bill that would require providers of military life insurance to offer recipients of death benefits an option to receive a lump-sum payment of benefits.
The website for the Servicemembers’ Group Life Insurance (SGLI) program says the program provides a free financial counseling service. The VA says the SGLI program automatically pays lump-sum death benefits into an Alliance Account retained asset account that provides immediate access to the money.
Retained asset accounts are vehicles life insurers use to hold beneficiaries’ benefits until the beneficiaries withdraw cash with checks or payment cards.
Bloomberg Markets has attracted attention to the accounts with an article that quotes account critics. The critics say life insurers earn high returns on the cash in the accounts and pay beneficiaries low interest rates, even though the accounts are not insured by the Federal Deposit Insurance Corp. (FDIC). In some cases, the critics say, insurers may not give beneficiaries adequate notice that the funds will be held in something other than an FDIC-insured bank.
Supporters say life insurers that offer retained asset accounts usually let beneficiaries choose between several different payout options, and that retained asset accounts can give grieving beneficiaries time to mourn before making major financial decisions.
The Servicemembers’ and Veterans’ Group Life Insurance Handbook does not indicate tht the SGLI retained asset account, the Alliance Account, is a bank account.
According to a section in a version of the handbook updated July 25, and a February 2007 version of the section stored at Archive.org:
If the proceeds are to be paid in a lump-sum payment, the beneficiary will receive the insurance proceeds through an Alliance Account. An Alliance Account is an interest bearing draft account with an account book similar to a checking account. Insurance proceeds are deposited in the beneficiary’s name and the beneficiary can write drafts for any amount up to the full amount of the proceeds. The amount of interest earned is at a competitive rate and is guaranteed by Prudential. Through the Alliance Account, the beneficiary has immediate access to any or all of their money.