WASHINGTON BUREAU — Life industry representatives today delivered the message that the retained asset account is an appropriate alternative to forcing people “to make a big financial decision at a time of maximum stress.”
The American Council of Life Insurers, Washington, organized a conference call with reporters about an “issue that has burst upon us.”
RAAs are vehicles life insurers use to hold beneficiaries’ benefits until the beneficiaries withdraw cash with checks or payment cards.
Bloomberg Markets recently drew attention to RAAs by quoting critics who say life insurers earn high returns on the cash and pay beneficiaries low rates without giving the beneficiaries adequate notice that the cash is in something other than a bank account insured by the Federal Deposit Insurance Corp. (FDIC).
Paul Graham, the chief actuary at the ACLI, said he wanted to dispel myths about the accounts. “The thought that this money is in a less secure location than in a bank is ill-founded,” he said.
Most states say their guaranty plans would cover at least the first $300,000 in promised benefits should an insurer fail. That compares with a $250,000 FDIC limit, Graham said.
The accounts offer reasonable interest rates, and “we can’t see any detrimental benefits to the beneficiaries whatsoever,” Graham said.