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RAAs: Birny Birnbaum Weighs In

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WASHINGTON BUREAU — A consumer watchdog is asking the new National Association of Insurance Commissioners (NAIC) retained asset account unit for details about RAA oversight.

Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, is trying to find out whether any RAAs are insured by the Federal Deposit Insurance Corp. (FDIC) and how a state guaranty fund could protect an RAA holder.

“Given that the insurer has, presumably, paid the death benefit and the consumer has transferred the benefit to an RAA, why and how would the guaranty fund cover an RAA of a failed insurer?” Birnbaum asks.

Birnbaum also is asking whether a guaranty fund has ever paid a consumer for an RAA account provided by a failed insurer. “If yes, under what circumstances?” he asks.

Other topics Birnbaum is addressing include the number of RAAs in place; changes in the number of RAAs and the RAA asset total over time; the median amount of time that consumers keep funds in the accounts; and whether any state has disapproved an RAA agreement for any reason.

If consumers were keeping funds in RAAs for 5 years or more, “would regulators consider that an issue to investigate?” Birnbaum asks.

RAAs are accounts life insurers use to hold beneficiaries’ benefits until the beneficiaries withdraw the cash using checks, payment cards or other means.

Critics say life insurers earn high returns on the cash and pay beneficiaries low rates without giving the beneficiaries adequate notice that the cash is held in something other than a bank account insured by the FDIC. Supporters say RAAs give grieving beneficiaries a chance to deal with their emotions before addressing financial concerns, and that funds guaranteed by an insurer may be safer than bank deposits insured by the FDIC.

The RAA working group at the NAIC, Kansas City, Mo., will gather for the first time Sunday at the NAIC summer meeting in Seattle.

The new working group will be co-chaired by Roger Sevigny, NAIC immediate past president and New Hampshire Insurance Commissioner and Thomas Sullivan, NAIC Life Insurance and Annuities Committee chair and Connecticut commissioner.


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