SEATTLE–It was standing room only at the first meeting of the National Association of Insurance Commissioners’ (NAIC’s) Retained Asset Account (RAA) Working Group.
Commissioners sat for more than two hours listening to testimony from carriers, guarantee association representatives, consumer advocates and a legislator.
The RAA session, which took place Sunday here at the NAIC’s summer meeting, attracted about 200 attendees to the conference room and at least a dozen insurance commissioners to hear opening testimony on what the co-chairmen said will be a quick process to take whatever action is necessary to address the controversy.
Before the meeting, during the meeting’s opening session, NAIC President Jane Cline noted that regulators had received “few complaints or questions” about RAAs, but she said media stories about the accounts had raised questions about consumer choice and insurer disclosure practices.
She said one aim of the NAIC will be to reach out to consumers with an action notice explaining RAAs.
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 Federal Deposit Insurance Corp. (FDIC). In some cases, critics say, getting cash out of RAAs may be difficult.
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.
Rhode Island state Rep. Brian Kennedy, D-Hopkinton, R.I., a former president of the National Conference of Insurance Legislators, Troy, N.Y., told attendees that the current NCOIL president, Kentucky state Rep. Robert Damron, D-Nicholasville, Ky., is promoting a model law that would provide for regulating RAAs at the state level, which few states do today. The model would create new disclosure requirements, and it would bar insurers from opting beneficiaries into an RAA if the policyholder has failed to designate how payments are to be made.
Connecticut Insurance Commissioner Thomas Sullivan, task force co-chairman, said he did not feel a model law was the best way to deal with this issue. Kennedy said NCOIL believes it has to act before Congress does.