Since Bloomberg News broke the story on July 28 of deceased veterans’ families, and others, receiving not lump-sum payouts but “checkbooks,” drawn not on FDIC-insured bank accounts but on accounts held by the insurance companies, debate has raged. Depicted in the press as “institutionalized bad faith,” a “scheme to defraud,” and other incendiary terms, the practice of retained asset accounts (RAAs) has come under an attack as virulent as any the insurance industry may have faced in a very long time.

The industry is now playing catch-up, as evidenced in an NU Online News Service blog entry on Wednesday that advised insurance industry folks to take to the Web and defend the practice, which the blogger, Bill Coffin, says is “nothing new.”

RAAs may very well be nothing new in the industry, but they’re apparently not what bereaved families expect upon the death of a loved one, as a rule. And the public outcry is being followed by some action, at least: as reported in another NU Online News Service article on Wednesday, the House Veterans Affairs Committee has approved a proposal that could have an impact on these accounts.

The bill introduced by Rep. Deborah Halvorson, D-Ill., the Securing America’s Veterans Insurance Needs and Goals (SAVINGS) Act of 2010 (H.R. 5993), would require insurers “to provide information about the RAAs, including a comparison of the RAA interest rate and the rate the funds might earn if held in a financial institution, to the beneficiaries of soldiers who die.” It would also require “the U.S. Department of Veterans Affairs (VA) to report to Congress each year on the number of SGLI beneficiaries getting RAA counseling and any recommendations or complaints about the RAA counseling.”

Among other points at issue are a few main ones: disclosure–the amount of disclosure required to pierce the fog of grief may be greater than insurers have allowed for–the money itself, which is not FDIC-guaranteed in companies’ accounts; and interest: companies bring in a higher interest rate on those retained assets than they pay out to grieving families–not a popular fact, regardless of whether those additional funds help to keep the business running.

NAIC has formed a new retained asset account unit; New York Attorney General Andrew Cuomo has opened an investigation, as reported by Bloomberg; and NU Online News Service reports that consumer advocate Birny Birnbaum has weighed in with questions for NAIC’s new unit about the accounts. In a time when people are already stressed and worried about where their next dollar is coming from, the industry had best be prepared for a long siege.