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Life Health > Life Insurance

RAAs: NCOIL Revamps Proposed Model

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WASHINGTON BUREAU — The National Conference of Insurance Legislators (NCOIL) is emphasizing disclosure provisions in the latest version of a retained asset account (RAA) model.

The amended proposed model would create a “Beneficiaries Bill of Rights Act” that would require insurers to make detailed disclosures both to account beneficiaries and to state regulators.

An earlier version, exposed in late August, would not have let insurers use an RAA as the default Soldiersoption for paying life insurance death benefits. Most life insurers that have RAA programs now use the RAA benefits payment method as the default option.

Another provision that was eliminated — after six conference calls, according to officials at NCOIL, Troy, N.Y. – was one dealing with consent. The exposure draft would have required an insurer to get written consent from the beneficiary, or, in the case of a group contract, the policy owner, before putting the policy death benefits in an RAA.

In the latest revision, any funds remaining in the account after 4 years would have to be returned to the beneficiary if there was no activity in the account and if the insurer had not received “an affirmative directive” to maintain the account from the beneficiary.

NCOIL officials say the latter change was made at the request of Birny Birnbaum, a consumer advocate and critic of RAAs.

The final draft was predominately crafted by the Louisiana Insurance Department. The Louisiana proposal consolidated the model’s initial language.

The NCOIL Life Insurance Committee will be trying to win passage of the revised model at NCOIL’s annual meeting in

Austin Nov. 19.

Rep. George Keiser, R-Bismarck, N.D., NCOIL’s incoming president, said Sunday at a conference organized by the American Council of Life Insurers (ACLI), Washington, that the thrust of the model was changed because insurers told NCOIL leaders that regulators had received few complaints or even inquiries about RAAs.

Most of the criticism, the NCOIL leaders were told, came from the media and from lawyers seeking clients.

Several federal congressional committees, the U.S. Veterans Department, the U.S. Department of Defense and the National Association of Insurance Commissioners, Kansas City, Mo., have said they are looking into the issue.

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

Representatives who say they represent consumers have argued that 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).

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.


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