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NAIC: RAA Session Packs the Room

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ORLANDO, FLA.–A standing-room-only crowd filled the hearing room Monday as regulators discussed recommendations for handling retained asset accounts (RAAs).

The Retained Asset Accounts Working Group at the National Association of Insurance Commissioner (NAIC), Kansas City, Mo., held a session here at the NAIC’s fall meeting. The RAA working group was established in August, during the NAIC’s summer meeting in Seattle.

The group is trying to adopt a model bulletin that would clarify RAA disclosure rules.

An RAA is a method of paying life insurance benefits through a vehicle that resembles a checking account rather than sending the beneficiary a check for the whole amount.

Critics say RAAs often pay lower interest rates than bank accounts and are not insured by the Federal Deposit Insurance Corp. (FDIC).

Supporters say RAAs pay rates comparable to the rates provided by other safe, highly liquid accounts, are backed by state insurance guaranty funds, and give grieving beneficiaries time to postpone making complicated financial decisions.

During the hour-and-a-half meeting yesterday, regulators tried to determine how to clarify what information consumers need to know to help make a decision and what the language should be to achieve that goal.

New Jersey Insurance Commissioner Thomas Considine revised a motion instructing the working group on what the next steps would be at least 4 times before the members of the joint working group could agree to adopt it.

During the discussion, Rhode Island state Rep. Brian Patrick Kennedy, D-Hopkinton, R.I., appearing on behalf of the National Conference of Insurance Legislators, Troy, N.Y., said NCOIL is working on model legislation aimed at greater disclosure and explanation of how the RAA works.

NCOIL’s position sparked a discussion between Kennedy and Connecticut Insurance Commissioner Thomas Sullivan, co-chairman of the committee, over whether a law or bulletin would better guarantee universal implementation.

Co-Chairman Roger Sevigny, the New Hampshire insurance commissioner, said the purpose of either proposal would be to promote uniformity of regulation.

During public discussion, Paul Graham, a senior vice president at the American Council of Life Insurers, Washington, praised the working group for gathering facts and seeking to understand the purpose of RAAs.

“The industry appreciates that,” Graham said.

Later, during a Consumer Liaison Committee session, individuals who represent consumer interests in NAIC proceedings were critical of RAAs, saying the accounts are confusing and deceptive.

Peter Kochenburger, a law professor, said more information about RAAs is still needed and not enough is known about the forms insurers use.

He said some programs could be misleading.

Brendan Bridgeland, with the Center of Insurance Research, Cambridge, Mass., said there is no telling how many RAAs are out there that remained unclaimed and that deeper examination needs to be done. He said there is no way to find out how many RAA assets are left unclaimed.

Dan Schwarcz, a law professor, criticized insurers for putting benefits into RAAs by default.

Mila Kofman, superintendent of the Bureau of Insurance in Maine, criticized the consumer representatives for not presenting their criticism of RAAs before the whole working group.

The representatives said they did not have the time to make a full presentation because the two sessions overlapped.


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