WASHINGTON BUREAU — California has moved to keep life insurers from making retained asset accounts (RAAs) the default benefits payment mechanism.
Members of the California Senate have voted 36-0 to approve S.B. 599, a bill that would require life insurers to get a written declaration stating how the beneficiary wants to receive the benefit payment.
S.B. 599 already has won approval in the California Assembly. The bill now goes to Gov. Jerry Brown, D.
Current California law gives life insurers the ability to pay benefits solely through an RAA.
California Insurance Commissioner Dave Jones, an S.B. 599 supporter, says one problem with the RAA payment mechanism is that an RAA is not necessarily a traditional bank account. If an RAA is not created in the form of a bank account, the account is not protected by the Federal Deposit Insurance Corp.
Although RAAs resemble checking accounts, retailers will not readily accept RAA drafts, and some RAAs have minimum draft requirements, Jones says.
S.B. 599 would require an insurer to try to get a written declaration from the beneficiary. But, if a consumer failed to make a decision, the bill would let an insurer set up an RAA if the declaration form clearly disclosed that the default benefits payment mechanism was an RAA.
The bill also would require insurers to provide beneficiaries with RAA-related disclosures, so that beneficiaries would have the information needed to make informed decisions about the RAA option.