For a non-issue, the controversy surrounding retained asset accounts has had quite a shelf life.
It got extended again in early October when California enacted into law two bills tightening consumer protections on retained asset accounts.
I’ve said it before and I’ll say it again: Much ado about nothing.
One of the new California laws repeals an existing law allowing insurers to require beneficiaries to receive their life insurance proceeds only through an RAA.
OK. Fine. Let beneficiaries decide they want a lump sum check from the insurance company instead of having proceeds placed into an RAA, from which they could already withdraw the entire amount from Day 1. Certainly, beneficiaries should have that option, even though one full withdrawal from their new RAA nets the same effect.
At its root, this whole issue always seemed more like a misunderstanding to me. People were outraged initially when they were led to believe via a rather one-sided Bloomberg News series of articles last year that greedy, evil insurance companies were bilking families of fallen soldiers who gave their lives for our country. If that were the case, outrage is justified. But actually, in a longstanding, legal business practice, insurance companies earn some interest on funds placed in retained asset accounts when beneficiaries allow the funds to remain there.