The model law for handling unclaimed assets as passed by the National Conference of Insurance Legislators is getting pushback from state insurance regulators, who say the model law will not work for handling existing claims.
Insurers must “complete regulatory and unclaimed property audits,” said Jack McDermott, director of communications for the Florida Office of Insurance Regulation.
Kevin McCarty, Florida insurance commissioner, is coordinating the National Association of Insurance Commissioners’ response to the unclaimed property issue. McCarty is also the incoming NAIC president.
McDermott’s comments on behalf of McCarty and the NAIC comes amid signs that the new NCOIL proposed model law is just adding to the confusion revolving around the system that must be used by insurers to comply with so-called escheat law, which deal with finding beneficiaries of unclaimed property, or turning the funds over to the states.
Moreover, industry officials, trade groups and some industry lawyers say the new model law just adds to the confusion surrounding resolution of the issue.
Whit Cornman, a spokesman for the American Council of Life Insurers, said that the ACLI believes that life insurers adhere to the letter and spirit of all laws and regulations pertaining to unclaimed property. At the same time, he added, unclaimed property requirements themselves across the country are unclear.
“Consistent with our industry’s commitment to policyholders and beneficiaries, we are prepared to work with all stakeholders in the development of clear and uniform standards for unclaimed property reporting going forward,” Cornman said.
The key issue is a determination made in June by California that insurers were using “an asymmetrical approach” to settling death claims when policyholders die. California used Verus, a Connectucut-based auditing firm, to conduct its unclaimed life insurance audit. Florida has also used Verus to conduct its own audits regarding unclaimed life insurance benefits.
Since then, New York’s Department of Financial Services has come up with a different approach, the New York attorney general and comptroller’s office have launched an independent investigation, and Minnesota is also asking for different data in requiring its insurers to report their compliance with state law.
An industry lawyer, who asked not to be named, said the NCOIL model just points up the conflicting obligations insurers are being asked to comply with.
The lawyer said, “What are insurers supposed to do, and what is the standard?”
McDermott, for example, said that despite the new NCOIL model law, “state insurance commissioners will continue to address these issues through a market investigation and settlements or administrative actions against insurers that may have violated existing law.”
The new NCOIL model law on the issue was approved by the group’s executive committee Sunday. The revised model would require life insurers to match Social Security death master file records, or “an equally comprehensive service,” with in-force life insurance policies and retained asset accounts each quarter.
The model law still must be approved by the states.
The finding was that insurers, most of them using the Social Security Death Master File, acted immediately to stop payments on annuities that required periodical payouts.