New York Department of Financial Services Superintendent Benjamin Lawsky said he hopes that his department’s focus on retained asset accounts (RAAs) will become a national standard, even though he said it will take some time for the industry to assimilate what New York has recently required.
But other states will get there, he hopes.
New York State became the first state to ever require life insurers to pay beneficiaries of life insurance claims immediately, effectively prohibiting the use of retained asset accounts under a circular letter issued last month.
Lawsky’s efforts hav a long road ahead in this goal, judging by the subject’s somewhat cool reception at the NAIC meeting.
Lawsky was speaking at the NAIC Spring National Meeting in New Orleans at a meeting of the Life and Annuities (A) Committee after NAIC funded consumer advocate Peter Kochenburger Executive Director, Insurance Law Center at the University of Connecticut School of Law broached the subject.
Kochenburger asked that the NAIC take this up at its next meeting, although there was no promise of that.
Similarly, when Lawsky ventured out to speak on the subject, no commissioner on the committee joined him in expressing concern or comment.
Lawsky noted that when asked, most beneficiaries prefer lump sum payments, he cited a GAO report entitled “Retirement Benefit and Retained Asset Account Disclosures Could Be Improved.” When consumers have the option to choose between RAAs and lump-sum check payments, the November 2011 report states, the overwhelming majority choose lump-sum check payments.
The issue had risen to prominence after some media reports suggested beneficiaries weren’t getting their payments in a timely fashion.
Bloomberg News published a series of stories dealing with complaints by military families that the funds were inappropriately being placed in RAAs and that insurers were earning money on the spread between the amount they earned by investing the money and the amount of interest they paid to the beneficiary.
Suits were filed by beneficiaries, several in Massachusetts federal courts, last year over the issue, and both the Veterans Administration and the Defense Department are looking into the issue.