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.
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 in February.
Lawsky’s efforts have a long road ahead in this goal, judging by the subject’s somewhat cool reception at the NAIC meeting. It is uncertain if the issue will be addressed at the next NAIC meeting. And when Lawsky spoke on the topic, no commissioner on the Life and Annuities (A) Committee joined him in expressing concern or comment.
Lawsky noted that when asked, most beneficiaries prefer lump sum payments, citing a November 2011 GAO report to that effect. The issue of RAAs had risen to prominence after some media reports suggested beneficiaries—including military families—were not getting their payments in a timely fashion.
An NAIC model bulletin drafted in 2010 would require insurers to disclose various important facts and features relating to RAAs, such as how a beneficiary may access the entire account amount, interest rate information, how the account funds are guaranteed, and how beneficiaries can learn about their guaranteed limits of coverage, but some have said it does not go far enough.
Critics have said that New York is overreaching, and expecting more from its insurers than the minimum regulations set forth.