NCOIL Seeking Comment on Beneficiaries’ Rights and Life Disclosure Models

State insurance legislators recently announced two consumer initiatives that they are working on to ensure that policyholders are treated fairly and have the proper information needed to make decisions.

State Rep. Robert Damron, D-Nicholasville, Ky., and president of the National Conference of Insurance Legislators, Troy, N.Y., is advancing a Beneficiaries’ Bill of Rights, which it recently exposed at the summer meeting of the National Association of Insurance Commissioners in Seattle.

The purpose of the Bill is to “require complete and proper disclosure, transparency, and accountability relating to retained asset accounts for life insurance death benefits and that beneficiaries are fully informed—in bold type and in layman’s language—of their options.”

Among the proposed requirements is a beneficiary’s written consent before payment was transferred into a Retained Asset Account and a prohibition against RAAs being a default method of payment.

The draft bill also requires insurers to report to state insurance departments “the number of beneficiaries with retained asset accounts in place, the total funds held in such accounts, a description of how the funds are invested, a listing of any retained asset account service fees charged by the insurer and the funds necessary to cover liabilities under those accounts on their annual statement required by the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners.”

An insurer would also have to disclose information to RAA holders including:

--Any interest being paid under the options and how it is calculated;
--Whether the retained asset account is the equivalent of a checking or draft account;
--Any time delays the beneficiary should expect to encounter in completing any authorized transaction under a retained asset account and the anticipated amount of such time delay;
--That interest earned on the account may be taxable and the beneficiary should consult his or her
tax advisor.
Comments are due by Sept. 1.

Separately, state Rep. Ron Crimm, R-Lousville, Ky., is seeking comment by Sept. 8, on a proposed Life Insurance Disclosure Model Act.

The NCOIL Life Insurance & Financial Planning Committee will hold a conference call on the Beneficiaries’ Bill of Rights in early September to review any comments in order to have a final measure ready for consideration at the November 18 through 21 Annual Meeting in Austin, Texas. It will hold a call on the Life Disclosure model in mid-September and address it further at the annual meeting.

The draft model would require insurers to send a notice developed by the state insurance commissioner informing policy owners of “alternatives to the lapse or surrender of a policy and of the policy owner’s rights as an owner of a policy related to the disposition of a policy.”

The notice would be developed at no cost to insurers.

Alternatives would include:

(a) accelerated death benefits available under the policy or as a rider to the policy;
(b) the assignment of the policy as a gift;
(c) the sale of the policy pursuant to a life settlement contract, including that a life settlement is a
regulated transaction in this state;
(d) the replacement of the policy pursuant to [cite any regulation governing policy replacement];
(e) the maintenance of the policy pursuant to the terms of the policy or a rider to the policy, or
through life settlement contract;
(f) the maintenance of the policy through loans issued by an insurer or a third party, using the
policy or the cash surrender value of the policy as collateral for the loan;
(g) conversion of the policy from a term policy to a permanent policy; and
(h) conversion of the policy in o rder to obtain long-term care health insurance coverage or a
long-term care benefit plan.