State insurance legislators adopted several model laws that will establish guidelines for retained asset accounts, life insurance disclosures, after-market crash parts and surplus lines surplus compact.
The actions were taken during the 2010 annual meeting of the National Conference of Insurance Legislators, Troy, N.Y. The meeting was held in Austin, Texas.
The following models were adopted:
Retained Asset Accounts (RAAs)
A Beneficiaries’ Bill of Rights Model Act creates guidelines for the RAAs including disclosures about when payment options other than a lump-sum are offered and the right of beneficiaries to access the entire proceeds by cashing a single check.
RAA marketing materials, disclosures and forms would have to be filed with insurance regulators prior to their use and report annually on the number and amount of their RAAs, on how long the accounts have existed, and details regarding RAAs transferred to state unclaimed property funds, among other things. It would also require insurers to return RAA balances to a beneficiaries if—during any continuous three-year period—they did not give affirmative directive to maintain the account.
The written disclosures would have to state that beneficiaries can access the entire proceeds by cashing a single check. Required disclosures would also include any interest rates, fees, limitations and delays tied to the account, and whether or not the benefits have available Federal Deposit Insurance Corporation (FDIC) coverage, among other items.
The bill was co-sponsored by state Rep. Robert Damron, (Ky.), outgoing NCOIL president.
Life Insurance Disclosure
A Life Insurance Consumer Disclosure Model Act was adopted which requires insurers to notify people who are over age 60 or terminally/chronically ill in easily understandable language of alternatives to giving up their policy. As well as listing the options, the model would advise policy owners to contact their financial advisor, insurance agent, broker, or attorney to obtain advice or assistance. It also explains that these alternatives may or may not be available to particular consumers depending on a number of circumstances, including age and health status and policy terms.
The model follows a series of similar measures recently enacted in Kentucky, Maine, Oregon, and Washington. The NCOIL model requires insurance departments to develop the notice at no cost to insurers or other licensees. The model was sponsored by Rep. Ron Crimm (Ky.) and based upon a 2010 Kentucky law.
Market Conduct Analysis
A Market Conduct Annual Statement Model Act will provide statutory authority for regulators to annually collect MCAS data and establish rules to govern collection and sharing of the information.
It would allow commissioners to confidentially share MCAS data with other entities—including with the National Association of Insurance Commissioners, Kansas City, Mo., and other state and federal regulators—and would base insurer participation on a $50,000 direct written premium threshold currently required by the NAIC. The model was sponsored by state Sen. James Seward (NY), NCOIL past president.
After Market Crash Parts
A decision was made to defer a vote on the After Market Crash Parts Model until the spring meeting in Washington on March 4-6, 2011. The proposed model law would require disclosure and consent before a crash part is repaired or replaced; set ground rules for insurers to specify aftermarket crash parts; require lasting, visible labels on crash parts; and promote accountability.
The decision to defer followed a 13 to 11 vote in which NCOIL’s Property-Casualty insurance committee overturned an amendment on one of the thorniest aspects of the issue: the degree to which certification means that parts are good-quality and safe. The proposal required insurers to confirm that an aftermarket crash part warranty at least equals that for an original equipment manufacturer (OEM) version. It also—in reintroducing language that has recurred throughout consideration of the model—deemed certified aftermarket parts to be equivalent to OEMs.
State Sen. Ruth Teichman (Ks.) explained, “Legislators felt that defeat of the equivalency amendment, in addition to a vote that had freed insurers from paying for needed modifications to non-OEM parts, would create a loophole in which consumers would be unprotected from poor quality materials. Vehicle owners cannot be left stranded.”
On November 22, the Property-Casualty Insurers Association of America, Des Plaines, Ill., reiterated its opposition to the model and the amendment citing “problems with a costly but virtually useless policy notice requirement and compliance issues with the warranty equivalence language. However, PCI expressed support for tabling of a model act regarding insurer auto-body steering.
The slimmed-down Surplus Lines Insurance Multi-State Compliance Compact (SLIMPACT), dubbed SLIMPACT-Lite, was adopted. It would authorize a governing commission to establish allocation formulas, uniform payment methods and reporting requirements, foreign insurer eligibility requirements, and a single policyholder notice, among other things. To streamline taxation, it would require a state to create a single tax rate for surplus lines insurance, allow states to charge their own rates on multi-state risks, and set uniform payment dates.