Posted on Wednesday, 5th October 2011 by Keane Unclaimed Property Team
Over the past few months, Keane has blogged about some of the issues that have recently come to light in the life insurance industry – and how many life insurance companies have found themselves under scrutiny from a beneficiary communication and unclaimed property perspective. As a result, the life insurance industry is starting to see some regulatory changes that will impact the way they communicate with policyholders and beneficiaries. In fact, just last week, California passed two laws intended to tighten consumer protections on retained asset accounts (RAAs).
One of the laws, S.B. 599, repeals the current law that had previously allowed insurers to require beneficiaries to receive their life insurance proceeds only through an RAA. The new law now requires life insurers to obtain a beneficiary’s written declaration as to how he/she wants to receive a benefit payment. California State Insurance Commissioner Dave Jones asked the state legislature to pass this law because of the issues RAA accounts can present. Retained asset accounts appear similar to a checking account, however retailers do not readily accept RAA drafts, and some RAAs have minimum draft requirements. In addition, RAAs are not protected by federal deposit insurance, making the accounts not only hard to access, but also not ideal from a consumer perspective.
Under the new law, insurers can also set up an RAA if the beneficiary fails to make a decision and if the declaration form clearly disclosed that the default benefits payment mechanism was an RAA.
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