State insurance regulators, under pressure to improve disclosure of death-benefit payment options, issued a consumer alert about the industry practice of retaining funds rather than paying them in a lump sum.
“You may be able to earn a higher rate of interest on the life insurance proceeds if you select a different payout option,” the National Association of Insurance Commissioners said in the alert. “While the documents you receive might look like a checkbook, it might actually be drafts, which are similar to checks, but different in some ways.”
The alert was issued after an NAIC panel met yesterday in Seattle to review retained-asset accounts. The regulators created the panel after Bloomberg Markets magazine reported in July that insurers profit by holding and investing $28 billion owed to 1 million beneficiaries.
“Disclosure is paramount,” said Thomas R. Sullivan, co- chair of the working group, at its first meeting yesterday. “That seems to be the central issue.”