California Governor Jerry Brown signed into law on October 2, 2011 legislation requiring life insurers to obtain written declarations from beneficiaries selecting the method for receipt of benefit payment. Previously, California law permitted life insurers to limit beneficiaries’ option for receipt of payment to Retained Asset Accounts ("RAA"). While RAAs are similar to checking accounts in some respects, the life insurer retains control of the assets and the account.
SB 599 emphasizes "lump sum" payments over payment through RAAs. The new law defines "lump sum" as "a single payment made directly to the beneficiary that satisfies all of the benefits owed to the beneficiary."
As a result of Governor Brown signing SB 599, several changes will be implemented when the law takes effect on January 1, 2012:
- Life insurers will be required to offer a range of options for benefit payment unless payment is made as a "lump sum"
- Life insurers will be required to seek beneficiaries’ written declarations on claim forms to select a payment option
- If no payment option is selected by a beneficiary, a RAA may be used if significant disclosures have been made on the form.
- The disclosures must be "easy to understand" and appear in bold font at least 12-point in size
The law contemplates additional regulations specifying reasonable requirements for the form of the declarations and disclosures to be promulgated by the Insurance Commissioner.