On May 29, the National Association of Insurance Commissioners (the NAIC) Unclaimed Benefits Model Drafting (A) Subgroup (the Subgroup) met to discuss regulator and industry materials submitted to the Subgroup and identified three critical issues that it intends to consider when drafting the proposed NAIC model law on unclaimed death benefits (the NAIC Model Act).
Submissions from 11 different groups were discussed during the May 29th meeting. Four submissions were from insurance regulators (Louisiana, New York, Oklahoma and Wisconsin), and seven submissions were from interested parties (the Consumer Credit Industry Association (CCIA), the Center for Insurance Research (CIR), Kemper Life, the Loyal Christian Benefit Association (LCBA), the Louisiana Insurers’ Conference (LIC), the National Alliance of Life Companies (NALC), and the National Conference of Insurance Legislators (NCOIL)).
After considering these submissions, the Subgroup identified three critical issues that it will consider when drafting the NAIC Model Act:
- Whether the law should be prospective or retrospective, which may depend upon the types of conduct in which an insurer has previously engaged,
- Whether the law should apply equally to larger and small insurers, and
- Whether exceptions should be included for some life insurance policies, e.g., credit life insurance policies, which are exempted under the NCOIL Model Unclaimed Life Insurance Benefits Act (the NCOIL Model Act).
The next meeting will be held on June 12 at 1:00 p.m. EDT. The meeting will consist of presentations of (1) the NCOIL Model Act on unclaimed insurance benefits, (2) a proposal from the chief regulators of the Investigations of Life/Annuity Claims Settlement Practices (D) Task Force member states that have acted as lead states for the multistate targeted market conduct examinations of the 40 largest life insurers (the Lead State Proposal), (3) the New York Unclaimed Insurance Benefits Law, (4) the proposed Louisiana Unclaimed Life Insurance Benefits Act (the Proposed Louisiana Act), and (5) the proposed Oklahoma Unclaimed Life Insurance Benefits Act (the Proposed Oklahoma Act).
As noted in an explanatory statement, the Lead State Proposal embodies the key terms of the Regulatory Settlement Agreements, or RSAs, signed by 18 life insurers. It would require insurers to conduct quarterly searches of the Social Security Death Master File using “reasonable” fuzzy match criteria against each insurer’s entire life and annuity business and retained asset accounts to locate deceased insureds, conduct thorough searches for beneficiaries and escheat any unclaimed funds promptly.
By contrast, the Proposed Louisiana Act and the Proposed Oklahoma Act are based on the NCOIL Model Act, with important modifications . The Proposed Louisiana Act limits its retrospective application to insurers that have engaged in asymmetric conduct, i.e., insurers that have previously used the Social Security Death Master File in connection with searching for information on whether owners under the insurer’s annuity contracts might be deceased, but not in connection with whether the insureds under its life insurance policies might be deceased. The Proposed Oklahoma Act is prospective only, applies only to policies issued and delivered in Oklahoma, and gives the Insurance Commissioner discretion to phase-in compliance.
The Subgroup has indicated that it intends to select one of theproposed acts as a starting point for the NAIC Model Act. Once a starting point has been established, the Subgroup will consider the major issues outlined above, as well as any potential legal issues, such as the constitutionality of a retrospective unclaimed benefits law.