On August 27, 2010, the NAIC Retained Asset Accounts Working Group ("RAA Working Group") discussed its August 23, 2010 draft "Action Plan," which reflected the conclusions of the RAA Working Group from its August 15th meeting, identified additional information sought by the RAA Working Group, and outlined preliminary regulatory options under consideration. The Action Plan facilitates the RAA Working Group's charge to "review the use of retained asset accounts (RAAs) by insurance companies and make recommendations as may be necessary, including whether there is appropriate consumer disclosure."
During the August 27th call, regulators focused on the collection of information - what information should be collected, how the information should be gathered, and the scope and timing of the information gathering process. In addition to the six items included in the August 23rd Action Plan, the RAA Working Group agreed that information should be collected on industry practices with respect to:
- How RAAs operate for group contracts - for example, who makes the decision as to whether benefits are paid through an RAA and who earns the interest on benefits held in an RAA.
- Whether insurers consider insured/policyholders' prior instructions on the payment of benefits before the insurers pay benefits through an RAA.
- The protections afforded consumers in the event of forgeries.
The RAA Working Group discussed whether the information it sought should be collected by industry trade associations, the NAIC, or individual states. Because of its desire to quickly make recommendations and consider appropriate consumer disclosure in view of pending federal and state legislative review, the RAA Working Group considered limiting its data requests to insurers representing the majority of the industry sales rather than a more time-consuming survey of all insurers. Individual states could, if they desired, survey insurers in their state.
During the call, several regulators expressed their views on regulatory changes they believed are needed. New Jersey stated it is going to require the filing of RAA materials by insurers. Several states reflected that consumers must be given understandable disclosures to make informed decisions. At least one state wanted to ensure that the state guaranty laws provided unlimited coverage for RAAs in situations when an insurer was solvent at the time of the benefit payment and then subsequently became insolvent while the benefit continued to be held in an RAA. The state posited that the guaranty fund should cover 100% of the RAA amount in that situation or else the consumer is being penalized for not taking the benefit out immediately.
The Action Plan is being updated to reflect the changes made during the call and then will be circulated for approval. The NAIC staff will also develop a survey for the RAA Working Group's approval. In the meantime, the RAA Working Group is further considering how the information will be collected.