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News Release

New Jersey Department of
Banking and Insurance


Commissioner Tom Considine

For Immediate Release:
September 30, 2010

For Further Information:
Ed Rogan or Marshall McKnight (609) 292-5064


New Jersey DOBI Commissioner Considine Orders Greater
Consumer Protections for Life Insurance Beneficiaries

Reaffirms Value of RAA Payment Option

TRENTON – New Jersey Department of Banking and Insurance (DOBI) Commissioner Tom Considine recently ordered greater regulatory oversight and added consumer protection measures for life insurance claim beneficiaries, particularly those who receive settlements through alternatives to a single check. Considine said the documents establishing one of those options, a Retained Asset Account (RAA) agreement, will no longer be exempt from regulatory review. Currently, language used in RAA contracts between life insurance recipients and insurers, which should provide adequate, clear disclosure information, does not require approval by most state insurance departments.

On Friday, September 24, Considine ordered enhanced disclosures, including the presence of state guaranty fund protection and the absence of Federal Deposit Insurance Corporation (FDIC) coverage, which typically protects bank depositors.

“RAAs have been a longstanding option for consumers. They provide beneficiaries with both flexibility and value not found in a single check payment,” said Considine. “However, during a difficult time, beneficiaries deserve extra safeguards so that if they choose an RAA over a single check settlement, they know their state regulator has thoroughly vetted the documents covering the transaction,” he continued. “A uniform approach to RAA regulation with improved transparency will benefit the entire industry and especially consumers who face key financial decisions while experiencing bereavement. The action we recently took in New Jersey will ensure both greater transparency and greater regulatory security.”

An RAA is a temporary repository of funds that gives a life insurance beneficiary the extra time they may need to consider all available financial options while earning interest. An RAA resembles a checking account but is generally not held in a bank. The full value of the policy payment is available at any time. The RAA is just one of several payment options available to consumers.

Considine also called for a change to the National Association of Insurance Commissioners Model Guaranty law to protect beneficiaries with increased coverage on life insurance proceeds above the levels currently guaranteed. In New Jersey, the current limit of $500,000 per insured protects consumers through the guaranty fund. Any RAA settlement above this level could expose the consumer to some financial risk. In situations where the consumer agrees to an RAA payment option while the carrier is solvent, an unlimited level of protection provided by the guaranty association covering those funds could remove this risk for those consumers.

“I believe we should consider this adjustment to guaranty coverage as a means of eliminating any possible disadvantage to consumers,” said Considine. “RAA funds are sometimes said to be ‘as good as cash.’ Removing the credit risk through added guaranty fund coverage makes this so.”  

The order is available at http://www.state.nj.us/dobi/orders/a10_119.pdf.

Additional information on life insurance can be found at www.njdobi.org or by calling 1-800-446-7467. 

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