Insurance Commissioner Dave Jones Announces Passage of Bill to Protect Life Insurance Beneficiaries
News: 2011 Press Release
Insurance Commissioner Dave Jones today announced that the California State Legislature passed SB 599, which protects consumers' rights to choose how they want their life insurance proceeds paid. The measure, sponsored by the California Department of Insurance, received strong bipartisan support and was authored by Senate Appropriations Committee Chair Christine Kehoe (D-San Diego). The bill requires life insurers to obtain a beneficiary's written declaration as to how he or she wants to receive benefit payment.
Current law allows insurers to require life insurance benefits to be paid only through a Retained Asset Account (RAA). An RAA involves an insurer depositing the insurance benefits into an account under its control and sending the beneficiary a draft book. While RAAs appear similar to a checking account, they have certain features that can compromise consumer protection and fund accessibility.
"Many beneficiaries are unknowingly having their life insurance proceeds automatically placed into a retained asset account," said Insurance Commissioner Dave Jones. "SB 599 would halt this practice and ensure that beneficiaries are provided the opportunity to decide how they want to receive their benefits."
Specifically, SB 599 requires insurers to get a beneficiary's written declaration on the claim from as to how they want to receive their benefit payment. If the beneficiary does not make a designation, an insurer may issue an RAA only if the form clearly discloses this fact in the section where payment is selected. The bill also requires insurers to provide beneficiaries with specified RAA-related disclosures so that they have the information needed to make informed decisions on whether an RAA is an appropriate benefit settlement option for them. SB 599 is double-jointed with SB 713, a companion RAA-disclosure bill.
"SB 599 protects consumers from insurers deciding how they should receive their life insurance benefits," said Commissioner Jones. "I urge Governor Jerry Brown to sign this important consumer protection legislation."
The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.