Insurance Commissioner Dave Jones Applauds Governor for Signing Bill to Protect Life Insurance Beneficiaries
News: 2011 Press Release
Insurance Commissioner Dave Jones today announced that Governor Jerry Brown signed SB 599, which protects consumers' right to choose how they want their life insurance proceeds paid. The measure, authored by Senate Appropriations Committee Chair Christine Kehoe (D-San Diego) and sponsored by Insurance Commissioner Dave Jones, requires life insurers to obtain a beneficiary's written declaration as to how he or she wants to receive a benefit payment.
Instead of sending life insurance beneficiaries a check for the full amount of benefits owed, many life insurance companies automatically deposit the benefits into a Retained Asset Account (RAA). While RAAs appear similar to a checking account, they have certain features that can make it difficult for a beneficiary to access the funds and RAAs are not protected by federal deposit insurance. In addition, insurance companies invest the funds in the RAA and draw interest, only a portion of which is paid to the beneficiary, so beneficiaries are deprived of earning the fullest investment return on the benefits.
"This issue first came to my attention when military families complained that they had not been asked for permission before the life insurance benefits of loved ones who died in military service were put into a retained asset account by life insurers," said Commissioner Jones. "Now military families as well as all Californians will be able to decide for themselves how they want their life insurance benefits to be paid by requiring insurers to get their permission before putting their benefits into a retained asset account controlled by the insurer."
The bill also requires insurers to provide specified RAA-related disclosures so that beneficiaries have the information needed to make informed decisions on whether an RAA is appropriate for them. SB 599 and SB 713 are a two-bill package of consumer protection reforms regarding Retained Asset Accounts.
SB 713 requires additional disclosures to consumers regarding Retained Asset accounts. SB 713 was previously signed into law by the Governor and both bills will go into effect on January 1, 2012.
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.