Filed Under:Your Practice, Regulatory

NAIC to eye guidelines on unclaimed property

A key National Association of Insurance Commissioners (NAIC) committee agreed late Friday to determine whether guidelines should be developed to provide consistency in the handling of unclaimed death benefits. The decision was made after considerable debate by the NAIC’s Life Insurance and Annuity Committee. It was made at the urging of NAIC President Jim Donelon and Nebraska Insurance Director Bruce Ramge and because state regulators are under considerable pressure from the industry.

The American Council of Life Insurers (ACLI) is leading the charge on behalf of its members. In several letters to the NAIC, ACLI officials have called attention to the “challenges life insurers face in complying with the growing inconsistency and complexity of the regulatory framework for unclaimed benefit administration,” and has demanded that the NAIC, as the industry “standard-setting organization,” craft uniform guidelines, a model law or guidance on the issue. 

However, “There is a long way to go on this,” as stated by one company official. 

The official said the industry is still divided on how they want the NAIC and states to proceed, with some opposed to using the Social Security Death Master File (DMF) on current business and others wanting uniform standards that all insurers follow.

The company official provided a note summarizing the meeting written by outside lawyers for the insurer at Sutherland, Asbill & Brennan.

The note said that the so-called “(A) Committee” voted to expose a charge for 2014 proposed by Ramge to “undertake a study to determine if recommendations should be made to address consistency in the handling of unclaimed death benefits.” 

Only Florida voted against the motion to expose the charge for comment by interested parties.    The charge and the comment period (likely 7-10 days) will be posted on the (A) Committee’s website, the Sutherland advisory said.

The Friday debate exposed a rift amongst states on the issue. Florida, California and New Hampshire “wanted to water down the charge to the point where nothing would be done,” the Sutherland advisory said.

They are the states amongst the most aggressive in pursuing enforcement actions, including large settlements and fines, against insurance companies for not complying with state escheat laws by turning over proceeds of life insurance policies where the policy owner has died, but no beneficiaries put in claims for the proceeds.

Illinois, Pennsylvania and North Dakota are among other states that are the leads in pursuing large fines for noncompliance as well as agreements mandating use of the DMF on a regular basis to ensure that claims are paid on life insurance policies or the money turned over to the states. In some states, especially in California, parallel probes are being conducted by state treasurer or comptroller offices, or unclaimed property agencies.

In the latest global settlement, against Transamerica in September, officials of the lead states said the deal represents the eighth life claim settlement agreement for the states. Presently, the state insurance regulators have either reached settlements or concluded the investigation of nine of the top 20 companies constituting over 45 percent of the total market. “Nationally, the priority is focused on the remaining examinations of more than 30 top life and annuity insurers in this market,” the Florida Insurance Department said in a statement.

Besides the 20 largest companies, some states, like California, are being aggressive in pursuing enforcement actions against smaller insurers.

At the Friday meeting, demands that the NAIC start to work on uniform guidelines were led by Ramge and Jim Donelon, NAIC president. For example, Donelon said that in the past two weeks, ever since the NAIC Executive Committee voted down the charge, he has heard from many members who want something done. 

Donelon said that there are a number of NAIC commissioners who think this issue needs to be address, while others have gone along with the lead States’ approach of pursuing settlements. 

Donelon said it is past due that the NAIC do something on this issue and he is “embarrassed” that not more has been done to pursue resolution of the probes during his tenure as president of the NAIC. He urged the committee to vote for the charge. 

After that, “the vote to expose the charge passed almost unanimously,” the Sutherland summary said.

Most of the nation’s large insurers have settled with state regulators and treasurers over the issue, and now John Chiang, California controller, and some state insurance regulators have expanded the probe to smaller insurers.

For example, on Oct. 30, Chiang countersued Thrivent Financial for Lutherans, based in Minneapolis, in response to a lawsuit filed a few days earlier by Thrivent seeking to limit access to its records by outside vendors hired by California to pursue its books for compliance with unclaimed property laws.

Earlier in the month, Chiang won a lawsuit against American National Insurance Co. of Galveston, Texas, dealing with access to ANICO records. He has also filed suit seeking the same thing against Kemper Insurance, based in Chicago.

A third front is West Virginia. Oral arguments were heard in early September on litigation dealing with the issue against 68 insurers admitted to sell life insurance in the state. It is unclear when the court will rule.

The audits are being conducted by three independent vendors: Verus, the Unclaimed Property Clearinghouse and Kelmar Co.

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