Chapter 370

2011 -- H 5244 SUBSTITUTE A AS AMENDED

Enacted 07/13/11

A N A C T

RELATING TO INSURANCE - LIFE INSURANCE BENEFICIARIES' BILL OF RIGHTS

Introduced By: Representatives Kennedy, San Bento, Naughton, Azzinaro, and

Gallison

Date Introduced: February 03, 2011

It is enacted by the General Assembly as follows:

SECTION 1. Title 27 of the General Laws entitled "INSURANCE" is hereby amended

by adding thereto the following chapter:

CHAPTER 4.9

BENEFICIARIES' BILL OF RIGHTS

27-4.9-1. Short title. – This chapter shall be known and may be cited as the

"Beneficiaries' Bill of Rights Act of 2011."

27-4.9-2. Purpose. - The purpose of this chapter is to require complete and proper

disclosure, transparency, and accountability relating to any method of payment for life insurance

death benefits and require that beneficiaries are fully informed in bold type and in layman’s

language of their options.

27-4.9-3. Definitions. - As used in this section:

(1) “Policy” means any policy or certificate of life insurance that provides a death

benefit.

(2) “Retained Asset Account” means any mechanism whereby the settlement of proceeds

payable under a life insurance policy, including, but not limited to, the payment of cash surrender

value, is accomplished by the insurer or an entity acting on behalf of the insurer depositing the

proceeds into an account, where those proceeds are retained by the insurer, pursuant to a

supplementary contract not involving annuity benefits.

27-4.9-4. General Requirements. - (a) An insurer may not use a retained asset account

as the mode of settlement unless the insurer discloses such option to the beneficiary or the

beneficiary’s legal representative prior to the transfer of the death benefit to a retained asset

account.

(b) A beneficiary shall be informed of his or her rights to receive a lump-sum payment of

life insurance proceeds in the form of a bank check or other form of immediate full payment of

benefits.

27-4.9-5. Disclosure Requirements. - (a) A complete listing and clear explanation of all

of the life insurance proceeds payment options available to the beneficiary in written or electronic

format shall accompany the tender of other than a lump sum payment of a life insurance death

benefit.

(b) The use of a retained asset account shall require in the description and explanation

pursuant to subsection (a) herein the following:

(1) The recommendation to consult a tax, investment, or other financial advisor regarding

tax liability and investment options;

(2) The initial interest rate, when and how interest rates may change, and any dividends

and other gains that may be paid or distributed to the account holder;

(3) The custodian of the funds or assets of the account;

(4) The coverage guaranteed by the Federal Deposit Insurance Corporation (FDIC), if

any, and the amount of such coverage;

(5) The limitations, if any, on the numbers and amounts of withdrawals of funds from the

account, including any minimum or maximum benefit payment amounts;

(6) The delays, if any, that the account holder may encounter in completing authorized

transactions and the anticipated duration of such delays;

(7) The services provided for a fee, including a list of the fees or the method of their

calculation;

(8) The nature and frequency of statements of account;

(9) The payment of some or all of the proceeds of the death benefit may be by the

delivery of checks, drafts, or other instruments to access the available funds;

(10) The entire proceeds are available to the account holder by the use of one such check,

draft, or other instrument;

(11) The insurer or a related party may derive income, in addition to any fees charged on

the account, from the total gains received on the investment of the balance of funds in the

account;

(12) The telephone number, address, and other contact information, including website

address, to obtain additional information regarding the account; and

(13) The following statement: “For further information, please contact the department of

business regulation.”

(c) The writings produced to satisfy the requirements of this section shall be in easy-to-

understand language and bold or at least twelve (12) point type.

27-4.9-6. Insurer Reporting. – (a) Insurers shall, on an annual basis, report the

following information to the insurance commissioner within the department of business

regulation:

(1) The number and dollar balance of retained asset accounts in force at the beginning of

the year;

(2) The number and dollar amount of retained asset accounts issued/added during the

year;

(3) The number and dollar amount of retained asset accounts closed out/withdrawn

during the year;

(4) The number and dollar balance of retained asset accounts in force at the end of the

year;

(5) The investment earnings or interest credited to retained asset accounts;

(6) Fees and other charges assessed during the year;

(7) A narrative description of how the accounts are structured. The description shall

include:

(i) All of the different interest rates paid to retained asset account holders during the

reporting year and the number of times changes were made during the reporting year;

(ii) A list of all applicable fees charged by the reporting entity directly or indirectly

associated with the retained asset accounts; and

(iii) Whether the retained asset accounts were the default method for satisfying life

insurance claims;

(8) The number and balance of retained asset accounts in force at the end of the current

year and prior year segregated within "aging categories" of "up to twelve (12) months," "thirteen

(13) to twenty-four (24) months," "twenty-five (25) to thirty-six (36) months," "thirty-seven (37)

to forty-eight (48) months," "forty-nine (49) to sixty (60) months," and over sixty (60) months;"

(9) The identity of any entity or financial institution that administers retained asset

accounts on the insurer’s behalf;

(10) The number and amounts of retained asset accounts that are transferred annually to

the state unclaimed property funds under abandoned property laws; and

(11) Any other information relating to retained asset accounts as prescribed by the

department of business regulation.

(b) An insurer shall immediately return any remaining balance held in a retained asset

account to the beneficiary when the account becomes inactive. A retained asset account shall

become inactive for purposes of this subsection if no funds are withdrawn from the account, and

if no affirmative directive has been provided to the insurer by the beneficiary, during any

continuous three (3) year period.

(c) All marketing materials, disclosure statements, and supplemental contract forms

utilized in connection with retained asset accounts shall be filed with the state insurance

department prior to their use. The commissioner shall disapprove any materials, statements, or

forms submitted under this section that are inconsistent with section 27-4.9-5 or are otherwise

untrue, deceptive, or misleading.

27-4.9-7. Effective Date. - This chapter shall apply to claims for a death benefit under

any policy or certificate of life insurance subject to the insurance laws of the state where the

beneficiary resides submitted on or after September 1, 2011.

SECTION 2. This act shall take effect upon passage.

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LC00699/SUB A

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