Prohibits insurers from using retained asset accounts to hold proceeds from death benefits.
TITLE OF BILL: REVISED 12/30/11 An act to amend the insurance law, in relation to prohibiting retained-asset accounts
PURPOSE OR GENERAL IDEA OF BILL: Bans retained-asset accounts.
SUMMARY OF SPECIFIC PROVISIONS: Section 1. Amends section 321? of the Insurance Law. Prohibits proceeds from a life insurance policy to be held in a retained-asset account held by the insurer. Defines a retained-asset account.
Section 2. Effective Date
EXISTING LAW: None.
JUSTIFICATION: A recent news report in Bloomberg News (July 28, 2010) told the story of a twenty-four year old Army sergeant who had been killed by a bomb in Afghanistan and his $400,000 life insurance policy held by Prudential Financial, Inc. Unfortunately, the money wasn't deposited in a bank account guaranteed by the Federal Deposit Insurance Corporation. It was held in a general corporate account - a retained-asset account - controlled by Prudential, where it continued to earn investment income. While Prudential earned 4.8% on income held in retained-asset accounts, it usually paid the survivors only 1% interest.
This legislation would prohibit retained asset accounts. Life insurance policies should be paid in full upon the death of a beneficiary and not retained in an account controlled by the insurer. Corporations like Prudential must not be allowed to earn millions of dollars on its insurance policies while at the same time only paying out a fraction to the survivors.
PRIOR LEGISLATIVE HISTORY: 2011: S.504 - Defeated in Insurance/A.683 - Referred to Insurance 2010: S.8469 - Referred to Rules
FISCAL IMPLICATIONS: None to state.
EFFECTIVE DATE: Sixty days after it shall have become law.
STATE OF NEW YORK ________________________________________________________________________ 504 2011-2012 Regular Sessions IN SENATE (PREFILED) January 5, 2011 ___________Introduced by Sen. DIAZ -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance AN ACT to amend the insurance law, in relation to prohibiting retained- asset accounts THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 3213 of the insurance law is amended to read as follows: S 3213. Payment of proceeds. 1. WHERE THE PROCEEDS OF A POLICY OF LIFE INSURANCE DELIVERED OR ISSUED FOR DELIVERY IN THIS STATE ARE PAYA- BLE, ACCORDING TO ITS TERMS, SUCH PROCEEDS SHALL NOT BE HELD IN A RETAINED-ASSET ACCOUNT HELD BY THE INSURER. FOR PURPOSES OF THIS SECTION A "RETAINED-ASSET ACCOUNT" SHALL MEAN AN ACCOUNT NOT GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FUNDS OF WHICH ARE RETAINED BY THE INSURER, WITH ALL OR A PORTION OF THE INTEREST BEING PAID TO THE INSURER, BUT THE FUNDS OF SUCH ACCOUNT ARE PAYABLE TO THE BENEFICIARY OR BENEFICIARIES BY USE OF A CHECKBOOK. 2. Where the proceeds of a policy of life insurance delivered or issued for delivery in this state are payable, according to its terms, to two or more beneficiaries without designation of their respective interests, the proceeds shall be paid to such beneficiaries in equal portions. S 2. This act shall take effect on the sixtieth day after it shall have become a law.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD03338-01-1