2011 -- S 0045 SUBSTITUTE A

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LC00205/SUB A

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2011

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A N A C T

RELATING TO INSURANCE - LIFE INSURANCE BENEFICIARIES' BILL OF RIGHTS

     Introduced By: Senators Walaska, and Bates

     Date Introduced: January 19, 2011

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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

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by adding thereto the following chapter:

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     CHAPTER 4.9

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BENEFICIARIES' BILL OF RIGHTS

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

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"Beneficiaries' Bill of Rights Act of 2011."

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

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

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

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language of their options.

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

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

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benefit.

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

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

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

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

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supplementary contract not involving annuity benefits.

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

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

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

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account.

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

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

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benefits.

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

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

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

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benefit.

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

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pursuant to subsection (a) herein the following:

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

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tax liability and investment options;

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

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

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

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

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any, and the amount of such coverage;

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

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account, including any minimum or maximum benefit payment amounts;

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

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transactions and the anticipated duration of such delays;

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

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calculation;

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

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

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

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

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draft, or other instrument;

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

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

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account;

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

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address, to obtain additional information regarding the account; and

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

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business regulation.”

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

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

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

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following information to the insurance commissioner within the department of business

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regulation:

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

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the year;

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

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year;

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

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during the year;

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

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year;

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

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

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

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include:

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

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

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

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associated with the retained asset accounts; and

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

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insurance claims;

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

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

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

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

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

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accounts on the insurer’s behalf;

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

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the state unclaimed property funds under abandoned property laws; and

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

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department of business regulation.

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

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

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

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

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continuous three (3) year period.

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

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

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

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

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untrue, deceptive, or misleading.

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

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

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beneficiary resides submitted on or after September 1, 2011.

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     SECTION 2. This act shall take effect upon passage.

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LC00205/SUB A

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - LIFE INSURANCE BENEFICIARIES' BILL OF RIGHTS

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     This act would provide greater amounts of information and transparency for purchasers

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and beneficiaries of life insurance products.

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     This act would take effect upon passage.

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LC00205/SUB A

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