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| | Dave Jones, California Insurance Commissioner, Announces Passage Of Bill To Protect Life Insurance Beneficiaries
By Press Release - September 2, 2011
Commissioner Jones Urges Governor to Sign SB 599 Into Law
Dave Jones yesterday announced that the California State Legislature passed SB 599, which protects consumers’ rights to choose how they want their life insurance proceeds paid. The measure, which received strong bipartisan support and is authored by Senate Appropriations Committee Chair Christine Kehoe (D-San Diego), requires life insurers to obtain a beneficiary’s written declaration as to how he or she wants to receive benefit payment.
Current law allows insurers to require life insurance benefits to be paid only through a Retained Asset Account (RAA). An RAA involves an insurer depositing the insurance benefits into an account under its control and sending the beneficiary a draft book. While RAAs appear similar to a checking account, they have certain features that can compromise consumer protection and fund accessibility.
“Many beneficiaries are unknowingly having their life insurance proceeds automatically placed into a retained asset account,” said Insurance Commissioner Dave Jones. “SB 599 would halt this practice and ensure that beneficiaries are provided the opportunity to decide how they want to receive their benefits.”
Specifically, SB 599 requires insurers to get a beneficiary’s written declaration on the claim from as to how they want to receive their benefit payment. If the beneficiary does not make a designation, an insurer may issue an RAA only if the form clearly discloses this fact in the section where payment is selected. The bill also requires insurers to provide beneficiaries with specified RAA-related disclosures so that they have the information needed to make informed decisions on whether an RAA is an appropriate benefit settlement option for them. SB 599 is double-jointed with SB 713, a companion RAA-disclosure bill.
“SB 599 protects consumers from insurers deciding how they should receive their life insurance benefits,” said Commissioner Jones. “I urge Governor Jerry Brown to sign this important consumer protection legislation."
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