Iowa-2013-SSB3088-Introduced

S.F. _____ Section 1. NEW SECTION . 507B.4C Unclaimed life insurance. 1 1. Purpose. The purpose of this section is to 2 require complete and proper disclosure, transparency, and 3 accountability relating to any method of payment for life 4 insurance death benefits regulated by the commissioner. 5 2. Definitions. As used in this section, unless the context 6 otherwise requires: 7 a. “Account owner” means the owner of a retained asset 8 account who is a resident of this state. 9 b. “Annuity” means an annuity contract issued in this state. 10 “Annuity” does not include any annuity contract used to fund an 11 employment-based retirement plan or program where the insurer 12 takes direction from the plan sponsor or plan administrator. 13 c. “Authorized person” means a policy owner, insured, 14 annuity owner, annuitant, or account holder, as applicable 15 under a policy, annuity, or retained asset account. 16 d. “Death master file” means the United States social 17 security administration’s death master file or any other 18 database or service that is at least as comprehensive as the 19 United States social security administration’s death master 20 file for determining that a person has died. 21 e. “Death master file match” means a search of the death 22 master file that results in a match of an authorized person’s 23 name and social security number or an authorized person’s name 24 and date of birth. 25 f. “Insurer” means a life insurance company regulated under 26 chapter 508. 27 g. “Knowledge of death” means receipt of an original or 28 valid copy of a certified death certificate or a death master 29 file match validated by a secondary source by the insurer. 30 h. “Policy” means any policy or certificate of life 31 insurance issued in this state. “Policy” does not include any 32 of the following: 33 (1) A policy or certificate of life insurance which provides 34 a death benefit under an employee benefit plan subject to the 35 -1- LSB 5427SC (2) 85 av/nh 1/ 8

S.F. _____ federal Employee Retirement Income Security Act of 1974, Pub. 1 L. No. 93-406, as codified at 29 U.S.C. §1002 et seq. 2 (2) A policy or certificate of life insurance which provides 3 a death benefit under an employee benefit plan subject to a 4 federal employee benefit program. 5 (3) A policy or certificate of life insurance which is 6 used to fund a preneed plan for cemetery merchandise, funeral 7 merchandise, funeral services, or a combination thereof. 8 (4) A policy or certificate of credit life or accidental 9 death insurance. 10 (5) A policy issued to a group master policyowner for which 11 the insurer does not provide recordkeeping services. 12 i. “Recordkeeping services” means services provided by an 13 insurer who has entered into an agreement with a group policy 14 customer to be responsible for obtaining, maintaining, and 15 administering in the insurer’s own recordkeeping systems at 16 least all of the following information about each individual 17 insured under the insured’s group insurance contract or a line 18 of coverage thereunder: 19 (1) Social security number or name and date of birth. 20 (2) Beneficiary designation information. 21 (3) Coverage eligibility. 22 (4) Benefit amount. 23 (5) Premium payment status. 24 j. “Retained asset account” means an interest-bearing 25 account set up by an insurer in the name of the beneficiary of a 26 policy or annuity upon the death of the insured. 27 3. Insurer duties. 28 a. For any in-force policy, annuity, or retained asset 29 account issued for delivery in this state for which the insurer 30 has not previously been notified of a claim, an insurer shall 31 perform a comparison of such policy, annuity, or retained asset 32 account against the death master file, on at least a semiannual 33 basis, to identify potential death master file matches. 34 (1) An insurer may comply with the requirements of this 35 -2- LSB 5427SC (2) 85 av/nh 2/ 8

S.F. _____ subsection by using the full death master file for the initial 1 comparison and thereafter using the death master file update 2 files for subsequent comparisons. 3 (2) Nothing in this section shall be interpreted to limit 4 the right of an insurer to request a valid death certificate as 5 part of any claims validation process. 6 b. If an insurer learns of the possible death of an 7 authorized person through a death master file match or 8 otherwise, the insurer shall, within ninety days, do all of the 9 following: 10 (1) Complete a good faith effort, which shall be documented 11 by the insurer, to confirm the death of the authorized person 12 against other available records and information. 13 (2) Review the insurer’s records to determine whether the 14 deceased authorized person had purchased any other products 15 from the insurer. 16 (3) Determine whether benefits may be due in accordance with 17 the applicable policy, annuity, or retained asset account. 18 (4) If the beneficiary or an authorized person has not 19 communicated with the insurer within the ninety-day period, 20 take reasonable steps, which shall be documented by the 21 insurer, to locate and contact any beneficiary or other 22 authorized person on the policy, annuity, or retained asset 23 account, including sending the beneficiary or other authorized 24 person information regarding the insurer’s claims process and 25 regarding the need to provide an official death certificate, 26 if applicable under the policy, annuity, or retained asset 27 account. 28 c. Every insurer shall implement procedures to account for 29 all of the following: 30 (1) Common nicknames, initials used in lieu of a first or 31 middle name, use of a middle name, compound first and middle 32 names, and interchanged first and middle names. 33 (2) Compound last names, maiden or married names, and 34 hyphens, blank spaces, or apostrophes in last names. 35 -3- LSB 5427SC (2) 85 av/nh 3/ 8

S.F. _____ (3) Transposition of the month and date portions of the date 1 of birth. 2 (4) Incomplete social security numbers. 3 d. An insurer may disclose minimum necessary personal 4 information about a beneficiary or authorized person to an 5 individual or entity whom the insurer reasonably believes may 6 be able to assist the insurer in locating the beneficiary or 7 authorized person entitled to payment of the claims proceeds. 8 e. An insurer or its service provider shall not charge a 9 beneficiary or authorized person any fees or costs associated 10 with a death master file search conducted pursuant to this 11 section. 12 f. The benefits from a policy, annuity, or retained asset 13 account, plus any applicable accrued interest, shall first be 14 payable to designated beneficiaries or authorized persons, 15 and in the event that the beneficiaries or authorized persons 16 cannot be found, shall escheat to the state as unclaimed 17 property pursuant to chapters 556 and 633. 18 4. Rules. The commissioner shall adopt rules to administer 19 the provisions of this section. 20 5. Orders. The commissioner may issue an order doing any 21 of the following: 22 a. Limiting the death master file comparisons required 23 under subsection 3, paragraph “a” , to an insurer’s electronic 24 searchable files or approving a plan and timeline for 25 conversion of an insurer’s files to electronic searchable 26 files. 27 b. Exempting an insurer from the death master file 28 comparisons required under subsection 3, paragraph “a” , 29 or permitting an insurer to perform such comparisons less 30 frequently than semiannually upon a demonstration of financial 31 hardship by the insurer. 32 c. Phasing in requirements for compliance with this section 33 according to a plan and timeline approved by the commissioner. 34 6. Unfair trade practice. Failure to meet any requirement 35 -4- LSB 5427SC (2) 85 av/nh 4/ 8

S.F. _____ of this section with such frequency as to constitute a general 1 business practice is an unfair method of competition and 2 an unfair or deceptive act or practice in the business of 3 insurance under this chapter. 4 7. Insurer unclaimed property reporting. 5 a. If an insurer identifies a person as deceased through 6 a death master file match as described in subsection 3, 7 paragraph “a” , or other information source, and validates such 8 information through a secondary information source, the insurer 9 may report and remit the proceeds of the policy, annuity, or 10 retained asset account due to the state prior to the dates 11 required for such reporting and remittance under chapter 556, 12 without further notice to or consent by the state, after 13 attempting to contact any beneficiary under either of the 14 following circumstances: 15 (1) The insurer is unable to locate a beneficiary who is 16 located in this state under the policy, annuity contract, or 17 retained asset account, after conducting reasonable search 18 efforts of up to one year after the insurer’s validation of the 19 death master file match. 20 (2) No beneficiary or person, as applicable for unclaimed 21 property reporting purposes under chapter 556, has a last known 22 address in this state. 23 b. Once the insurer has reported upon and remitted the 24 proceeds of the policy, annuity, or retained asset account to 25 the state pursuant to chapter 556, the insurer is relieved 26 and indemnified from any and all additional liability to any 27 beneficiary or authorized person relating to the proceeds 28 reported upon and remitted. This indemnification shall be in 29 addition to any other protections provided by law. 30 Sec. 2. Section 556.1, Code 2014, is amended by adding the 31 following new subsection: 32 NEW SUBSECTION . 5A. “Knowledge of death” means the same as 33 defined in section 507B.4C. 34 Sec. 3. Section 556.3, subsection 2, Code 2014, is amended 35 -5- LSB 5427SC (2) 85 av/nh 5/ 8

S.F. _____ to read as follows: 1 2. “Unclaimed funds,” funds” , as used in this section , means 2 all moneys held and owing by any life insurance corporation 3 unclaimed and unpaid for more than three years after the 4 moneys became due and payable as established from the records 5 of the corporation under any life or endowment insurance 6 policy or annuity contract which has matured or terminated. 7 A life insurance policy not matured by actual proof of the 8 knowledge of death of the insured is deemed to be matured and 9 the proceeds thereof are deemed to be due and payable if the 10 policy was in force when the insured attained the limiting 11 age under the mortality table on which the reserve is based 12 and shall be presumed abandoned and to be unclaimed funds as 13 defined in this section if unclaimed and unpaid for more than 14 two years thereafter, unless the person appearing entitled 15 thereto has within the two-year period assigned, readjusted, or 16 paid premiums on the policy, or subjected the policy to loan 17 or corresponded in writing with the life insurance corporation 18 concerning the policy. Moneys otherwise payable according 19 to the records of the corporation are deemed due and payable 20 although the policy or contract has not been surrendered as 21 required. 22 Sec. 4. EFFECTIVE DATE. This Act takes effect July 1, 2015. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 This bill relates to unclaimed life insurance death 27 benefits. The purpose of the bill is to require complete and 28 proper disclosure, transparency, and accountability relating 29 to any method of payment for life insurance death benefits 30 regulated by the commissioner of insurance. 31 New Code section 507B.4C requires that for in-force life 32 insurance policies, annuities, and retained asset accounts 33 issued for delivery in this state, insurers must perform a 34 comparison of such documents against the United States social 35 -6- LSB 5427SC (2) 85 av/nh 6/ 8

S.F. _____ security administration’s death master file or file updates 1 at least semiannually to determine whether any policy owners, 2 insureds, annuity owners, annuitants, or account holders have 3 died. If an insurer learns of the possible death of such 4 a person, the insurer has 90 days to complete a good faith 5 effort to confirm the death against other available records 6 and information, review the insurer’s records to see if the 7 deceased authorized person had purchased any other products 8 from the insurer, determine whether benefits are due, and take 9 reasonable steps to locate and contact any beneficiary or other 10 authorized person on the policy, annuity, or retained asset 11 account. 12 An insurer may disclose minimum necessary personal 13 information to individuals or entities who may be able to 14 assist in locating a beneficiary or other authorized person 15 entitled to payment of the claims proceeds. An insurer shall 16 not charge a beneficiary or other authorized person any fees or 17 costs associated with conducting a death master file search. 18 The claims proceeds shall first be payable to the designated 19 beneficiaries or authorized persons and if they cannot be 20 found, shall escheat to the state as unclaimed property 21 pursuant to Code chapters 556 (disposition of unclaimed 22 property) and 633 (probate code). 23 The insurance commissioner may adopt rules to implement the 24 provisions of the new Code section. The commissioner may issue 25 orders limiting the number of death master file comparisons 26 that an insurer is required to make and approving a plan and 27 timeline for conversion of the insurer’s files to electronic 28 searchable files, exempting an insurer from the death master 29 file comparisons required or permitting an insurer to perform 30 such comparisons less frequently upon a demonstration of 31 financial hardship, or phasing in requirements for compliance 32 with the new requirements according to a plan and timeline 33 approved by the commissioner. 34 Failure to meet any of the new requirements with such 35 -7- LSB 5427SC (2) 85 av/nh 7/ 8

S.F. _____ frequency as to constitute a general business practice is an 1 unfair method of competition and an unfair or deceptive act 2 or practice in the business of insurance and is punishable, 3 after notice and a hearing, by a summary cease and desist 4 order, imposition of a civil penalty of not more than $1,000 5 for each violation, but not exceeding an aggregate of $10,000, 6 suspension or revocation of applicable licenses, and a penalty 7 of not more than $10,000 for each violation of a cease and 8 desist order. 9 If an insurer identifies a person as deceased through a death 10 master file match or other information source, and validates 11 such information through a secondary source, the insurer may 12 report and remit the proceeds due to the state prior to the 13 three-year period set forth in Code chapter 556 pertaining 14 to disposition of unclaimed property, without further notice 15 to or consent by the state, after attempting to contact any 16 beneficiary under either of the following circumstances: (1) 17 the insurer is unable to locate a beneficiary who is located 18 in this state under the policy, annuity, or retained asset 19 account, after conducting reasonable search efforts of up to 20 one year, or (2) no beneficiary or other person, as applicable 21 for unclaimed property reporting purposes, has a last known 22 address in the state. An insurer who reports on and remits 23 such proceeds in this manner is relieved and indemnified from 24 any and all additional liability relating to the proceeds. 25 Coordinating changes are made to Code chapter 556 pertaining 26 to disposition of unclaimed property. Code section 556.1 27 is amended to provide that for purposes of disposition of 28 unclaimed property under that Code chapter, “knowledge of 29 death” means the same as provided in new Code section 507B.4C. 30 Code section 556.3(2) is amended to refer to “knowledge of 31 death” instead of “proof of the death” pertaining to unclaimed 32 funds held by life insurance companies. 33 The bill takes effect July 1, 2015. 34 -8- LSB 5427SC (2) 85 av/nh 8/ 8