Bill Text: NJ S2435 | 2010-2011 | Regular Session | Introduced
Bill Title: Regulates use of retained asset accounts by life insurers.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2010-11-22 - Introduced in the Senate, Referred to Senate Commerce Committee [S2435 Detail]
Download: New_Jersey-2010-S2435-Introduced.html
Sponsored by:
Senator JEFF VAN DREW
District 1 (Cape May, Atlantic and Cumberland)
SYNOPSIS
Regulates use of retained asset accounts by life insurers.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning life insurance and amending N.J.S.17B:25-11 and P.L.2005, c.190.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.17B:25-11 is amended to read as follows:
17B:25-11. a. There shall be a provision that when benefits under the policy shall become payable by reason of the death of the insured, settlement shall be made within 60 days after receipt of due proof of death and, at the insurer's option, surrender of the policy or proof of the interest of the claimant or both.
b. If a claim or a portion of a claim for benefits under a policy requires additional investigation or is denied by the insurer, the claimant shall be notified in writing no later than the 45th calendar day following receipt by the insurer of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer under the terms of the policy, that the claim, or a portion thereof, is subject to additional investigation or denied, and the reason the claim is being investigated or denied. Notwithstanding the provisions of this subsection b. to the contrary, the notice to the claimant for any claim which the insurer concludes, based upon its investigation and which conclusion is reasonably based upon the contents of the insurer's claim file, constitutes probable cause for fraud shall not be required to contain the specific reasons for the investigation. A conclusion of fraud that is not reasonably based upon the contents of the insurer's claim file, notwithstanding that the violation did not occur with such frequency as to indicate a general business practice, shall be a violation of section 1 of P.L.1975, c.101 (C.17B:30-13.1). Any uncontested portion of a claim shall be paid no later than the 60th calendar day following receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer under the terms of the policy.
c. The insurer, upon receipt of any document or information requested relating to a claim or portion of a claim under investigation, shall pay the benefits for which the claim is made or deny the claim no later than the 90th calendar day following the receipt of the document or information.
d. Payment of a claim or a portion thereof that is not under investigation by the insurer shall be overdue if not remitted to the claimant by the insurer on or before the 60th calendar day following receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer pursuant to the policy. Payment of a claim or a portion of a claim under investigation or denied that becomes eligible for payment shall be overdue if not remitted to the claimant by the insurer on or before the 90th calendar day following receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer. Overdue payments shall bear an annual rate of interest equal to the average rate of return of the State of New Jersey Cash Management Fund, established pursuant to section 1 of P.L.1977, c.281 (C.52:18A-90.4), for the preceding fiscal year, rounded to the nearest one-half percent.
e. When benefits under the policy shall become payable by reason of the death of the insured an insurer shall use a retained asset account only if the insurer:
(1) discloses in simple language to the claimant that the claimant is not obligated to accept the retained asset account and that the claimant may receive the benefit in full from the insurer;
(2) obtains prior written approval from the claimant to establish a retained asset account;
(3) discloses to the claimant that the retained asset account is not insured by the Federal Deposit Insurance Corporation due to the fact that the insurer is not a traditional depository institution, but the disclosure may include information explaining any protections that may be provided by the New Jersey Life & Health Insurance Guaranty Association; and
(4) pays all interest received by the insurer on the funds held in the retained asset account, less reasonable administrative expenses, if any, to the claimant and discloses to the claimant any calculation of the interest earned on the account.
For the purposes of this subsection "retained asset account" means an account established by an insurer in favor of a claimant with the benefit owed to the claimant.
(cf: P.L.2001, c.91, s.1)
2. Section 8 of P.L.2005, c.190 (C.17B:27-75) is amended to read as follows:
8. a. Notwithstanding any policy provision to the contrary, benefits under a group life insurance policy subject to this act shall become payable by reason of the death of the insured within 60 days after the receipt of due proof of death and, at the insurer's option, proof of the interest of the claimant.
b. If a claim or a portion of a claim for benefits under a policy requires additional investigation or is denied by the insurer, the claimant shall be notified in writing no later than 45 days following receipt by the insurer of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer under the terms of the policy, that the claim, or a portion thereof, is subject to additional investigation or denied, and the reason the claim is being investigated or denied. Notwithstanding the provisions of this subsection b. to the contrary, the notice to the claimant for any claim which the insurer concludes, based upon its investigation and which conclusion is reasonably based upon the contents of the insurer's claim file, constitutes probable cause for fraud shall not be required to contain the specific reasons for the investigation. A conclusion of fraud that is not reasonably based upon the contents of the insurer's claim file shall be a violation of section 1 of P.L.1975, c.101 (C.17B:30-13.1), notwithstanding that the violation did not occur with such frequency as to indicate a general business practice. Any uncontested portion of a claim shall be paid no later than 60 days following receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer under the terms of the policy.
c. The insurer, upon receipt of any document or information requested relating to a claim or portion of a claim under investigation, shall pay the benefits for which the claim is made, or deny the claim no later than 90 days following the receipt of the document or information.
d. Payment of a claim or a portion thereof that is not under investigation by the insurer shall be overdue if not remitted to the claimant by the insurer on or before 60 days following receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer pursuant to the policy. Payment of a claim, or a portion of a claim under investigation, or denied, that becomes eligible for payment shall be overdue if not remitted to the claimant by the insurer on or before 90 days following receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer. Overdue payments shall bear an annual rate of interest equal to the average rate of return of the State of New Jersey Cash Management Fund, established pursuant to section 1 of P.L.1977, c.281 (C.52:18A-90.4), for the preceding fiscal year, rounded to the nearest one-half percent.
e. When benefits under the policy shall become payable by reason of the death of the insured an insurer shall use a retained asset account only if the insurer:
(1) discloses in simple language to the claimant that the claimant is not obligated to accept the retained asset account and that the claimant may receive the benefit in full from the insurer;
(2) obtains prior written approval from the claimant to establish a retained asset account;
(3) discloses that the retained asset account is not insured by the Federal Deposit Insurance Corporation due to the fact that the insurer is not a traditional depository institution, but the disclosure may include an explanation of any protections provided by the New Jersey Life & Health Insurance Guaranty Association; and
(4) pays all interest received by the insurer on the funds held in the retained asset account, less reasonable administrative expenses, if any, to the claimant and discloses to the claimant any calculation of the interest earned on the account.
For the purposes of this subsection "retained asset account" means an account established by an insurer in favor of a claimant with the benefit owed to the claimant.
(cf: P.L.2005, c.190, s.8)
3. This act shall take effect immediately.
STATEMENT
Retained asset accounts are accounts established by life insurers in which, instead of paying the beneficiary a lump sum, they place money owed to beneficiaries and issue the beneficiary a checkbook from which they can write checks against the funds in the retained asset account. Under this arrangement, insurers are able to keep the difference between the interest rate they pay out to the beneficiary and the income generated from investing these funds.
This bill requires that life insurers, before placing funds into a retained asset account, disclose certain information to the claimant and pay all interest received by the insurer on the funds held in the retained asset account, less reasonable administrative expenses, if any, to the claimant.
Specifically, under this bill insurers would be required to disclose:
- that the claimant is not obligated to accept the retained asset account, and that the claimant may receive the lump sum benefit in full from the insurer;
- that the retained asset account is not insured by the Federal Deposit Insurance Corporation due to the fact that the insurer is not a traditional depository institution, but may include an explanation of any protections provided by the New Jersey Life & Health Insurance Guaranty Association; and
- any calculation of the interest earned on the account.
In addition, the bill provides that, before establishing a retained asset account, the insurer would be required to obtain prior written approval from the claimant.
