BILL ANALYSIS
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THIRD READING
Bill No: AB 786
Author: Jones (D)
Amended: 8/18/10 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Retained-asset accounts
SOURCE : Author
DIGEST : This bill restricts use of retained-asset
accounts by life insurers absent compliance with specified
protections, and makes a violation an unfair and deceptive
act in the business of insurance.
Senate Floor Amendments of 8/18/10 delete the prior version
of the bill relating to individual health care coverage,
and instead add the current language.
ANALYSIS : Retained-asset accounts (RAAs) are a life
insurance claims settlement device giving consumers access
to benefits under a life insurance policy via a checkbook
type of account administered by the insurer. The National
Association of Insurance Commissioners is re-reviewing
current RAA disclosure practices and developing a consumer
alert to help policyholders better understand the terms of
such settlements. Regulators are also reviewing
requirements and terms for the "checkbook" usage associated
with such policies; there is a concern that how an insurer
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manages it RAA program affects if the consumer is FDIC
[Federal Deposit Insurance Corporation]-insured.
This bill:
1. States that the use by an insurer of an RAA is an unfair
and deceptive practice in the business of insurance
unless:
A. Prior written approval from the claimant is
obtained.
B. Disclosure that the claimant is not required to
accept the RAA is provided.
C. Disclosure of the fact the RAA is not insured by
the FDIC is made.
D. All interest received by the insurer, less
reasonable administrative fees, is paid to the
beneficiary or claimant.
2. Consistent with the approach of California's existing
Unfair Practices Act (Section 790 et seq. of the
Insurance Code), makes violations subject to a civil
penalty fixed by the Insurance Commissioner, not to
exceed $5,000 for each act or $10,000 if the act is
willful.
3. Defines "retained-asset account" as an account set up by
an insurer in favor of a beneficiary or claimant with
the benefits or claim funds owed to the beneficiary or
claimant.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
JJA:mw 8/18/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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