The American Council of Life Insurers (ACLI) Senior Vice President, Insurance Regulation & Chief Actuary Paul Graham provided the following statement at a meeting of the National Association of Insurance Commissioners Retained Asset Account Working Group:

Seattle, WA (Aug. 15, 2010) – “We appreciate the opportunity to share our perspectives on an issue that has recently garnered a lot of attention. Retained asset accounts have existed since the early 1980s, providing beneficiaries with a valuable method for receiving life insurance proceeds after the death of a loved one. There have been relatively few complaints to companies or regulators during that time period. However, certain media reports have questioned the validity and appropriateness of these accounts, concluding that consumers are somehow being harmed. Unfortunately, such conclusions have been drawn based on inaccurate, incomplete, and misleading information. We firmly believe quite the opposite:  retained asset accounts provide a valuable benefit to beneficiaries who, in their absence, may be forced to make the most important financial decision in their lives during the most stressful period of their lives. That is, retained asset accounts provide the benefit of time. They allow grieving beneficiaries to make financial decisions at the time they choose to make them, while providing interest income that compares favorably with many other on-demand deposits while that time elapses.

“The media reports have focused on four main concerns:  the security of retained asset accounts, interest rates paid on the accounts, choices provided to beneficiaries and disclosures made by the insurer.  The first three of these are quite easily addressed. While the accounts are not covered by FDIC, in the extremely rare event of an insurer insolvency, retained asset accounts are protected by state guaranty associations. The accounts are credited with market interest rates for on-demand deposits. And beneficiaries have access to their money just as rapidly as if a bank check was cut from the insurer’s bank account. Complete choice is maintained by the beneficiary, whether they choose to immediately draw upon the funds, or to postpone their investment decisions to a later date.

“Regarding disclosure, the NAIC Model Bulletin on Retained Asset Accounts prescribes disclosures that should be provided to beneficiaries when a retained asset account is established on their behalf. Our research suggests that it is general industry practice to provide the disclosures required in the model bulletin, regardless of whether a state has adopted the model or not.  Given the lack of consumer complaints and positive feedback from consumers over the years, it would appear that those disclosures are doing the job, notwithstanding the recent media reports. However, complete transparency is important, and ACLI believes it to be entirely reasonable to re-examine the nature and timing of the disclosures that are required. We pledge our complete support to our regulators as they re-examine the best method of setting nationwide uniform disclosure requirements for retained asset accounts.” 

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The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with more than 300 legal reserve life insurer and fraternal benefit society member companies operating in the United States. ACLI members represent more than 90 percent of the assets and premiums of the life insurance and annuity industry. In addition to life insurance and annuities, ACLI member companies offer pensions, 401(k) and other retirement plans, long-term care and disability income insurance, and reinsurance. ACLI's public Web site can be accessed at www.acli.com.