Method to pay death benefits might get look

CARSON CITY -- Nevada Insurance Commissioner Brett Barratt said he hasn't received any complaints about a checkbook method used by some insurers to pay death benefits.

But Barratt told the Reno Gazette-Journal his office might review state regulations to make sure consumers know what such accounts involve.

"Nevada law already requires a full and frank disclosure so that beneficiaries can make informed choices and know what the options are," Barratt said. "People pay into these policies all their lives, and their families deserve to collect and not be misled."

Under "retained asset accounts," beneficiaries are sent checkbooks instead of a lump payment for death benefits. Such accounts allow insurers to keep proceeds of a life insurance policy in their general corporate accounts, earning investment income, while giving the beneficiary the ability to withdraw funds over time.

New York Attorney General Andrew Cuomo last month launched an investigation into the accounts, saying they generate big profits for insurers at the expense of bereaved families.

Nevada regulations require beneficiaries be offered a lump-sum payment and that insurers disclose any interest rate for the beneficiary and associated fees.

The regulations don't require the companies to reveal how much interest income they are making on the money held for the beneficiary.

This month, the National Association of Insurance Commissioners issued a consumer alert about the industry practice of holding death-benefit payments in retained asset accounts.

"You may be able to earn a higher rate of interest on the life insurance proceeds if you select a different payout option," the alert said.

Amy Bach, director of United Policyholders, a San Francisco-based consumer advocacy group, said the accounts are one of the many complex insurance products linked to insurance firm investments.