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Sponsor's memo
BILL NUMBER:S8469
Title of bill
An act to amend the insurance law, in relation to prohibiting retained-asset accounts
Purpose or general idea of bill
Bans retained-asset accounts
Summary of specific provisions
Section 1. Amends section 3213 of the Insurance Law to prohibit proceeds from a life insurance policy to be held in a retained-asset account held by the insurer. Defines a retained-asset account.
Justification
A recent news report in Bloomberg News (July 28, 2010) told the story of a twenty-four year old Army sergeant who had been killed by a bomb in Afghanistan and his $400,000 life insurance policy held by Prudential Financial, Inc.
Unfortunately, the money wasn't deposited in a bank account guaranteed by the Federal Deposit Insurance Corporation. It was held in a general corporate account - a retained-asset account -controlled by Prudential, where it continued to earn investment income. While Prudential earned 4.8% on income held in retained-asset accounts, it usually paid the survivors only 1% interest.
This legislation would prohibit retained asset accounts. Life insurance policies should be paid in full upon the death of a beneficiary and not retained in an account controlled by the insurer. Corporations like Prudential must not be allowed to earn millions of dollars on its insur- ance policies while at the same time only paying out a fraction to the survivors.
Prior legislative history
New Bill
Fiscal implications
None to state
Effective date
Sixty days after it shall have become law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.