What's happening
This bill prohibits life insurance proceeds in New York from being held in retained-asset accounts by insurers.
Why it matters
Boosts consumer protection by requiring life insurance beneficiaries in New York to receive lump-sum payments instead of having their funds held in insurer-controlled accounts. this limits the insurer’s ability to profit from holding the proceeds and ensures beneficiaries have immediate access to the full amount.
Eliminates the use of retained-asset accounts that are not FDIC-insured and may pay interest to the insurer rather than the beneficiary. , reducing confusion and financial risk for families during a vulnerable time.
Clarifies payout procedures and reduces administrative complexity for beneficiaries. they will no longer have to manage or understand unusual checkbook-style accounts, making the claims process more straightforward and transparent.
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Who cares
Headline styles
Ban Retained Asset Accounts
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to insurance
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4854
2017-2018 Regular Sessions
IN SENATE
March 3, 2017
Introduced by Sen. DIAZ -- read twice and ordered printed, and when printed to be committed to the Committee on Insurance
AN ACT to amend the insurance law, in relation to prohibiting retainedasset accounts
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Section 3213 of the insurance law is amended to read as follows:
§ 3213. Payment of proceeds. 1. Where the proceeds of a policy of life insurance delivered or issued for delivery in this state are payable, according to its terms, such proceeds shall not be held in a retained-asset account held by the insurer. For purposes of this section a "retained-asset account" shall mean an account not guaranteed by the federal deposit insurance corporation, the funds of which are retained by the insurer, with all or a portion of the interest being paid to the insurer, but the funds of such account are payable to the beneficiary or beneficiaries by use of a checkbook.
2. Where the proceeds of a policy of life insurance delivered or issued for delivery in this state are payable, according to its terms, to two or more beneficiaries without designation of their respective interests, the proceeds shall be paid to such beneficiaries in equal portions.
§ 2. This act shall take effect on the sixtieth day after it shall have become a law.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD07296-01-7
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
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. Prohibits proceeds from a life insurance policy to be held in a retained-asset account held by the insurer. Defines a retained-asset account.
Section 2. Effective Date
Existing law
None
Justification
A 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 insurance policies while at the same time only paying out a fraction to the survivors.
Prior legislative history
2016: S.476- REFERRED TO INSURANCE/A.888 - referred to insurance 2015: S.476- REFERRED TO INSURANCE/A.888 - referred to insurance 2014: S.13 - Referred to Insurance/A.638 - Referred to Insurance 2013: S.13 - Referred to Insurance/A.638- Referred to Insurance 2012: S.504 - Referred to Insurance/A.683 - Referred to Insurance 2011: S.504 - Defeated in Insurance/A.683 - Referred to Insurance 2010: S.8469 - Referred to Rules
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.