HARRISBURG, Sept. 3 – State Rep. Robert F. Matzie, D-Allegheny/Beaver, has introduced legislation (H.B. 2682) that would prohibit life insurance companies from profiting from death benefits through the use of retained asset accounts.
“After reading several articles about this issue and how it’s affected families, especially those of service men and women who gave the ultimate sacrifice, I was outraged,” Matzie said. “I contacted Chairman Deluca of the House Insurance Committee and staff to assist in crafting language to give the Commonwealth the regulatory power needed to remove retained asset accounts as the default account for policies.”
Matzie said these accounts have been utilized by insurers to pay the proceeds of a life insurance policy, but unfortunately, at times have also been used to the detriment of consumers.
Insurers use retained asset accounts as a way to keep cash when beneficiaries of the policies do not elect a lump-sum payout of death benefits. Beneficiaries are instead issued a “checkbook” to access their funds. Meanwhile, the insurance companies earn interest from the money in the accounts.
In some instances, consumers have been led to believe that they have immediate access to the account, when in fact they have not had that access. In other instances, the insurance company has earned interest far above what it has paid consumers.
Pennsylvania currently has no explicit regulatory authority over these practices. Matzie’s legislation would fill that regulatory hole.
Specifically, Matzie’s bill would prohibit the use of retained asset accounts as the default method for satisfying a life insurance obligation, and require full disclosure by insurers of those instances where the account is used. The disclosure would include the account’s features, including immediate access to the funds.