The National Association of Insurance Commissioners (NAIC) is developing a model law to address situations where life insurance benefits or annuity proceeds go unclaimed because the beneficiary does not know about the existence of the insurance policy or annuity contract and files no claim for benefits or proceeds when the insured or annuitant dies. The model law would require an insurance company to periodically check the Death Master File, a death database maintained by the Social Security Administration, against the insurer's list of life insurance insureds and take steps to contact the beneficiary(ies) if no claim has been filed following an insured’s/annuitant's death.
One issue is whether credit life insurance should be governed by the model law. ABIA argues it shouldn’t be because the beneficiary of a credit life insurance policy is normally a lender that will know that a borrower/insured has died when premium payments stop and file a claim; so there is no need for the credit life insurer to take on the burden of checking the death database.
But Birny Birnbaum of the Center for Economic Justice, a consumer group, wants credit life insurance to be governed by the model law. He speculates that in certain circumstances, it may not be in the lender’s best interest to file a claim for benefits, so no claim is filed, which could harm the borrower's beneficiary. This is an implausible theory, so ABIA has submitted a letter to the NAIC working group asking it to keep the exclusion for credit life insurance in the model law. ABIA’s letter more thoroughly explains the issue. ABIA is coordinating its efforts with the Consumer Credit Industry Association (CCIA). The issue likely will be resolved before year’s end. ABIA will continue to work the issue.
If you have questions about the issue, please contact Chrys Lemon of McIntyre & Lemon, PLLC, one of ABIA’s counsels, at firstname.lastname@example.org or (202) 659-3900.