Texas: Many Life Insurers Keep Beneficiary Proceeds in Accounts

The Texas Department of Insurance says a recent industry survey shows that many life insurance companies place policy proceeds into Retained Asset Accounts (RAAs) instead of paying proceeds directly to the beneficiaries. The department is encouraging policyholders to carefully read the terms of their claim form and accompanying brochures when filing a life insurance policy death claim.

RAAs provide a settlement option in which life insurance proceeds are placed in an account. Often, this account is under the control of the insurer or its agent but made accessible to the beneficiary via checks or drafts. When RAAs are used, a beneficiary has an absolute and immediate right to all the funds in the account by writing a single check.

According to the TDI survey of 160 life insurance companies completed in December, more than half of the 71 companies currently offering RAAs use the accounts as the default policy settlement option. Other key findings in the survey include:

• As of Dec. 31, 2010, survey respondents reported 51,484 open accounts totaling nearly $2.3 billion.
• The average duration of an RAA in Texas is four years and three months. For accounts with no withdrawal activity for more than four years, the average duration is nine years.
• More than 12,000 accounts had no withdrawal activity for more than three years; 8,646 of these accounts had no activity for more than four years.
• The total amount held in the 12,000 accounts which had been inactive for at least three years was more than $329 million.
• Forty-nine percent of companies offering RAAs did not report accounts exceeding three years without account holder contact to the Texas Comptroller of Public Accounts as unclaimed property.
• The most prevalent range of interest rates credited in the aggregate to RAA accounts in 2010 was 1.01 percent to 1.5 percent.

The report of the survey results titled Retained Asset Accounts Survey Results March 2011 is posted on the agency website at: http://www.tdi.state.tx.us/reports/life/documents/raareport.pdf

Topics Carriers Texas