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Prospects Fade for NAIC Unclaimed Life Insurance and Annuities Model Act

Life, Annuity, and Retirement Solutions   |   Financial Services Regulatory   |   March 13, 2017
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The prospects for an NAIC Unclaimed Life Insurance and Annuities Model Act (“Model Act”) appear to be fading based on developments at the Unclaimed Life Insurance Benefits (A) Working Group’s March 7 meeting. The Working Group, which was charged with “develop[ing] a new NAIC model law to address the issue of unclaimed death benefits,” voted to suspend its work on a proposed Model Act and to report on the status of its drafting efforts to its parent Life Insurance and Annuities (A) Committee at the NAIC’s Spring National Meeting next month.

The suspension of work follows an impasse over whether the Model Act would apply only to life insurance policies and annuity contracts issued after the Model Act’s effective date (i.e., “prospective application”) or to existing business as well (i.e., “retroactive application”). At its December 2016 meeting, the Working Group narrowly approved an amendment to eliminate retroactive application from the prior working draft and to replace it with language offering adopting states three options: (1) prospective application; (2) retroactive application; and (3) prospective application for insurers that have not engaged in asymmetric use of the death master file. This amendment passed by a one vote margin, 7-6, with the Working Group Chair breaking an initial tie.

On March 7, the Working Group voted to suspend all further work, subject to further direction from the (A) Committee, and to report to the (A) Committee on the status of its efforts. As a preface to the vote, the chair provided three observations. First, many states’ concerns regarding use of the death master file have already been addressed through settlements in enforcement actions conducted under existing laws. Second, many states have already adopted their own statutes on the subject. Finally, the division within the Working Group over retroactive application raises the possibility that the Model Act may not clear the NAIC’s procedural requirements for a draft Model Act to be considered by the NAIC at large; specifically, that a proposed Model Act must be approved by a two-thirds majority of the relevant committee (here, the (A) Committee) and by a two-thirds majority of the Executive (EX) Committee. The chair noted that 12 of the 15 states on the (A) Committee are voting members of the Working Group, where the vote over retroactive application came down to a 6-6 split before the chair broke the tie. This persistent division over retroactive application among the members of the Working Group raises the prospect of a similar result at the (A) Committee.

In discussion over the motion to suspend the Working Group’s operations, a commentator asked whether the Working Group should discuss other possible recommendations to the (A) Committee, such as providing comments to the National Conference of Insurance Legislators (NCOIL). The chair noted this was beyond the scope of the Working Group’s charge and that nothing in the Working Group’s motion precluded the (A) Committee from considering that issue directly. It remains to be seen how the (A) Committee will proceed with the promulgation of an unclaimed death benefits Model Act.


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