California Compels Life Insurers to Get Permission to Retain Benefits

Life insurers in California must receive approval from beneficiaries before keeping death-benefit payments in retained-asset accounts, under a state law Gov. Jerry Brown signed Monday.

The law requires insurers to get a written declaration from beneficiaries on how they want to receive payments, according to Dave Jones, the state insurance commissioner. If a beneficiary doesn’t make a choice, the insurer may issue a retained-asset account only if it has clearly disclosed its intention to do so.

Insurers have drawn fire from government officials since Bloomberg Markets magazine reported last year that carriers profit by holding and investing $28 billion owed to beneficiaries in so-called retained-asset accounts.

Retained-asset accounts were created as “a compassionate response” to beneficiaries’ needs, Jack Dolan, a spokesman for the American Council of Life Insurers, said last year. The products give grieving families time to decide what to do with their payouts, the council said.