HSB 516 (LSB 5427HC (4) 85)

HOUSE FILE _____

BY  (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON COWNIE)

A BILL FOR

An Act relating to unclaimed life insurance death benefits, providing penalties, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  507B.4C  Unclaimed life insurance.
   1.  Purpose.  The purpose of this section is to require complete and proper disclosure, transparency, and accountability relating to any method of payment for life insurance death benefits regulated by the commissioner.
   2.  Definitions.  As used in this section, unless the context otherwise requires:
   a.  “Account owner” means the owner of a retained asset account who is a resident of this state.
   b.  “Annuity” means an annuity contract issued in this state. “Annuity” does not include any annuity contract used to fund an employment-based retirement plan or program where the insurer takes direction from the plan sponsor or plan administrator.
   c.  “Authorized person” means a policy owner, insured, annuity owner, annuitant, or account holder, as applicable under a policy, annuity, or retained asset account.
   d.  “Death master file” means the United States social security administration’s death master file or any other database or service that is at least as comprehensive as the United States social security administration’s death master file for determining that a person has died.
   e.  “Death master file match” means a search of the death master file that results in a match of an authorized person’s name and social security number or an authorized person’s name and date of birth.
   f.  “Insurer” means a life insurance company regulated under chapter 508.
   g.  “Knowledge of death” means receipt of an original or valid copy of a certified death certificate or a death master file match validated by a secondary source by the insurer.
   h.  “Policy” means any policy or certificate of life insurance issued in this state. “Policy” does not include any of the following:
   (1)  A policy or certificate of life insurance which provides a death benefit under an employee benefit plan subject to the federal Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, as codified at 29 U.S.C. §1002 et seq.
   (2)  A policy or certificate of life insurance which provides a death benefit under an employee benefit plan subject to a federal employee benefit program.
   (3)  A policy or certificate of life insurance which is used to fund a preneed plan for cemetery merchandise, funeral merchandise, funeral services, or a combination thereof.
   (4)  A policy or certificate of credit life or accidental death insurance.
   (5)  A policy issued to a group master policyowner for which the insurer does not provide recordkeeping services.
   i.  “Recordkeeping services” means services provided by an insurer who has entered into an agreement with a group policy customer to be responsible for obtaining, maintaining, and administering in the insurer’s own recordkeeping systems at least all of the following information about each individual insured under the insured’s group insurance contract or a line of coverage thereunder:
   (1)  Social security number or name and date of birth.
   (2)  Beneficiary designation information.
   (3)  Coverage eligibility.
   (4)  Benefit amount.
   (5)  Premium payment status.
   j.  “Retained asset account” means an interest-bearing account set up by an insurer in the name of the beneficiary of a policy or annuity upon the death of the insured.
   3.  Insurer duties.
   a.  For any in-force policy, annuity, or retained asset account issued for delivery in this state for which the insurer has not previously been notified of a claim, an insurer shall perform a comparison of such policy, annuity, or retained asset account against the death master file, on at least a semiannual basis, to identify potential death master file matches.
   (1)  An insurer may comply with the requirements of this subsection by using the full death master file for the initial comparison and thereafter using the death master file update files for subsequent comparisons.
   (2)  Nothing in this section shall be interpreted to limit the right of an insurer to request a valid death certificate as part of any claims validation process.
   b.  If an insurer learns of the possible death of an authorized person through a death master file match or otherwise, the insurer shall, within ninety days, do all of the following:
   (1)  Complete a good faith effort, which shall be documented by the insurer, to confirm the death of the authorized person against other available records and information.
   (2)  Review the insurer’s records to determine whether the deceased authorized person had purchased any other products from the insurer.
   (3)  Determine whether benefits may be due in accordance with the applicable policy, annuity, or retained asset account.
   (4)  If the beneficiary or an authorized person has not communicated with the insurer within the ninety-day period, take reasonable steps, which shall be documented by the insurer, to locate and contact any beneficiary or other authorized person on the policy, annuity, or retained asset account, including sending the beneficiary or other authorized person information regarding the insurer’s claims process and regarding the need to provide an official death certificate, if applicable under the policy, annuity, or retained asset account.
   c.  Every insurer shall implement procedures to account for all of the following:
   (1)  Common nicknames, initials used in lieu of a first or middle name, use of a middle name, compound first and middle names, and interchanged first and middle names.
   (2)  Compound last names, maiden or married names, and hyphens, blank spaces, or apostrophes in last names.
   (3)  Transposition of the month and date portions of the date of birth.
   (4)  Incomplete social security numbers.
   d.  An insurer may disclose minimum necessary personal information about a beneficiary or authorized person to an individual or entity whom the insurer reasonably believes may be able to assist the insurer in locating the beneficiary or authorized person entitled to payment of the claims proceeds.
   e.  An insurer or its service provider shall not charge a beneficiary or authorized person any fees or costs associated with a death master file search conducted pursuant to this section.
   f.  The benefits from a policy, annuity, or retained asset account, plus any applicable accrued interest, shall first be payable to designated beneficiaries or authorized persons, and in the event that the beneficiaries or authorized persons cannot be found, shall escheat to the state as unclaimed property pursuant to chapters 556 and 633.
   4.  Rules.  The commissioner shall adopt rules to administer the provisions of this section.
   5.  Orders.  The commissioner may issue an order doing any of the following:
   a.  Limiting the death master file comparisons required under subsection 3, paragraph “a”, to an insurer’s electronic searchable files or approving a plan and timeline for conversion of an insurer’s files to electronic searchable files.
   b.  Exempting an insurer from the death master file comparisons required under subsection 3, paragraph “a”, or permitting an insurer to perform such comparisons less frequently than semiannually upon a demonstration of financial hardship by the insurer.
   c.  Phasing in requirements for compliance with this section according to a plan and timeline approved by the commissioner.
   6.  Unfair trade practice.  Failure to meet any requirement of this section with such frequency as to constitute a general business practice is an unfair method of competition and an unfair or deceptive act or practice in the business of insurance under this chapter.
   7.  Insurer unclaimed property reporting.
   a.  If an insurer identifies a person as deceased through a death master file match as described in subsection 3, paragraph “a”, or other information source, and validates such information through a secondary information source, the insurer may report and remit the proceeds of the policy, annuity, or retained asset account due to the state prior to the dates required for such reporting and remittance under chapter 556, without further notice to or consent by the state, after attempting to contact any beneficiary under either of the following circumstances:
   (1)  The insurer is unable to locate a beneficiary who is located in this state under the policy, annuity contract, or retained asset account, after conducting reasonable search efforts of up to one year after the insurer’s validation of the death master file match.
   (2)  No beneficiary or person, as applicable for unclaimed property reporting purposes under chapter 556, has a last known address in this state.
   b.  Once the insurer has reported upon and remitted the proceeds of the policy, annuity, or retained asset account to the state pursuant to chapter 556, the insurer is relieved and indemnified from any and all additional liability to any beneficiary or authorized person relating to the proceeds reported upon and remitted. This indemnification shall be in addition to any other protections provided by law.
    Sec. 2.  Section 556.1, Code 2014, is amended by adding the following new subsection:
   NEW SUBSECTION.  5A.  “Knowledge of death” means the same as defined in section 507B.4C.
    Sec. 3.  Section 556.3, subsection 2, Code 2014, is amended to read as follows:
   2.  “Unclaimed funds,” funds”, as used in this section, means all moneys held and owing by any life insurance corporation unclaimed and unpaid for more than three years after the moneys became due and payable as established from the records of the corporation under any life or endowment insurance policy or annuity contract which has matured or terminated. A life insurance policy not matured by actual proof of the knowledge of death of the insured is deemed to be matured and the proceeds thereof are deemed to be due and payable if the policy was in force when the insured attained the limiting age under the mortality table on which the reserve is based and shall be presumed abandoned and to be unclaimed funds as defined in this section if unclaimed and unpaid for more than two years thereafter, unless the person appearing entitled thereto has within the two-year period assigned, readjusted, or paid premiums on the policy, or subjected the policy to loan or corresponded in writing with the life insurance corporation concerning the policy. Moneys otherwise payable according to the records of the corporation are deemed due and payable although the policy or contract has not been surrendered as required.
    Sec. 4.  EFFECTIVE DATE.  This Act takes effect July 1, 2015.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill relates to unclaimed life insurance death benefits. The purpose of the bill is to require complete and proper disclosure, transparency, and accountability relating to any method of payment for life insurance death benefits regulated by the commissioner of insurance.
   New Code section 507B.4C requires that for in-force life insurance policies, annuities, and retained asset accounts issued for delivery in this state, insurers must perform a comparison of such documents against the United States social security administration’s death master file or file updates at least semiannually to determine whether any policy owners, insureds, annuity owners, annuitants, or account holders have died. If an insurer learns of the possible death of such a person, the insurer has 90 days to complete a good faith effort to confirm the death against other available records and information, review the insurer’s records to see if the deceased authorized person had purchased any other products from the insurer, determine whether benefits are due, and take reasonable steps to locate and contact any beneficiary or other authorized person on the policy, annuity, or retained asset account.
   An insurer may disclose minimum necessary personal information to individuals or entities who may be able to assist in locating a beneficiary or other authorized person entitled to payment of the claims proceeds. An insurer shall not charge a beneficiary or other authorized person any fees or costs associated with conducting a death master file search. The claims proceeds shall first be payable to the designated beneficiaries or authorized persons and if they cannot be found, shall escheat to the state as unclaimed property pursuant to Code chapters 556 (disposition of unclaimed property) and 633 (probate code).
   The insurance commissioner may adopt rules to implement the provisions of the new Code section. The commissioner may issue orders limiting the number of death master file comparisons that an insurer is required to make and approving a plan and timeline for conversion of the insurer’s files to electronic searchable files, exempting an insurer from the death master file comparisons required or permitting an insurer to perform such comparisons less frequently upon a demonstration of financial hardship, or phasing in requirements for compliance with the new requirements according to a plan and timeline approved by the commissioner.
   Failure to meet any of the new requirements with such frequency as to constitute a general business practice is an unfair method of competition and an unfair or deceptive act or practice in the business of insurance and is punishable, after notice and a hearing, by a summary cease and desist order, imposition of a civil penalty of not more than $1,000 for each violation, but not exceeding an aggregate of $10,000, suspension or revocation of applicable licenses, and a penalty of not more than $10,000 for each violation of a cease and desist order.
   If an insurer identifies a person as deceased through a death master file match or other information source, and validates such information through a secondary source, the insurer may report and remit the proceeds due to the state prior to the three-year period set forth in Code chapter 556 pertaining to disposition of unclaimed property, without further notice to or consent by the state, after attempting to contact any beneficiary under either of the following circumstances: (1) the insurer is unable to locate a beneficiary who is located in this state under the policy, annuity, or retained asset account, after conducting reasonable search efforts of up to one year, or (2) no beneficiary or other person, as applicable for unclaimed property reporting purposes, has a last known address in the state. An insurer who reports on and remits such proceeds in this manner is relieved and indemnified from any and all additional liability relating to the proceeds.
   Coordinating changes are made to Code chapter 556 pertaining to disposition of unclaimed property. Code section 556.1 is amended to provide that for purposes of disposition of unclaimed property under that Code chapter, “knowledge of death” means the same as provided in new Code section 507B.4C.  Code section 556.3(2) is amended to refer to “knowledge of death” instead of “proof of the death” pertaining to unclaimed funds held by life insurance companies.
   The bill takes effect July 1, 2015.