NEW YORK — The Federal Deposit Insurance Corp. is reviewing whether life insurers misled customers about retained death benefits and is urging companies to clearly disclose that the funds aren’t guaranteed by the federal government.
Chairman Sheila Bair said an initial review indicates consumers may mistakenly believe the accounts are insured by the FDIC, according to a letter to the National Association of Insurance Commissioners.
“I am writing to express our serious concerns,” Bair said in the letter. “(Life insurers) should explain that these accounts are not FDIC-insured, and that fact should be clearly and conspicuously disclosed not only to policyholders, but also to their beneficiaries at the time of the policyholder’s death.”
Life insurers have drawn fire from state and national elected officials since Bloomberg Markets magazine reported last month that more than 100 carriers profit by holding and investing $28 billion owed to life-insurance beneficiaries. Retained-asset accounts are backstopped by insurer guaranty associations in the event a carrier fails, according to MetLife Inc., the nation’s biggest life insurer, and the National Organization of Life Health Insurance Guaranty Associations.
“If that is the case, it would seem disclosure and explanation of these guarantees to beneficiaries and policyholders would be appropriate,” Bair wrote. “We believe it is important to avoid public confusion.”
