NEW YORK (
) -- The
Federal Deposit Insurance Corp.
is asking state insurance regulators to review the sale "retained asset accounts" (RAs) to determine if disclosures clearly state that the products are not federally guaranteed.
Sheila Bair, FDIC chairwoman, sent a
to the National Association of Insurance Commissioners earlier this week arguing that consumers may mistakenly believe retained-asset accounts were FDIC insured since they are often administered by banks.
"Based on the documents that we have seen, we feel strongly that life insurersusing RAs 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," Bair said in the letter to state regulators.
Retained asset accounts are life insurance products where the insurer "retains' the assets of a policy on payout and then allows the beneficiary to make withdrawals rather than issuing a lump-sum payment. A recent article in
questioned whether insurers were profiting unfairly from the accounts.
The products are currently being investigated by New York Attorney General Andrew Cuomo to determine if life insurers are defrauding RA policyholders, according to published reports.
The Wall Street Journal
Prudential Financial Inc.
, and other companies do disclose that their policies are not insured by the FDIC within customer agreements.
Written by Maria Woehr in New York