by John Darer® CLU ChFC MSSC RSP CeFT RSP CLTC
What is a Retained Asset Account?
- A Retained Asset Account (RAA) is a financial account typically established by life insurance companies to manage death benefit proceeds.
- Key features of RAAs include: functioning as a checking account, allowing beneficiaries to access funds via a checkbook rather than receiving a lump sum payment; serving as a temporary repository for funds, giving beneficiaries time to consider financial options at their own pace; earning interest from the date of death until the settlement date while the beneficiary determines how to manage the money; and generally being free of fees for creation after filing a life insurance claim.
Retained Asset Accounts for Life Insurance Beneficiaries have have been in existence since the mid 1980s 
A July 28, 2010 Bloomberg article suggested that insurers were profiting at the expense of grieving military families by holding onto the insurance proceeds in retained-asset accounts, triggering a media and regulatory frenzy. Bloomberg said the "funds allow more than 100 carriers to earn income on $28 billion owed to life insurance beneficiaries. New York-based MetLife Inc., the biggest U.S. life insurer, retains about $10 billion".
Following similar reasoning, one might question why innovations like the use of "stored value cards" for auto and property claims have not been highlighted. These cards offer significant accounting advantages, enable automation, and allow insurers to retain assets until the insured party actually spends the claim funds.
Is it possible that life insurance beneficiaries appreciate the retained asset accounts? Is it possible that consumers feel safer with insurers than banks?
Even with FDIC protection let's face it there were over 100 bank failures in 2010, ahead of 2009's pace. The National Association of Insurance Commissioners (NAIC) is ramping up efforts to make sure that better efforts to educate consumers are implemented.
Paying interest from the date of death to date of settlement of the life insurance claim is a general practice
As previously noted, the Bloomberg article fails to mention that it has long been standard practice for insurers to pay interest from the date of death to the settlement date of a life insurance claim. Consumers who are unaware of this should be informed. Having personally filed death claims on behalf of clients when I was with Northwestern Mutual in the past, I can confirm that, at least in those cases, all options were clearly outlined in the letter sent to the policyholder.
American Council of Life Insurers on Retained Asset Accounts July 28, 2010
Life Insurance Company Retained Asset Accounts for Policy Death Benefits August 7, 2010
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