Connecticut’s insurance regulator yesterday shot back at critics of insurers’ use of so-called retained asset accounts.
“We should regulate on protecting consumers at large, not on one incident — and one incident where we don’t necessarily have all the facts,” said Thomas R. Sullivan, Connecticut’s insurance commissioner, in an interview.
Mr. Sullivan said that a Bloomberg Markets magazine article about the experience of the mother of a soldier who had died in Afghanistan left out information on how the death-benefit account functioned in that particular situation.
That story, which was published last month, noted that the woman, Cindy Lohman, received her son’s death benefit from
Prudential Financial Inc. in the form of a checkbook and that two of the “checks” — drafts, really— were rejected by two retailers, including Target Inc. (A call to Target’s media hotline for comment was not immediately returned).
An inquiry to
Prudential Financial from the office of Thomas B. Considine, the insurance and banking commissioner in New Jersey, revealed that 25 of the checks written from Ms. Lohman’s checkbook had been accepted and cleared between 2008 and 2010, the Wall Street Journal reported yesterday. Mr. Considine found that Prudential had “acted properly” in the situation, according to the Journal.
“If all that is true, then Ms. Lohman used the proceeds and the checks, understood the mechanics of the retained-asset account, and made those transactions leading up to the infamous Target transaction,” Mr. Sullivan said in an interview. “Those facts were left out of the reporting, and that should’ve been more thoroughly investigated.”
Retailers can be leery of third-party checks and drafts, however, and some are less willing to take them as payment. “If, for whatever reason, the entity that issues one of these drafts isn’t able to make good on them, the retailer has no recourse,” said J. Craig Shearman, vice president for government affairs and public relations at the National Retail Federation, a retail trade association.
“If the issuing company went bankrupt, and the retailers were holding drafts, they would be in line with the creditors, as opposed to taking a bank check that has certain guarantees associated with it,” he added.
The New Jersey commissioner turned his findings over to the National Association of Insurance Commissioners’ working group on retained-asset accounts (which is co-chaired by Mr. Sullivan and New Hampshire insurance regulator Roger Sevigny), said Marshall McKnight, a spokesman with the New Jersey Department of Banking and Insurance.
Mr. Sullivan said that the committee will review the facts it’s collecting and that it won’t let this incident color its regulatory actions.
“We need to be diligent and deliberate in whatever policy position we take coming out of this,” he added.
Connecticut is home to a number of sizeable life insurers, including The Hartford Financial Services Group and the Phoenix Companies Inc.
