BULLETIN NO. 01-19
TO: ALL NEW JERSEY LICENSED LIFE INSURANCE COMPANIES
FROM: DONALD BRYAN, ACTING COMMISSIONER FOR INSURANCE
RE: P.L. 2001, C. 91 -- PROMPT PAYMENT OF AND ACCRUAL OF INTEREST ON LIFE INSURANCE PROCEEDS
P.L. 2001, c. 91, enacted on May 10, 2001, and effective on August 8, 2001 (amending N.J.S.A. 17B:25-11 and N.J.S.A. 17B:27-10), requires all individual and group life insurers to pay claims within a specified period of time and to pay interest on overdue claims. The purpose of this Bulletin is to apprise insurers of the law's requirements, as well as the Department's requirements in implementing the law.
Following is a summary of the law's provisions:
- The law requires that insurers pay benefits under a policy within 60 days after receipt of due proof of death, and at the insurer's option, proof of the interest of the claimant. For individual life policies, the insurer may also require surrender of the policy.
- If a claim or a portion of a claim for benefits under a policy requires additional investigation or is denied by the insurer, the law requires the insurer to notify the claimant of such fact in writing within 45 days. The insurer shall also notify the claimant of the reason the claim is being investigated or denied, except in certain cases involving fraud.
- Any uncontested portion of a claim is to be paid within 60 days of receipt of due proof of death, proof of the interest of the claimant, or any other document or information requested by the insurer under the terms of the policy.
- The insurer, upon receipt of any document or information requested relating to a claim or portion of a claim under investigation, shall pay the benefits for which the claim is made or deny the claim within 90 days.
- Payment of a claim or a portion thereof that is not under investigation by the insurer shall be overdue if not remitted to the claimant by the insurer within 60 days.
- Payment of a claim or a portion of claim under investigation or denied that becomes eligible for payment shall be overdue if not remitted to the claimant by the insurer within 90 days of eligibility for payment.
- Overdue payments shall bear an annual rate of interest equal to the average rate of return of the State of New Jersey Cash Management Fund, established pursuant to N.J.S.A. 52:18A-90.4, for the preceding fiscal year, rounded to the nearest one-half percent (e.g., 5.78% would be rounded to 6.0%; 5.41% would be rounded to 5.5%; 5.45% would be rounded to 5.5%). The Department has determined that insurers may choose whether to use the Fund's State or Other-than-State rates. However, insurers shall not be permitted to change the rate once chosen. The Cash Management Fund toll free daily rate hotline number is 1-888-286-5052. The rates of return are also published on the State Treasury website at www.state.nj.us/treasury.
The Department intends to propose rule amendments implementing the provisions of P.L. 2001, c. 91. In the interim, the Department is requiring that all individual and group life forms reflect the requirements described in the first bullet point of this Bulletin. All group life forms shall additionally contain, in substance, all the other requirements described above.
10/12/01 /s/ Donald Bryan Acting Commissioner for Insurance