* Treasurer Frerichs’ office has some big problems with the governor’s amendatory veto of Frerichs’ life insurance bill, HB302…
* When trying to prohibit the use of contingent fee auditors by the Treasurer, the Governor proposes to amend the wrong Act.
* The existing unclaimed property law is scheduled to be repealed and replace by a new law on January 1, 2018. HB 302 would also become effective on January 1, 2018.
* So, the Governor is proposing to amend a law that will no longer exist.
* In support of his amendment to shorten the period that insurers must review to see if they owe benefits because their insured died, the Governor relies on 1) an Illinois insurance regulation; 2) a US Supreme Court case; 3) the unfairness of distinguishing between insurers
* The insurance regulation was put in place in 2016 by the Rauner administration in order to help insurers destroy records; but, the underlying portion of the Insurance Code still provides for criminal penalties for insurers that destroy records. Further, the regulation still requires maintaining records with “legal or fiscal” value.
* The US Supreme Court case cited does not say that you cannot distinguish between companies based on the condition of their records. The case is about artists who unsuccessfully challenged the NEA’s community standards for grants. It is about First Amendment rights – not due process rights. And, the government actually won the case by an 8 to 1 margin.
* Further, the bill the Governor signed last year actually allows his Department of Insurance to differentiate between insurers based on their electronically searchable records. So, this wasn’t an issue for him last year.
If you click here you’ll see the governor’s full AV language with commentary by the treasurer’s office. Click here for raw audio of Frerichs’ press conference.
* From Treasurer Frerichs’ press release…
Currently, some life insurance companies do not pay death benefits when they know, or should have known, a customer died. Between 2011 and 2015, treasurer office audits found more than $550 million in death benefits that were not paid to grieving families in Illinois. Nationally, the figure is more than $7.4 billion, according to the Wall Street Journal.
Rauner’s veto outlaws the audits. Without this enforcement tool, life insurers can act with impunity. “This is clear evidence that Gov. Rauner is lining corporate pockets with this veto,” Frerichs said.
There are three commonsense reasons why Rauner’s veto is wrong and his focus on contingency-fee auditors is misplaced.
1) Rauner’s amendatory veto makes Illinois the only state in the country to prohibit contingency-fee auditors and eliminates any hope that an unscrupulous company will pay 100 percent of what they owe to Illinois residents.
2) Audits would not be necessary if life insurance companies made it a priority to pay death benefits when they know or should have known that a customer has died.
3) Signing the legislation and requiring life insurance companies to review their records would move compliance away from the treasurer and into the Governor’s Department of Insurance, which has stronger enforcement tools, including the ability to suspend a company’s license to do business in Illinois. […]
Using contingency-fee auditors is a best-practice approach because it leverages expertise to maximize efficiency. Families receive every cent they are owed. Without the audits, insurance companies keep 100 percent of the death benefits.
“Rauner vetoed this bill because he wants to stop auditors who have successfully found hundreds of millions of dollars in unpaid life insurance benefits. However, auditors never get a penny of your loved one’s life insurance policy,” Frerichs said. “All Rauner did was take away the tool that allowed us to return $550 million to grieving families.”
More is at stake than just unpaid life insurance policies.
For example, without a veto override, the treasurer’s office would lose its ability to effectively look at the books of large banks, such as Wells Fargo, to confirm it did not inappropriately keep funds from bank customers. Or the ability to look at Sprint and Radio Shack to confirm each has paid out all rebate checks issued as an incentive to make a purchase.