Recently, the Associated Press reported that the New York State
Attorney General has served subpoenas on two major multi-national
life insurers as part of that office's inquiry into those
companies policies for paying death benefits to life insurance
policyholders' beneficiaries. This news comes after Bloomberg
News reported that the United States' Department of
Veterans' Affairs has begun an investigation into the
possibility that life insurance companies are improperly benefiting
by holding onto death benefit proceeds after these should have been
paid to death benefit beneficiaries
Specifically, Bloomberg News reported that many major life
insurers standard practice is for the companies not to pay a life
insurance death benefit in a lump-sum. Instead, many life insurance
companies are holding these cash benefits in their own investment
accounts so that the companies can invest the cash and profit on
their own behalf. The report comments that these companies are
making significant profits for themselves while they pay the
parties that are entitled to the death benefit a very low interest
rate for allowing the company to use the money for its own
interests. In addition, the report says that these insurers have
tended to mislead these beneficiaries about how well the companies
are protecting this money on the beneficiaries' behalf.
With this kind of United States Government investigation into
life insurance company practices, it raises the question should
life insurers working in China be concerned about a government
regulatory authority investigation into their death benefit payment
In general, the Chinese government tends to place a lot of
emphasis on making sure policyholders understand the insurance
policies they buy, and the government tends to hold insurers
accountable when they fail to properly explain insurance policies
to policyholders. Therefore, we tend to think the answer is yes,
insurance companies should be concerned that the Chinese government
may place more scrutiny on their death benefit payment practices
because of the United States' government's investigation
into life insurance death benefit payment practices.
We always recommend our insurance client's stay abreast on
Chinese government regulatory authorities' legislative,
regulatory, and enforcement activities. At present, we are not
aware that the Chinese government will begin to place more scrutiny
on insurers' death benefit payment practices. In turn, we
believe that the best course action for insurers working in China
is for them to review their death benefit claims handling
procedures to make sure that they are adhere to the Chinese
law's requirements for death benefit payments. This internal
procedural review will help insurers in case the Chinese government
does decide to place company practices under more scrutiny.
If you have any questions about what exactly the Chinese
law's requirements are for death benefit payments, or any other
Chinese legal compliance questions please contact us.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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