Innovation, Technology and Compliance

Admittedly, those are not words you see in the same sentence very often.

Nonetheless, Colorado Division of Insurance Bulletin No. B-6.3, issued in mid-June, is an interesting example of the effort by regulators to contend with new insurance product development features and technologies that were just not contemplated when state insurance laws were written. In the absence of any CO law specifically permitting or prohibiting use of pre-paid debit or stored value cards as a method of paying benefits, the CO bulletin provides guidance about insurers’ use of such cards for benefit payment purposes.

Insurers must afford claimants the choice of whether to receive their benefits in the form of a stored value card or a traditional check, draft, or EFT, and the right to subsequently revoke that choice at any time.

Insurers remain liable to claimants for any outstanding amounts in the event of insolvency or insufficiency of the issuer of the pre-paid debit or stored value card.

Claimants cannot be assessed any fees, charges or surcharges for depositing, withdrawing or drawing down or accessing the funds on their card, and “there should not be burdensome obstacles to the claimant being able to access the funds.”

The insurer and the card issuer must make full written disclosure of all aspects of the card system to claimants at the time the claimant chooses the form in which he/she wants to receive his benefits, including:

• All fees associated with use of the card, including ATM, paper statement, card replacement, overdraft, balance inquiry or similar fees;

• Customer service and contact information, including a list of financial institutions that participate in the card system in the claimant’s area and ATM’s where funds can be accessed;

• Whether interest is paid on funds remaining on the card, and to whom the interest is payable; and

• That the funds on the card are subject to Colorado’s unclaimed property laws.