To Trust or Not to Trust?

A topic that always gets the tongues of Compliance folks wagging is the long standing use of trusts to write and issue group insurance business and what state filings are required to support that approach. Since a master trust policy is typically issued to a bank or other entity in a state besides the situs state of the employer group that is participating under the trust policy, questions arise as to the states where the trust policy provisions must be filed or whose laws will govern the coverage.

Is it only in the state where the master trust policy is issued? Or must filings be done in other states where the participating employer is located and/or where the insureds actually reside or work? And since many state’s laws – this being the United States – do not clearly address this issue, there are sometimes quite varied interpretations of the appropriate course of action for insurers on the filing question.

On that note, the Washington Insurance Commissioner recently issued a consent order holding that “beginning in 2005 Aetna [Life Insurance Company] issued unfiled group term life and short term disability plans to Washington consumers through the Rhode Island Trust.” WA fined $1,000,000 for “issuing, delivering and using unapproved policy forms,” cited Aetna for “failing to file copies of all certificate forms and other related forms providing coverage in Washington” and found that the insurer “engaged in unfair practices with respect to out of state group life and disability insurance.”