Weekly Tip: Assignment Change of Beneficiary or Change of Owner


Weekly Tips

Assignment Change of Beneficiary or Change of Owner


The uniformity and consistency that has been achieved in the development of the Uniform Standards across all product lines is one of the many benefits of the Insurance Compact. The Uniform Standards adopted by the Insurance Compact for products within each of its authorized lines of business contain some common requirements. Among these are the provision requirements regarding Assignments, Change of Beneficiary, and Change of Ownership. Each of these provisions must be contained in policy forms and contracts filed for approval with the Insurance Compact.

One common element is that policies may not include any restrictions (on assignments, changes to beneficiaries, or owners). The only exceptions are restrictions required for the purposes of satisfying applicable laws or regulations. One of the more common mistakes is to include a blanket restriction, or other restrictions that may have been allowed in filings made with states, or where there may be a state based market regulation situation the filer seeks to address in the form. If the policies include any of these scenarios, the reviewers will issue an objection. By not including a restriction or by including language that states "the restriction applies only where required for purposes of satisfying applicable laws or regulations" will allow the filers to avoid any objections.

Another element of each of these provisions is that the form must describe the respective procedures used by the Company. The language should be straight forward. The notification needs to be signed and dated, received by the Company, and take effect on the date of the notice unless otherwise specified by the owner. Some Companies fail to address this, while others may use language that tends to place burdensome conditions on the transaction or require approval of the form used to submit the notification of change by the owner. Each of these will result in an objection by our reviewer. Probably the most common error is failing to include the language that states the respective change takes effect "on the date of the notice unless otherwise specified by the owner".

Some additional points to remember are:

  • The provisions applicable to assignments and changes of ownership prohibit restrictions on assignment in policy forms such as right of first refusal or first offer provisions.
  • If irrevocable beneficiaries are referenced in the policy, the policy must explain that such a beneficiary cannot be changed without the consent of the irrevocable beneficiary.

As you review the Uniform Standards and develop your product filing and if you have any questions regarding how to meet these Insurance Compact requirements, please do not hesitate to contact the IIPRC Office.