News: Consolidator Report
The New York Department of Insurance (DOI) may have just made "cashing out" a little easier for consumers after it recently ruled that property and casualty insurers can pay claims using prepaid Visa cards in lieu of issuing settlement checks.
Debit cards are already used to pay certain workers’ compensation claims in the state in a program approved by the New York State Workers’ Compensation Board and DOI, prompting at least one insurer to ask if all property/casualty claims could be paid with prepaid cards to lower the cost of claim operations. The insurer also argued that the card program would make funds more readily accessible to claimants.
The DOI outlined the following rules for the use of prepaid cards in paying claims:
The claimant may opt to receive payment by other methods, such as by check, if for any reason the claimant does not wish to receive the prepaid card.
In situations where the use of the prepaid card would be inappropriate (i.e., where there is a loss payee involved), the insurer would issue a settlement check instead of the card.
The insurer would deposit funds directly into an insurer-owned funding account, and the insurer would be responsible for funding the account for purposes of paying claims. At the time of a claim payment, a bank associated with the prepaid card program would then open a non-interest bearing account in the claimant’s name and transfer funds from the funding account to the claimant’s account.
The bank will distribute the prepaid debit cards directly to the claimant, which the claimant can use to access settlement funds.
Card payments can be no more than $25,000, and claimants can withdraw no more than $1,000 per day from ATMs.
Read the legal opinion in full