The organization of state insurance regulators issued a consumer alert about retained assets accounts (RAAs), days after the Federal Deposit Insurance Corp (FDIC) said life insurers using the product should reveal more information.

RAA provides the flexibility to earn interest on the life insurance proceeds, but choosing a different payout option may yield higher rate of interest, The National Association of Insurance Commissioners said in an alert posted on its website.

While the documents you receive might look like a checkbook, it might actually be drafts which are similar to checks, but different in some ways, it said.

New York Attorney General Andrew Cuomo subpoenaed many insurers including MetLife Inc and Prudential Financial Inc
last month as the state widened a probe into possible fraud in the life insurance industry.

At issue is whether insurers, rather than pay out lump sums upon the deaths of the policyholders, instead keep money in potentially risky accounts they controlled, and pay out low yields to the survivors.

The NAIC's newly created RAA Working Group also held a meeting on Sunday to review the use of RAAs by insurance companies and to study whether appropriate consumer protections are in place.

(Reporting by Anurag Kotoky in Bangalore; Editing by Louise Heavens)