Veterans Agency to Probe Insurers on Soldier Benefits
The U.S. Department of Veterans Affairs is investigating life insurance companies’ practice of putting veterans’ death benefits in corporate accounts and keeping most of the investment profits instead of paying the survivors. “The possibility that life insurance companies are profiting inappropriately from these service members’ sacrifice is completely unacceptable,” Mike Walcoff, acting undersecretary for the agency’s Veterans Benefit Administration, said yesterday in a statement that announced the investigation.
Bloomberg Markets magazine reported what has become a standard practice for life insurance policies issued by companies including Prudential Financial Inc. and MetLife Inc. Instead of paying a lump sum to survivors when a policyholder dies, insurers keep the money in their own accounts, pay uncompetitive interest rates to survivors and give them misleading guarantees about the safety of the funds.
Prudential, the second-largest life insurer, handles life insurance policies for U.S. military personnel and veterans. New York-based MetLife, the largest life insurer in the U.S., provides insurance for nonmilitary federal employees.
We're from the insurance company--and we're here to help you...
In 2008, Prudential paid survivors 1 percent interest on their accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings.
Good that they are looking into this. Side note, Prudential was making 4.8%? Wow. I need to get some of that action.
Another side note, my old boss's son died after he had gone AWOL. The insurance paid off in this case and the parents bought a new house with the money, so not every insurance company shirks their obligation. (I would have thought going AWOL would have invalidated the policy.)
Thomas Sowell: There are no solutions, just trade-offs.
