Wednesday, August 04, 2010

Company Makes Money From Military Death Benefits

As reported in "Fallen Soldiers' Families Denied Cash as Insurers Profit," by David Evans in the Jul 28, 2010 issue of Bloomberg, Prudential Financial Inc., which handles life insurance for the Department of Veterans Affairs, has been making money off of the death benefits they handle for the families of military men and women who die in uniform.

In lieu of a lump sum check Prudential gives the family a "check book" to draw on the funds which are kept, not in an individual account, but in the Prudential corporate fund, which is not insured by FDIC. Prudential makes roughly 4.8% interest in the money while paying the family 1% interest.

Apparently this is a common practice among insurance companies, including MetLife:

Gerry Goldsholle, the man who invented retained-asset accounts, says MetLife makes $100 million to $300 million a year from investment returns on the death benefits it holds.

Pennsylvania's insurance commissioner is taking note:
Pennsylvania Insurance Commissioner Joel Ario, whose state has no rules for retained-asset accounts, says he has asked his staff to prepare a regulation forbidding insurance companies from using such accounts as the default method of paying a death claim.

“I haven’t heard a plausible argument about why these accounts are better for the consumer,” Ario says.

Congressman Patrick Murphy of Pennsylvania's 8th district, according to a press release from his office is looking into the matter:
After learning of the ongoing scam, Pennsylvania Congressman Patrick Murphy (D-8th District) wrote a letter to the head of Prudential Financial, Inc. demanding that they end the practice immediately, disclose the exact amount of profit they made off troops’ death benefits, and return the money to the families. Murphy also made clear in his letter that while he hopes public outrage is sufficient cause for them to stop this practice, he’s already working with colleagues to pursue legislation to ensure it never happens again. While these practices may not be illegal, he said, they’re immoral and should stop immediately.

This is just so despicable and slimy. It's absolutely appalling.

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