Later On

A blog written for those whose interests more or less match mine.

Speaking of end-of-life: Life insurance firms profiting from death benefits

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David Evans at the NPR site:

Life insurance companies delay issuing death benefits owed to families of service members and others by promising to hold the money in safekeeping, an investigation by Bloomberg Markets magazine found. Senior writer David Evans and Cindy Lohman, whose son was killed in Afghanistan, discuss the findings with NPR’s Robert Siegel. Below is a preview of Evans’ September 2010 magazine article. Read a transcript of the interview.

Millions of Americans are being duped by life insurance companies that have figured out a way to hold onto death benefits owed to families. MetLife and Prudential lead the way in making hundreds of millions of dollars in secret profits every year on money that belongs to relatives of those who die, an investigation by Bloomberg Markets magazine found. Among the people being tricked are parents and spouses of U.S. soldiers killed in battle in Iraq and Afghanistan.

(Update: New York Launches Probe Of Life Insurance Industry July 29, 2010)

Survivors of service men and women are told they’ll get a $400,000 life insurance payout. They don’t. Instead, Prudential — which has a government contract to provide life insurance for military families — keeps their money.

Families are surprised when they receive what looks like a checkbook. In documents, Prudential promises to hold the money in safekeeping for as long as families would like, saying it will pay them 0.5 percent interest. What Prudential doesn’t disclose is that it is keeping survivors’ money in Prudential’s own corporate investment account, where the company is earning five to 10 times as much as it pays to families. The so-called checks have JPMorgan Chase printed on them, but they cannot be used as regular checks. Instead, they are to be submitted back to Prudential to get any money

Heard On ‘Morning Edition’, July 29, 2010: Expert Blasts Insurance Practice As Deceptive  [4 min 53 sec]

But the money isn’t in a bank, and it’s not protected by FDIC insurance. None of these facts are spelled out to the survivors; the details are often hidden in fine print.

Nor are families told that they could earn more than twice as much interest by opening FDIC-insured money market accounts at banks across the country. Families of fallen soldiers say they often don’t want to touch the "checkbooks" because they view them as payments in return for their sacrificed child. As a result, Prudential holds onto the death benefits, often for a year or more.

"I’m shocked," says Cindy Lohman, a Maryland woman whose son, Ryan, was killed in Afghanistan in 2008. "It’s a betrayal. It saddens me as an American that a company would stoop so low as to make a profit on the death of a soldier."

Millions of Americans have unwittingly been placed in the same position by their insurance companies…

Continue reading.

Written by LeisureGuy

2 August 2010 at 10:27 am

Posted in Business, Daily life

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