Fallen Soldiers' Families Denied Cash as Insurers Profit

[Modbert]

Fallen Soldiers' Families Denied Cash as Insurers Profit - Bloomberg

The package arrived at Cindy Lohman’s home in Great Mills, Maryland, just two weeks after she learned that her son, Ryan, a 24-year-old Army sergeant, had been killed by a bomb in Afghanistan. It was a thick, 9-inch-by- 12-inch envelope from Prudential Financial Inc., which handles life insurance for the Department of Veterans Affairs.

Inside was a letter from Prudential about Ryan’s $400,000 policy. And there was something else, which looked like a checkbook. The letter told Lohman that the full amount of her payout would be placed in a convenient interest-bearing account, allowing her time to decide how to use the benefit.

Prudential disclosed that what it called its Alliance Account was not guaranteed by the Federal Deposit Insurance Corp., Bloomberg Markets magazine reports in its September issue.

Lohman, 52, left the money untouched for six months after her son’s August 2008 death.

“It’s like you’re paying me off because my child was killed,” she says. “It was a consolation prize that I didn’t want.”

As time went on, she says, she tried to use one of the “checks” to buy a bed, and the salesman rejected it. That happened again this year, she says, when she went to a Target store to purchase a camera on Armed Forces Day, May 15.

It was being held in Prudential’s general corporate account, earning investment income for the insurer. Prudential paid survivors like Lohman 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings.

“I’m shocked,” says Lohman, breaking into tears as she learns how the Alliance Account works. “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. Is there anything lower than that?”

Millions of bereaved Americans have unwittingly been placed in the same position by their insurance companies. The practice of issuing what they call “checkbooks” to survivors, instead of paying them lump sums, extends well beyond the military.

In the past decade, these so-called retained-asset accounts have become standard operating procedure in an industry that touches virtually every American: There are more than 300 million active life insurance policies in the U.S., and the industry holds $4.6 trillion in assets, according to the American Council of Life Insurers.

Insurance companies tell survivors that their money is put in a secure account. Neither Prudential nor MetLife Inc., the largest life insurer in the U.S., segregates death benefits into a separate fund.

The sweeping financial regulatory legislation signed by President Barack Obama on July 21 doesn’t address retained-asset accounts. It creates a new federal insurance office, which won’t be a regulator. It will collect information, monitor the industry for systemic risk and consult with state insurance regulators.

So would any good USMBer care to defend these vultures who steal from the families of our dead soldiers? Maybe give a little spiel about how we can trust these companies?

 

[Madeline]

Despicable.

 

[RetiredGySgt]

Fallen Soldiers' Families Denied Cash as Insurers Profit - Bloomberg

The package arrived at Cindy Lohman’s home in Great Mills, Maryland, just two weeks after she learned that her son, Ryan, a 24-year-old Army sergeant, had been killed by a bomb in Afghanistan. It was a thick, 9-inch-by- 12-inch envelope from Prudential Financial Inc., which handles life insurance for the Department of Veterans Affairs.

Inside was a letter from Prudential about Ryan’s $400,000 policy. And there was something else, which looked like a checkbook. The letter told Lohman that the full amount of her payout would be placed in a convenient interest-bearing account, allowing her time to decide how to use the benefit.

Prudential disclosed that what it called its Alliance Account was not guaranteed by the Federal Deposit Insurance Corp., Bloomberg Markets magazine reports in its September issue.

In the past decade, these so-called retained-asset accounts have become standard operating procedure in an industry that touches virtually every American: There are more than 300 million active life insurance policies in the U.S., and the industry holds $4.6 trillion in assets, according to the American Council of Life Insurers.

Insurance companies tell survivors that their money is put in a secure account. Neither Prudential nor MetLife Inc., the largest life insurer in the U.S., segregates death benefits into a separate fund.

The sweeping financial regulatory legislation signed by President Barack Obama on July 21 doesn’t address retained-asset accounts. It creates a new federal insurance office, which won’t be a regulator. It will collect information, monitor the industry for systemic risk and consult with state insurance regulators.

So would any good USMBer care to defend these vultures who steal from the families of our dead soldiers? Maybe give a little spiel about how we can trust these companies?

Ok I will bite, how is it stealing from the families? Your piece clearly explains the full award is available to the beneficiary. All the Insurers have done is found a novel way to make a profit off a payout.

Now get back to me when you have some evidence the Insurance is not being paid out.

 

[RetiredGySgt]

By the way, if this is stealing, then every bank in the world steals from its members.

 

[Madeline]

It certainly does not sound as if the families receive full disclosure, or that the insurers pay anything like a fair interest rate.

 

[editec]

So what's new?

Everybody swoons over soldiers going to war. They are nice shiney heros for all of us to rally around and send off to fight our wars of imperialism

It's those damned vets who died or worse, need our help, that we can't stand and treat like shit.

And that is essantially the way it has always been.

 

[Madeline]

Mebbe so, editec. But once we had the GI Bill and veterans' preferences. We used to do much more, and if private companies stole from their families, I don't recall hearing about it.

Canca just imagine the convo at the insurance company? "How can we drive up profits on this product? O, I know...the families of dead soldiers might not be sophisticated about money and they'd be distracted by grief. We can sneak a provision past them....."

All fraud and theft is begun by first identifying the group you hope to steal from and why they are vulnerable. Mebbe it is just me, but identifying these families as targets because they are grief-stricken after losing American soldiers' lives strikes me as especially depraved.

 

[RetiredGySgt]

It certainly does not sound as if the families receive full disclosure, or that the insurers pay anything like a fair interest rate.

They are not REQUIRED to pay them any set amount of interest. And in fact they get full disclosure with the award letter, it states what their award is. Now unless you can provide evidence they can not request and receive a lump sum payment, this is nothing more then people accepting what they are offered.

The OP claims the Insurance Companies are stealing from them. Provide evidence.

 

[Quantum Windbag]

It certainly does not sound as if the families receive full disclosure, or that the insurers pay anything like a fair interest rate.

They are getting interest on a cash payment, how is that not fair? If they do not want Prudential to also profit they can move it to another agency than Prudential.