While Cuccinelli fiddles, New York Attorney General Cuomo is challenging unscrupulous insurance practices preying on the families of deceased servicemembers. Industry practices place death benefits at risk and siphon what appear to be unreasonable portions of proceeds from deposits to corporate coffers. Another lowlight of the McDonnell administration’s business sense.
“Prudential paid survivors like Cindy Lohman, the mother of an Army sergeant who died in Afghanistan, 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. Lohman told Bloomberg Markets that Prudential’s IOUs were rejected twice by salespeople when she tried to use them to make retail purchases.” – Bloomberg
And New York is not alone. Kansas and Missouri insurance regulators are among those who are going after the insurers who offer so-called retained-asset accounts after Bloomberg Markets reported that the funds allow more than 100 carriers to earn income on $28 billion owed to life insurance beneficiaries. And the practices may violate federal bank law. One of the insurers involved in this practice may be the McLean based Capital One Financial Corp.
Update: This practice is widespread, affecting the Federal Employees Group Life Insurance program and many private sector insurance plans.
“Both the handbook issued to FEGLI policyholders and MetLife’s death-benefit claims form say the insurer will automatically open a “money-market account” for the beneficiary. They omit that MetLife actually doesn’t open any account; it puts the money in its own general account. The company also omits that the funds aren’t at a bank and aren’t FDIC-insured.” – Bloomberg