Life Insurance Companies Take Advantage of Policy Beneficiaries
Life insurance companies, including the top two in the U.S., MetLife, Inc. and Prudential Financial, Inc., may be profiting at the expense of beneficiaries of life insurance policies, including families of fallen soldiers, reports an article in Bloomberg Markets magazine.
According to Bloomberg Markets, life insurance beneficiaries should not leave their proceeds with the life insurance companies, but should take their money straight to the bank. The insurance companies, reportedly, encourage beneficiaries to leave their benefits with the insurers in what are called "retained-assets" accounts. The companies explain that they are doing the beneficiaries a favor by relieving them of the burden of making difficult financial decisions at a time of such emotional stress.
It has been reported that about 40 of these "retained-assets" accounts keep the beneficiaries' money and invest it at a much higher rate than they pay out to their beneficiaries. The insurance companies, reportedly, put the money into their own general funds, receive as much as 4.4 percent interest (in the case of Prudential), and pay out as little as 0.5 percent when the survivors withdraw benefits.
Not Federal Deposit Insurance Corporation (FDIC) Insured
In addition, the Federal Deposit Insurance Corporation (FDIC) does not insure money in retained accounts. This is something that is not revealed to the beneficiaries, or revealed only in the small print. Such information has not been known to most of the country's life insurance regulatory agencies.
The insurance companies, reportedly, take advantage of people in the early stages of bereavement. According to Bloomberg Markets, they offer to hold onto survivors' money. They mail the survivors a "checkbook,"which is not a real checkbook, but essentially is a type of IOU for them to receive their benefits, and then keep the money in their own general funds.
The checkbook system is "institutionalized bad faith,"says an insurance law professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas. "In my view, this is a scheme to defraud by inducing the policy holder's beneficiary to let the life insurance company retain assets they're not entitled to. It's turning death claims into a profit center."
About 1 million such death benefit accounts, holding $28 billion that are not backed by the FDIC, exist in the country.
Ask a Lawyer if You Think You've Been Deceived
If you believe that you've been the victim of a deceptive practice such as this, contact us for legal assistance. Our consumer fraud lawyers are investigating potential claims on behalf of beneficiaries who believe they have been deceived by life insurance companies across the country.
You may also check out our consumer fraud alerts.