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Insurers Profit From Dead Vets' Benefits

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  • Insurers Profit From Dead Vets' Benefits

    New York Attorney General Andrew Cuomo subpoenaed Genworth Financial Inc., Unum Group and an insurer acquired by France’s Axa SA as the state widens a life- insurance fraud probe, said a person briefed on the demands.

    New York Life Insurance Co., Northwestern Mutual Life Insurance Co. and Guardian Life Insurance Co. of America also were ordered to turn over information, the person, who declined to be identified because the subpoenas hadn’t been publicly disclosed, said yesterday. Cuomo is probing profits insurers earn on death benefits that the carriers retain on behalf of the families of deceased policyholders including military personnel.

    More than 100 carriers earn investment income on $28 billion owed to life insurance beneficiaries, Bloomberg Markets magazine reported this week. Cuomo announced an investigation yesterday into what he called “secret profits” and said he subpoenaed MetLife Inc. and Prudential Financial Inc. His probe follows reviews by the New York State Insurance Department and U.S. Department of Veterans Affairs.......

    Fallen Heroes

    Prudential paid survivors like Cindy Lohman, the mother of a slain Army sergeant, 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. Insurance companies may be violating a federal bank law, Bloomberg Markets reported. A 1933 statute makes it a felony for any company to accept deposits without state or federal authorization.

    “Until today I actually believed that the families of our fallen heroes got a check for the full amount of their benefits,” Gates said yesterday. “I will be very interested in the outcome of the VA investigation.”

    MetLife, the biggest U.S. life insurer, and No. 2 Prudential place death benefits in interest-bearing accounts and issue IOUs to survivors. Insurers market the accounts as a service to allow bereaved beneficiaries time to think about what they’ll do with the payout. Carriers make money by investing the funds in bonds and keeping the difference between returns and the interest they credit to the accounts. Bloomberg.
    |TG-X| mp40x

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