The following column by Diane Bullock (http://www.minyanville.com/special-features/articles/metlife-us-solider-death-benefit-scandal/8/3/2010/id/29434) reveals how insurers receive a colossal payday when an insured American soldier dies:
The insurance industry has hit moral bottom, said Diane Bullock. “In a massive, industrywide scandal perpetrated against military families,” several life insurers, including MetLife (MET), Prudential (PRU) , Genworth Financial Inc (GNW) , Guardian Life of America, AXA SA, MONY Life Insurance Co, New York Life Insurance Co, Northwestern Mutual Life Insurance Co, and Unum Group (UNM) , are being investigated by New York Attorney General Andrew Cuomo for allegedly defrauding and shortchanging the beneficiaries of fallen servicemen and women.
Here’s how the legal scam works: When a soldier dies, his life-insurance beneficiaries receive “a sympathy-tinged letter” from the insurer informing them that their $400,000 death benefit is being held in a safe, interest-bearing account. Only in the fine print does the insurer disclose that the account isn’t government-insured and may be earning as little as 0.5 percent interest. And there’s no mention that the insurer is pocketing returns of 5 percent or more by investing the benefit in high-yielding instruments.
The insuarnce companies under investigation deny wrongdoing, but California Rep. Linda Sanchez has proposed legislation to eliminate the practice. It can’t come soon enough. The death of any U.S. soldier should be “a national tragedy,” not a “colossal payday” for insurers.
“Business, Best columns,” The Week, August 13, 2010, at page 42.