Prudential Financial, Inc. “handles life insurance for the Department of Veterans Affairs. A Maryland mother received a package with information about her son’s $400,000 account after his death in Afghanistan. Inside was what looked like a checkbook and a letter saying the money would be held in an interest-bearing account to give her time to decide what to do with the money. The short story is that the checkbook was not a checkbook. It was a draft, and once executed, Prudential Financial had to deposit funds into a Chase bank account before she could receive the money. The interest payment on the money was far below normal and the money is not held in a FDIC account. MetLife is involved in similar tactics. The bottom line, those grieving for their loved ones should move the money to their own FDIC, interest bearing account. How much has Prudential and MetLife made off of the death of soldiers, and how much has the cheated the families lost.
Prudential holds the money in it’s Alliance Account. They tell survivors the 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.
Newark, New Jersey-based Prudential, the second-largest life insurer, holds payouts in its own general account, according to regulatory filings.
…the company [MetLife] was paying some survivors 0.5 percent in July while some others got 1.5 percent or 3 percent, depending on the age and origin of insurance accounts. The accounts don’t violate any laws, Madden says, and are authorized by New York state insurance law.
Insurance companies — in addition to holding onto the money of survivors, paying them uncompetitive interest rates and giving them misleading guarantees — may be violating a federal bank law. A 1933 statute makes it a felony for any company to accept deposits without state or federal authorization.
“There’s more than $25 billion out there in these accounts,” Baxter says. “A run could be triggered immediately by one insurance company not being able to honor its payout. The whole point of creating the FDIC was to put an end to bank runs.”
This type of “retained asset account” does not affect only military benefits. The retained asset account was “invented” to pay the insurer. These accounts can pay the insurer 1 to 3 points more than it pays out to survivors. There are so many of these accounts that state regulators cannot keep up with them, and other banks are involved. Read the whole story here.