Life insurers draw national scrutiny over veterans' death benefits
By Gary Linnell
ProWEB Wire (Industry News)
The White House and lawmakers have announced their support of a U.S. Department of Veteran Affairs investigation into life insurance companies' practice of placing veterans' death benefits into corporate accounts and keeping the majority of investment profits for themselves.
According to Mike Walcoff, acting undersecretary for the VA's Veteran Benefit Administration, "The possibility that life insurance companies are profiting inappropriately from these service members' sacrifice is completely unacceptable.
Bloomberg originally reported on the practice, which has become standard procedure for many insurers.
Rather than paying a lump sum to survivors upon the death of the policyholder, insurers keep the money in corporate accounts, and provide survivors with lower interest rates and misleading guarantees about the safety of the funds.
Survivors are told that the death benefit is being placed into a secure, interest-bearing account, and are issued a "checkbook" with which they can spend the funds. However, the insurers place the retained-asset accounts into their own accounts and retain most of the earnings. In addition, the money isn't guaranteed by the Federal Deposit Insurance Corp. and the checks merely act as IOUs for money in the insurer's account.
Daniel Akaka, chairman of the Senate Committee on Veteran Affairs said, "The purpose of these benefits is to assist grieving survivors -- not to improve insurance company profits."
The White House has voiced its support in to the VA's investigation, saying that President Obama wants to ensure America's responsibility to veterans and their families are fulfilled.
According to a statement issued by the American Council of Life Insurers, "Retained asset accounts provide a significant benefit to family members who are dealing with the emotional loss of a loved one. Financial matters may not be the first thing on their minds and retained-asset accounts provide a secure place for life insurance policies proceeds to be held until the money is needed."