Grieving families of soldiers killed in Afghanistan and Iraq are being fleeced by insurance companies holding their life insurance payouts in “retained asset” accounts.
The sneaky, grave-robbing insurance skimming — I’m happy to describe it as such — was brought into the sun this week by Bloomberg Markets. More information was reported by ProPublica and the San Francisco Chronicle this morning.
I wondered whether the retained-asset schemes are legal in Utah. I called the state Insurance Department. Utah law is silent on the practice, meaning nothing prohibits its use, said Betsy Jerome, consumer service analyst for life and annuities. However, the insurance commissioner will now explore the practice. Jerome said. She expects there now may be interest in state regulation or legislation to monitor, control or prohibit use of the asset accounts.
Here’s how the accounts work: Instead of immediately issuing a full payout to the beneficiaries of a fallen service member, a life insurance company holds the money and sends a checkbook to the family. The family then can write checks on the retained-asset account. But, meanwhile, the insurance company has transferred the payout into an investment pool. The company then pockets much of the profit.
Families are unaware of the shell game. Worse, it appears they are being misled.
“The reason cited is to give the beneficiary a time period to decide what they want to do with the money,” Jerome said. “Or at least that is the reason they are given.”
Jerome said this week’s exposure of the practice might be “sensational enough” to trigger regulatory and-or legislative action in Utah.
“It is bad if they are doing it to the veterans,” Jerome said.
She said her office has received a handful of calls from life insurance beneficiaries wondering about the checkbooks instead of lump-sum payouts. She advises consumers they could write themselves a check for the entire sum to get the money promptly.
Jerome invited consumers to fill out a form on the state Insurance Department website at http://www.insurance.utah.gov if they have questions.
“We are here to answer complaints,” she said.
Are you a family member of a fallen service member who’s received one of these non-payout payouts? I’d like to talk to you. Please e-mail me at firstname.lastname@example.org or call (801) 625-4251.
(UPDATED to correct reference to Bloomberg Markets)