Families of fallen soldiers ripped off by life insurers

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 mshenefelt@standard.net or call (801) 625-4251.

(UPDATED to correct reference to Bloomberg Markets)

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10 Responses to Families of fallen soldiers ripped off by life insurers

  1. Doug Gibson says:

    There’s a relatively new tactic being used by many financial services firms and even companies that want more 401(k) participation. It’s a practice, such as retained asset or even a 401(k) increase, and providing alternatives, such as writing a check for an entire sum, or an opt-out clause, that requires the consumer to stop something. It is sneaky, because few people take the initiative to do things themselves, as these firms researchers know..

  2. Drew Kerr says:

    The article appeared in BLOOMBERG MARKETS magazine, which it says right at the top of the story you linked to. Please update your credit in your post. Thanks.

  3. Mike Randle says:

    I’m a Conservative Republican who is fed up with thievery! We can’t trust our banks, our government or our corporations! I say cut ‘em all off! Our finest young people are defending us from tyrants who hate us because we are free and our corporations et al are ripping us off at home????? ENOUGH!!!

  4. laytonian says:

    Let’s get this straight:

    Regulating big business is bad (socialism).
    Unfettered, selfish, free market capitalism is good
    Rick Koerber
    MLMs
    Ponzi Schemes
    Ayn Rand/Objectivism
    Cleon Skousen
    Glenn Beck
    Rush Limbaugh

    Okay. No wonder most Utahns hate our current administration.

    They’re afraid that they’ll not be able to rip everyone else off, before Obama gets more regulation passed.

    I get it now!

  5. Mark Shenefelt says:

    Mike, who’s going to keep an eye on those corporations? Not the corporations. Not you or me. It needs to be done by government, In this case, it’s probably the state government. I’d like to see a little government regulation of the life insurance crooks, but I’ll bet the Tea Party types would lump it in with “ObamaObamaObamabadbadbad.”

  6. Charles Trentelman says:

    people who scream about government regulation stifling free enterprise may be sincere, but they forget that too many people see the words “free enterprise” and feel they really mean “free for all.”

    The idea that competition will self-regulate the economy is ludicrous, as situations like this make clear. If they can rip people off, they will, and in this case they have the gonads to color it as patriotism..

  7. Tom says:

    Good informative piece Mark, Thanks.

    You and the Standard do a great public service by exposing this kind of scam.

  8. Dovie says:

    Let’s not miss that insurance regulation is considered the domain of the states. It’s stuff like this that causes the feds to “take over everything”.

    Healthcare reform is really health insurance reform and there are very good reasons for it, as well. Comparable to this life insurance example.

  9. laytonian says:

    Mark, here’s something else to look into: what linkages are there between these insurance companies, their incorporation in tax shelters like The Cayman islands or the Bahamas (several Prudential Financial subsets link to there). AND….there’s also linkage to Bain Capital and other Bain divisions (ie, Romney).

  10. Mark Shenefelt says:

    Laytonian, my son and I were watching the Giants-Dodgers game and a Prudential commercial aired. It pitched Prudential as the only with-it investment company during the stock market crash and recession. Prudential and Met Life were the big life insurers fingered in the Bloomberg piece. Yes, “with it,” in a way … Hopefully the national media will look into more insurance angles, as you mention. Smell smoke, find fire.

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