The Giant Noodle
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Why are large life insurance companies profiting from billions of dollars they hold on behalf of the families of fallen military service members?
Bloomberg Markets magazine senior writer David Evans posed that question in an article in its September issue. The article, which took a close look at practices at Prudential Financial, has sparked sharp criticism from Cabinet members, reform proposals from U.S. lawmakers, and a fraud investigation by the New York Attorney General.
The U.S. Veterans Affairs Dept. and the National Association of Insurance Commissioners say they are reviewing military life insurance arrangements.
"It's disgraceful on the part of insurance companies," Senator John McCain (R-Ariz.), a onetime prisoner-of-war in Vietnam, said in an interview on Bloomberg Television. "We'll obviously have to be looking into it."
Under scrutiny are so-called retained-asset accounts. More than 100 carriers use the accounts to earn income on $28 billion owed to beneficiaries. New York-based MetLife, the biggest U.S. life insurer, retains about $10 billion and was among the carriers subpoenaed by Andrew Cuomo, the New York Attorney General.
Many life insurance companies suggest to beneficiaries that as an alternative to taking a lump-sum payment of death benefits, they leave the bulk of the policy proceeds with the carriers.
The accounts were set up for beneficiaries such as Cindy Lohman of Great Mills, Md. Her 24-year-old son had been killed by a bomb in Afghanistan. Prudential and the other insurers give the recipients limited checkbook-like access to the funds and pay modest interest.
CONTINUED: http://www.msnbc.msn.com/id/38629691/ns/business-bloomberg_businessweek/
Sorry, another nonissue raised for political hay.
Insurance companies, for years, have elected to pay out benefits into a money market account instead of issuing a check directly to the beneficiary of a death benefit. The way it works is that they pay the money into a money market account -- and then send the beneficiary checks so they can access the money. Accessing the money is as simple as writing a check to deplete the account. Their policies clearly state they are going to do that. At the most, it keeps a beneficiary from their money for one week. At best, it allows a beneficiary to think about what they want to do with the money instead of suddenly receiving a $50,000 check. No harm. No foul.
Another waste of Congress' time that allows to to "think" they're actually doing something.
Don't be misled by this crap.
And insurance company, that's in the insurance business to make a profit. I'm beside myself with outrage!!
What do you want the companies to do? And isn't that a high risk job? Considering it's Armed Services.... Look if the demand is there, let it continue, but if the majority of people vote it out of their state, then that is fine too. Just have to move to another state that would allow it. And I can actually see why some people choose to have the insurance, sometimes the death benefits from the VA might not be enough for the spouse and if the spouse becomes a single parent, then the extra money could help him or her.
So before anyone starts jumping the gun and claiming something, why not figure out why it is being done. Sound immoral right? But it might make sense for those few.
What do you want the companies to do? And isn't that a high risk job? Considering it's Armed Services.... Look if the demand is there, let it continue, but if the majority of people vote it out of their state, then that is fine too. Just have to move to another state that would allow it. And I can actually see why some people choose to have the insurance, sometimes the death benefits from the VA might not be enough for the spouse and if the spouse becomes a single parent, then the extra money could help him or her.
So before anyone starts jumping the gun and claiming something, why not figure out why it is being done. Sound immoral right? But it might make sense for those few.
MaggieD said:Sorry, another nonissue raised for political hay.
Insurance companies, for years, have elected to pay out benefits into a money market account instead of issuing a check directly to the beneficiary of a death benefit. The way it works is that they pay the money into a money market account -- and then send the beneficiary checks so they can access the money. Accessing the money is as simple as writing a check to deplete the account. Their policies clearly state they are going to do that. At the most, it keeps a beneficiary from their money for one week. At best, it allows a beneficiary to think about what they want to do with the money instead of suddenly receiving a $50,000 check. No harm. No foul.
Another waste of Congress' time that allows to to "think" they're actually doing something.
Don't be misled by this crap.
The problem is when the insurance company is making a 5% rate of return whereas the beneficiary is only making 0.5% or 1%.
The AM talk show host, who is a financial advisor, said this wasn't a big deal and that such a practice is even preferable to giving out lump sums to those grieving a loss. He explained that when this happens to any of his clients, he tells all of them that they shouldn't do anything with a life insurance pay out for at least 6 months. People are going to use those 6 months for grieving, and they are in no shape to adequately put any life insurance pay out to good use. Also, they can become targets for financial predators. So having it as a checking account actually protects the beneficiaries until they become of sound mind to use that money when they are emotionally better suited to put it to good use.
The problem is when the insurance company is making a 5% rate of return whereas the beneficiary is only making 0.5% or 1%.
Why are large life insurance companies profiting from billions of dollars they hold on behalf of the families of fallen military service members?
Bloomberg Markets magazine senior writer David Evans posed that question in an article in its September issue. The article, which took a close look at practices at Prudential Financial, has sparked sharp criticism from Cabinet members, reform proposals from U.S. lawmakers, and a fraud investigation by the New York Attorney General.
The U.S. Veterans Affairs Dept. and the National Association of Insurance Commissioners say they are reviewing military life insurance arrangements.
"It's disgraceful on the part of insurance companies," Senator John McCain (R-Ariz.), a onetime prisoner-of-war in Vietnam, said in an interview on Bloomberg Television. "We'll obviously have to be looking into it."
Under scrutiny are so-called retained-asset accounts. More than 100 carriers use the accounts to earn income on $28 billion owed to beneficiaries. New York-based MetLife, the biggest U.S. life insurer, retains about $10 billion and was among the carriers subpoenaed by Andrew Cuomo, the New York Attorney General.
Many life insurance companies suggest to beneficiaries that as an alternative to taking a lump-sum payment of death benefits, they leave the bulk of the policy proceeds with the carriers.
The accounts were set up for beneficiaries such as Cindy Lohman of Great Mills, Md. Her 24-year-old son had been killed by a bomb in Afghanistan. Prudential and the other insurers give the recipients limited checkbook-like access to the funds and pay modest interest.
CONTINUED: http://www.msnbc.msn.com/id/38629691/ns/business-bloomberg_businessweek/
Sorry, another nonissue raised for political hay.
Back to the original post. What Congress and AG's throughout the country should be investigating is the money that insurance companies are holding onto because no one claimed it. That amounts to hundreds of billions of dollars. If Uncle Henry dies, and his family doesn't know he has an insurance police with MetLife (example), they can't ever claim it. And MetLife just keeps the money. Insurance companies never go looking for police holders -- even the ones who'd be 130 years old by now. They just confiscate the money and build huge buildings. ;-)
This is a large profit center for insurance companies. Policies expire that were good as gold until the insured died and payments stopped. Those policies just simply expire and the company saves tens of millions of dollars in premiums and cash value promised. According to some estimates, 20% of all insurance policies are just lost in the cracks of the decedent's file cabinet or desk drawer.A couple of things here. First, if an insurance company doesn't know that someone is dead, I don't know how you could possibly hold them responsibile for the mistake of the insured in not informing his family of a policy or having some type of documentation of this policy's existence. The policy will terminate due to non-payment of funds, which is slightly different then how you picture it.
Second, if an insurance company is notified of a death, but no beneficiary comes forward (or they can't locate one), the proceeds are actually paid to the insured's state's unclaimed benefits fund after a set time, which amounts to a slush fund for the state.
Lastly, the fact that some policies terminate prior to death or after death without an insurance company being notified (which to the insurance company is the same as terminated prior to death) is actually calculated by the actuaries to set the price of the coverage. Premium levels are approved (and occasionally reviewed) by the state's DOI and will have to be adjusted if an insurance company has better than expected claims experience - which happens at times. So, i'm not sure the benefit to the insurance company is as large as you think.
This is a large profit center for insurance companies. Policies expire that were good as gold until the insured died and payments stopped. Those policies just simply expire and the company saves tens of millions of dollars in premiums and cash value promised. According to some estimates, 20% of all insurance policies are just lost in the cracks of the decedent's file cabinet or desk drawer.
One question would be, "What's the set time?" Link? Second question would be, "How is an insurance company notified of a death?" I think this applies when a family has contacted the insurance company and doesn't know how to contact the beneficiary. Do they check the Social Security database every year? I think we both know that doesn't happen. So, much of this money winds up in the insurance company's slush fund. Which is a great word for it. Thank you.
I doubt that percentage. But, I know it happens. We used to get claims from people that found policy information in the decesased's files a year + after the death. In some cases those policies had canceled prior to death, in other cases they were payable claims. I still don't have any clue how you can blame an insurance company for that, though. An insurance company can't be held responsible for what people do with the policy after they purchase it, wether it be not telling others about it or placing it with the rest of their important papers.
The time limit is set by the states. I really can't recall what the time limit was, but different states did have different time limits. Contrary to what we "both know" We actually did check to see if we could locate a beneficiary four times per year, every 90 days (this was required by the states, I believe). We tried our best to not have to forward it to the state, since it was nearly impossible to get back if we ever had to pay the claim at a later date. That money does not end up in the insurance company's slush fund. Anyway, I don't have a link, and dont care to hunt it down.
Yeah, I saw that 20% claim on an EHow link. Not credible, IMO. Can't find anything else. I'm sure it's not something insurance companies go out of their way to make public. As to how I can blame insurance companies, every state has an unclaimed property website. Why not insurance companies? I just handled the estate of an 83-year-old family friend who had literally thousands of paperes strewn everywhere in her house. Did we find all of her insurance policies? I doubt it. Was it her fault? Yeah, I guess it was. Should insurance companies be allowed to profit from it? No.
I did see that, when the 'average life span' has been exceeded, these assets are turned over to the state. It was a credible link. I didn't grab it. So you're right about those policies going into a state slush fund after a while. Again, an online database would stop THAT. There's a reason insurance companies don't do it, don't you think? This, of course, doesn't account for the policies where premiums just stop getting paid.
How would you suggest that an insurance company make these numbers public? To the insurance company it's just a terminated policy, and they already make public the number of policies that are canceled. It's how investors can review churn and retention. I really can't figure out how you envision the online database. I guess it would have to contain every policy that was ever terminated with an insurance company...
Maybe it should be a "backwards" database. I enter a name and social security number into a master database and the insurance companies search for matching records. MaggieD 333-33-3333 comes back with four hits -- Prudential; Nationwide; MetLife; Aetna. Click on links for more information. They're already in computers. Couldn't be that hard to do. Plus, without the social security number, information would remain confidential.
I dunno. Why do insurance companies do that? Do you think it's somehow cheaper to pay those benefits to the state government rather than the insured? I have first hand experience of how much work an insurance company engages in to track down a beneficiary prior to sending benefits to the state. Even before we forwarded the funds, we always sent a letter to all the possible addresses we had on file to let them know these funds were going ot the state unless we heard back shortly. That simple threat would finally get beneficiaries to come forward. In some cases it was tax issues that prevented them from coming forward, in others it was family rivalries.
Frankly, I think that tracking down the beneficiary slushes aren't the same as dropped policies and not even knowing the person is dead. Much smaller problem.
Maybe it should be a "backwards" database. I enter a name and social security number into a master database and the insurance companies search for matching records. MaggieD 333-33-3333 comes back with four hits -- Prudential; Nationwide; MetLife; Aetna. Click on links for more information. They're already in computers. Couldn't be that hard to do. Plus, without the social security number, information would remain confidential.
Could you not just do the same thing by calling Prudential, Aetna, JNL etc? Give them the name and SSN and find out if they have a policy for the deceased? I think it's both safer (hackers just got information on 200mil facebook users) for everyone and much less likely to result in providing a competing insurance company with information on another company's clients. Althogh it is a bit more time consuming. I highly doubt you'll be having insurance companies providing everyone with that level of detail on every client that has terminated a policy.
Could you not just do the same thing by calling Prudential, Aetna, JNL etc? Give them the name and SSN and find out if they have a policy for the deceased? I think it's both safer (hackers just got information on 200mil facebook users) for everyone and much less likely to result in providing a competing insurance company with information on another company's clients. Althogh it is a bit more time consuming. I highly doubt you'll be having insurance companies providing everyone with that level of detail on every client that has terminated a policy.
No. That's the ridiculous part. I know this because I just faced it. For one thing, you'd have to call allll of the insurance companies. But even, as was the case with this lady that passed, if you KNOW there's a policy, unless you are the beneficiary, they will give you absolutely no information. Even with death certificate in hand.
No. That's the ridiculous part. I know this because I just faced it. For one thing, you'd have to call allll of the insurance companies. But even, as was the case with this lady that passed, if you KNOW there's a policy, unless you are the beneficiary, they will give you absolutely no information. Even with death certificate in hand.
That's true. The reason insurance companies won't release information to you, is because you are not a party to the contract and the insurance company is prohibited by law from releasing information (privacy concerns and potential fraud). In fact, auditors would occasionally call pretending to be someone in order to obtain information from the company they were not entitled to.
Anyway, all you need to do is fax the death certificate in. If they have a policy for the client, they will attempt to locate the beneficiary. Anyway, it sounds like you're issue is more with the government than the insurance company. I imagine they would face the same restrictions with the database you previously suggested. If you are positive the lady had a policy with that company, you can even fax the death certificate with a letter to your state's DOI, they will forward it to the insurance company.
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