Insurance Companies Profit from Troop Deaths

Friday, July 30, 2010

Insurance companies contracting with the Department of Veterans Affairs (VA) to provide life insurance to soldiers have been profiting off monies intended for survivors of those killed in Afghanistan or Iraq.

Instead of paying lump sums to beneficiaries of troops killed, companies like Prudential and MetLife provide them with “checkbooks,” giving parents and relatives the impression that the life insurance money has been put into a bank account for them to draw on whenever they like. In reality, the money sits in general corporate accounts earning Prudential 4.8%, while the beneficiaries receive maybe 1%.
In reality, survivors have the right to take all the money and then put it in money-market accounts that earn a higher rate of interest.
“I’m shocked,” Cindy Lohman, whose son was killed in Afghanistan, told Bloomberg News. “It’s a betrayal. It saddens me as an American that a company would stoop so low as to make a profit on the death of a soldier. Is there anything lower than that?”
Jeffrey Stempel, an insurance law professor at the University of Nevada, Las Vegas, called the scheme “institutionalized bad faith.”
Rep. Bob Filner (D-California), the chairman of the House Veterans Affairs Committee, criticized not just the insurance industry, but also the VA employees who “too often failed to explain all the options available for these families in their time of need.”
David Evans, the Bloomberg reporter who developed the story, says that MetLife created the scheme in 1984. It soon spread throughout the insurance industry, creating “a shadow banking system” worth $28 billion.
-Noel Brinkerhoff, David Wallechinsky
Insurers Eyed in Death Benefit Profiteering (by Bryant Jordan,


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