Prudential, the second largest insurance company, is being accused by family members of fallen solders of profiting from death benefit pay outs. When soldiers are killed in the line of duty, the next of kin receives a life-insurance payment from the government but what most would think should be a lump sum turns out to be more like an “IOU” cleverly disguised as a check book.
Recently a mother lost her son in an explosion in Afghanistan. She received a checkbook and a packet from Prudential, instead of the $400,000 check she was expecting. She later found that the funds in the Alliance Account were not able to be withdrawn immediately, as she previously expected.
Journalist David Evans, with the Bloomberg Markets Magazine, stated that “The life insurance company is holding onto their money.” He also discovered that the money was being held in Prudential’s general corporate account. The money was accruing interest, most of it going to Prudential, instead of the families of the deceased soldiers.
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Prudential is earning almost 5% in the corporate account while the client is earning less than 1%. According to Evans, they discovered that there’s $28 billion in approximately one million accounts under the control of more than 120 insurance companies. Since this has happened, the Department of Veterans Affairs is conducting an investigation of the life insurance companies and their procedures.
On its own behalf, Prudential affirmed that they disclose the terms of the accounts to the accountholders, including the interest rates, which are comparable to the rates paid on other accounts. They also claim to make it clear to beneficiaries that they can withdraw some or all of their money immediately or at any other time and without delay.