Insurers Rip Off Families of Fallen US Soldiers

Keep payouts in interest-bearing accounts and skim off profits
By Caroline Miller,  Newser Staff
Posted Jul 29, 2010 7:35 AM CDT
Insurers Rip Off Families of Fallen US Soldiers
Nelda Mercado of New York grieves as her son, Master Sgt. Pedro Mercado, is buried at Arlington National Cemetery just outside of Washington in Arlington, Va., Thursday, July 22, 2010.    (AP Photo/J. Scott Applewhite)

It turns out that insurers handling death benefits for American soldiers have got a sweet scam going that enables them to keep profiting from the money even after it is supposedly paid out to families. They tell bereaved relatives that they've opened a convenient, interest-bearing account for their money that's a nice, safe place to keep it and they give them a "checkbook." But it's not a normal checkbook, they don't open individual accounts for each soldier, and they skim off most of the interest the money is making—giving beneficiaries 1% while it's earning 4%.

The military families are getting less than half the interest they would in a normal account, Bloomberg reports. Not only that, the money held in these general corporate accounts at Prudential or MetLife, isn't insured by the FDIC. Prudential says they make it clear to military families that they can take their money out anytime they want, but an insurance law professor isn't impressed. “It’s institutionalized bad faith,” he says. “It’s turning death claims into a profit center.” (More MetLife stories.)

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