Hang them in chains and let the crows peck at their eyes

[pecunium]

No, I'm not happy.

Prudential, and any number of other insurance companies are taking advantage of, one might go so far as to say cheating, the bereaved. Among those are the families of dead soldiers.

What they do is tell the beneficiaries of life insurance policies that their money is in a guaranteed account, earning interest, and can be accessed just as if it were a checking account.

The accounts pay about 4 percent... to Prudential, et al. The beneficiaries are getting, apparently, less than they would if they put it into a regular savings account. Which is all the more galling because the guarantee... isn't really.


New York-based MetLife has told survivors in a standard letter: “To help you through what can be a very difficult, emotional and confusing time, we created a settlement option, the Total Control Account Money Market Option. It is guaranteed by MetLife.”

No FDIC Insurance

The company’s letter omits that the money is in MetLife’s corporate investment account, isn’t in a bank and has no FDIC insurance.

“All guarantees are subject to the financial strength and claims-paying ability of MetLife,” it says.

Both MetLife, which handles insurance for nonmilitary federal employees, and Prudential paid 0.5 percent interest in July to survivors of government workers and soldiers. That’s less than half of the rate available at some banks with accounts insured by the FDIC up to $250,000. (Bloomberg)

Best part of this... the money, the payout someone spent money making sure was there to help their loved ones (one of the strange comforts while I was deployed, was knowing Maia was in no financial worry if I died... she was getting $525,000US, if I was killed. Even after throwing a huge wake, with no one needing to go home, and people from out of town covered for the trip, she was still going to be able to set up shop, doing pretty much whatever she wanted), that money... is vulnerable to MetLife's creditors. Same is true for Prudential, etc.

So the "guarantee" is worth not much.

Worse, the state regulators don't understand these instruments; many of them think they are in FDIC insured banks. More worrisome, the beneficiaries don't understand them, and may think of them as a long-term investment. If they are dormant too long, they may be forfeited to the State.

There are hundreds of thousands, perhaps millions, of of these accounts; they total billions of dollars, and the rightful owners of that money are being cheated of it's benefits.

Really, go read the article. Then complain to your senators, your state insurance commissioner, your congressional rep.

Because this is vile.

What they do to the families of vets... reprehensible. After the shock of losing a loved one, far too young; they are cheated. They get two options, a lump sum for everything, or 36 payments. If they opt for the lump sum, they get this shit.

They could, if they knew about it, move the money (in whole, or in part) into a Roth IRA. The insurance companies don't tell them this. There is a deadline to putting them into a Roth (which is tax free). Why? Because the insurance company wants to get the interest on that money, money they are contractually obliged to pay out; but which they pull a shuck and jive to make it look as though it's been paid, when they keep it in their own coffers.

Bloodsucking bastards, weasling little toads, hiding in the arcana of abstruse phrases in small type; at a time they know the people who read it are not at their mental best. Robbing the dead, and cheating the living.

No, I have little mercy in my heart for them, who use the law as a prybar to wrest pennies from widows and orphans.

Comments

[shekkara.livejournal.com]

Can't the beneficiaries just write themselves a check for the full amount to empty the MetLife account and put the money somewhere else?

[kukla-red.livejournal.com]

No, what they receive aren't really checks - they are drafts that will not be honored by the bank because they can't be verified. Buried in the fine print are instructions about getting the money directly but they make it hard to find.

[antonia-tiger.livejournal.com]

That sounds odd.

If they're not negotiable instruments, then it looks more like fraud than extreme sharp practice. Who are these fake checks meant to be paid to, and why should their bank accept them?

BTW, there's some people I know in the US, who maybe ought to be reminded of this (if they already know). They work on supporting soldier's families.

[pecunium.livejournal.com]

They are negotiable, they aren't checks. They are drafts on a privately held fund. What seems to happen is, you send them a "check" and they release the funds.

There is, apparently, some action on that aspect of it; the appearance of the drafts is such that it may be fraudulent.

[antonia-tiger.livejournal.com]

On this, I'm seeing it with eyes not familiar with the details of US banking systems. If it were happening like this, in the UK, it would mean it was happening outside the normal bank clearing system. That makes them seem closer to how an invoice would be handled, which is something that can be sold to a third party, at a discount.

"Factoring" is the term I recall.

Anyway, you send a company an invoice. They send you the payment, eventually, which might be a paper check (which goes through the bank system, adding more delays) or might be some form of electronic funds transfer.

Here in the UK, cheques aren't usually negotiable any more. It used to be (around a half-century ago) that my father's cheques could come back with multiple endorsements--they'd stood in for cash money on the Midlands cattle markets. He never made out a cheque on the side of a cow, but he did once get paid with a cheque written on a sugar bag.

Anyhow, off to talk with my contact...

[pecunium.livejournal.com]

It is happening outside the normal banking system, that's the problem. And yes, the "checks" could be sold off at a discount. We are moving to the point that banks won't treat a check as negotiable, but technically they still can be.

[pecunium.livejournal.com]

Yes, they can... but why? They have been told they have been told they have protected accounts paying interest.

They can safely leave it there, and it will make money. No need to fuss with it, no need to worry about finding a good vehicle to keep it from being lost on the stock market, etc.

How can they know the insurer is taking advantage of them. When the people who are supposed to know these things (the insurance regulators in the state gov'ts, and the guys at the VA who deal with them) have been completely bamboozled, how likely is it that someone in the complex stages of grief is going to know what's going on?

[shekkara.livejournal.com]

Huh. Well, thanks for posting. I have an account to move...

[soldiergrrrl.livejournal.com]

But why should they have to worry about that when they've just lost someone they care about? I can tell you that if my husband came home in a box, the *last* thing on my mind would be the money from the $400k lottery.

[shekkara.livejournal.com]

But they have to worry about it eventually. Beneficiaries don't just get the money when someone dies. You have paperwork to fill out, death certificates to send or fax to prove, etc. So at somepoint after the death of the loved one, you have to pull yourself together enough to do these administrative tasks. The article reads like this handled for soldiers' families by the government, but for the rest of us that checkbook doesn't show up until you've done that paperwork. And even then, eventually come tax time you will need to find out if the money (or a portion thereof) from the policy counts as taxable income. (Yes, I've had to do all this stuff.)

[soldiergrrrl.livejournal.com]

Well yes, I agree. However, honestly, I just can't see where there's any justification of the way this is working. If the company is going to put it into an account, then the account should work the way it *appears* to work.

[shekkara.livejournal.com]

Absolutely.

[antonia-tiger.livejournal.com]

The "justification" is from the point of view of the insurance company. Using Terry's half-million as an example, the insurance company doing it this way doesn't have to find half-a-million and pay it out. And they are paying much less than usual for the right to use that half-million, by borrowing from this source rather than the money markets. They're making their books look better, but just how much would they have to find to make the payouts? How does the quantity of money compare to their turnover and profit figures?

Well, for just Iraq, the USA has passed 4000 deaths, so potentially it's a couple of billion dollars (waves hands madly to get to that point) which is enough for an insurance company to notice.

Oh boy, do these guys have a motive...

[kukla-red.livejournal.com]

I heard about this on NPR last night. I almost threw up while driving.

[sunfell.livejournal.com]

What you said. NPR reported on this, too.

[mesoterica.livejournal.com]

God, that's terrible. Pretty sure there must be a special circle of hell reserved for those who take advantage of the bereaved...

[ironphoenix.livejournal.com]

Agreed.

Sadly, it'd have to be a pretty big circle.

[don-fitch.livejournal.com]

Disgusting... but not surprising. Mostly, Insurance Companies are Big Businesses, with the driving force behind them being "Make as much money/profit as possible (preferably this quarter) for the stockholders". Satisfying/pleasing/serving the customers, quality, honesty, or improving the the world/society ("The Long View" attributes that once (arguably) gave Businesses some element of validity) apparently are no longer significant factors in the way the world works. (See Also: Banks, Oil Companies, most Governments, &cet.)

[ironphoenix.livejournal.com]

I was thinking about this recently, and trying to work out why stock price matters to a company, since it doesn't really affect operations...

...and then the "DUH!" moment hit me, and I remembered: the company doesn't exist for its own benefit, but for the stockholders'. The stockholders are increasingly more interested in resale value of the stock (especially in the short term) and less interested in the nominal source of its value, the stream of dividend income.

Investors aren't really investors, by and large... they're gamblers, commodity traders in company stock.

[harimad.livejournal.com]

In theory, companies care about stock price because it is a market valuation of the past, present and future prospects. Many stockholders - particularly institutional investors - are in it for the medium and long term. Stock performance over time does have an effect on operations; it affects how the company can raise funds and at what cost. (More detail available if you're interested.)

Where the system really breaks down is the slightly differing incentives between the company and its agents (ie, management). Especially with the rise of stock options, management has incentive to, er, be concerned about stock price even at the expense of medium- and long-term interests of the company. The managers are supposed to be overseen by the Board of Directors but, in the US, they're more often the servant of the managers than their masters.

In this particular instance, Pru et al are committing fraud. They created a system by which the customers would think they had a bank account with all that implies - including rock-solid insurance - and benefited by it.

They should roast in hell with their only path out being through the souls of the dead soldiers whose families they abused.

[ironphoenix.livejournal.com]

Stock performance over time does have an effect on operations; it affects how the company can raise funds and at what cost.

True, I was glossing this over.

I recall reading in a book on corporate governance that stock options should be set up to vest sufficiently far out into the future as to align the managers' and directors' interests with the company's long-term interests, not just its short-term ones.

As for your latter point about Pru et al, yeah, there is no way in which that isn't reprehensible.

[harimad.livejournal.com]

The options also need to be priced reasonably and not at much less than current stock price. Really smart options & bonuses take into account what the sector or even market as a whole is doing, so the managers are rewarded for doing better than his peers rather than just riding the rising wave.

[ironphoenix.livejournal.com]

Good points!

[maps-or-guitars.livejournal.com]

Heinous.

[mtfay.livejournal.com]

As unehtical as it sounds, these PUBLICALLY held insurance companies will do it until they get sued over it AND lose (the lose part is the important part. Otherwise, overall, they will make more money from the practice than it costs them to defend it).

There is a disparity between the actions of mutual (policy holder owned) and public insurance companies - the mutual companies are, for the most part, held in check by their policy holders. If you insense your policy holders, you will recieve a revolt and the board of trustees won't last long (as, for instance, State Farm has learned a couple of times in its history). Publically-held insurance companies fall into the trap of "Shareholder return" and are easily inclined to do everything to rip off their policy holders up to and including refusing to honor purchased policies.