Recent allegations that life insurers are defrauding surviving family members of U.S. servicemen killed in action by rechanneling death benefits for corporate gain has led New York Attorney General Andrew Cuomo to subpoena both MetLife Inc. and Prudential Financial Inc. to answer the charges.
In a statement issued to the press, Cuomo said, “It is shocking and plain wrong for these multinational life insurance companies to pocket hundreds of millions in profits that really belong to those who have lost family members and have already suffered immensely.”
The subpoenas were issued a day after the U.S. Department of Veterans Affairs announced its own investigation of the matter. Prudential and MetLife are the two largest life insurance companies in the United States.
The questionable behavior involves a practice in which the companies do not make a lump sum payment to military families, but rather hold the money in potentially risky “retained-assets” accounts with low-paying yields.
The insurers, however, earn as much as 4.8 percent for themselves on the same accounts that can return as little as 0.5 percent to the families. Additionally, the retained-asset accounts are not FDIC guaranteed.
In the Reuters report on the issue, MetLife declined to comment, while a spokesman for Prudential, Bob DeFillippo, said the company would cooperate with Cuomo’s investigation.