Insurers Are Withholding Payouts From The Relatives Of The Deceased
Larry M. Elkin, Palisades Hudson
Oct. 11, 2010
Imagine that a man walks up to you with a proposal. He’d like you to lend him a large sum of money, possibly most of your worldly wealth, at an interest rate of less than 1 percent.
And then he says yes on your behalf.
In an excellent piece of reporting by David Evans, Bloomberg Markets magazine last week drew attention to the fact that many insurance companies are effectively doing just that. Instead of sending checks to the beneficiaries of life insurance policies, including relatives of soldiers killed on the battlefield, companies like Prudential and MetLife are sending IOUs in the form of “checkbooks.” The money from the death benefit has been placed in a special account for safekeeping, the companies tell the beneficiaries. There is a bank name on the “checks,” but the bank simply processes the transaction. The money itself stays with the insurance company.
In effect, these companies are electing to lend themselves money that belongs to the beneficiaries.