The U.S. Department of Veterans Affairs is writing about 10,000 beneficiaries of military and veterans’ life insurance policies to say that payments held in Prudential Financial Inc. accounts are safe and can be withdrawn at any time.
“We want to assure you that the life insurance benefit is secure and available to you,” said the letter, signed by Thomas Lastowka, director of a Philadelphia VA office that administers group life insurance programs for U.S. soldiers and veterans.
Bloomberg Markets magazine reported on July 28 that Newark, New Jersey-based Prudential offers to hold lump-sum payments for beneficiaries in the company’s coffers. The insurer pays interest on the accounts and makes money by investing the funds. The accounts provide checkbook-like access and aren’t federally insured.
Since the story was published, the VA says it is examining life insurance practices. Members of Congress also are demanding action and filing legislation requiring greater disclosure about practices for handling military death-benefit payments.
“The issues detailed in a recent Bloomberg story on veterans insurance raise serious concerns and I’ve received assurances from our ranking member that the Veteran’s Affairs Committee is pursuing the matter,” Senate Republican leader Mitch McConnell said.
Prudential, the second-largest U.S. life insurer, is the sole provider of life insurance for 6 million U.S. military personnel and veterans. Prudential spokesman Bob DeFillippo has said the company is “working with the VA to address concerns.”
New York Attorney General Andrew Cuomo has opened a probe into the practice and the National Association of Insurance Commissioners, which is responsible for regulating the industry, said oversight must be improved. New York-based MetLife Inc. and Prudential were among carriers subpoenaed by Cuomo.
The VA’s letter, saying that survivors of insured soldiers “may be aware of recent news stories highlighting one beneficiary’s concerns,” told beneficiaries that money placed in what Prudential calls “Alliance Accounts” is protected by guaranty funds in each state.
The accounts “are designed to be an interim solution while you determine the best way to manage your financial assets,” Lastowka wrote.
A Veterans Affairs department fact sheet released with the text of the letter says the agency “takes seriously the concerns regarding the Alliance Accounts and is reviewing the program to ensure that survivors are protected and being treated fairly.”
Lastowka’s letter said more than 60,000 of the accounts have been opened “and successfully managed” since 1999. The letter also told beneficiaries how to obtain free financial counseling that’s available under the insurance programs.