Insurance Agent Forum

[Robert Barney]

Fallen Soldiers' Families Denied Cash as Insurers Profit - Bloomberg

[dgoldenz]

Write yourself a check for $400k and you don't have a problem. Why would anyone leave such a big amount of cash with an insurance company?

[insurehound]

I saw this Robert...just going to post it but you beat me to it. I have to read it more thoroughly when I have more time.

[LGilmore]

There will always be bad press for the insurance industry. It's a given. Is this a real problem? It seems as if the person has ample opportunity to do what ever she wants, including nothing....

Opportunity cost.

This implies Pru is stealing money from her. What outrage would there be if Pru gave her the cash and she blew through it in a couple months? Where was pru to protect her from herself?

This is simply another can't win situation for carriers.

[insurehound]

In any savings account transaction, when do you ever get the full return? How is that stealing? And like dgoldenz said, you can just write a check for the full amount and be done with it.

...and why is this the insurance company's responsibility to educate the consumer on every method that earns more interest? Isn't that why we have insurance agents, financial planners and CPAs?

[Ron Van D]

This article was definitely written with an agenda, and that agenda was more Federal regulation is needed. I'm guessing these guys aren't tea partiers.

For those of us in the industry, we know that the money is safer here than with a bank.

[VolAgent]

They neglected to mention, this is exactly how banks make money too. They receive deposits from accountholders and then either invest the money or lend it out for a higher rate of return. I don't see how Pru or MetLife is doing anything wrong. Maybe just required "Not FDIC Insured" in big letters on the front page or something.

Also, it is obvious none of these people were working with an agent, I doubt an agent would have just let the money sit there.

[Markingriffin]

Watch out for that small print...It will get you everytime.

[BNTRS]

I don't get it. It's sits in the general account as a liability, which from a numbers point of view is a lot more secure than FDIC anyway. Pru made more money on the money than they paid in interest, this happens everywhere money is stored, be it your bank account, checking account, MMMF, annuity, cash value life insurance, the company holding the money has to stay in business somehow.

There are plenty of retained accounts that pay better rates than this account at Pru. Earlier this year I took the annual premium for a new policy drafted from a check from one of these accounts at Lincoln (husband died almost a year ago).

Of course, the guarantee fund speaks not a word to this type of account as far as I know. But again it comes down to being in the business of making promises. The life insurance industry isn't going to let one of their own fail to pay a claim, and likely not going to let one of their own fail to payout a death benefit held in one of these accounts. Doing so even for the worst insruance company is a huge black eye for the industry, and they simply don't want that. It may create a liquidity problem for a while, but they are never going to let it just disapear. And to suggest that a company like Prudential is just going to fail and the money will be gone is both foolish and a degree of journalistic negligence that should cause huge amount of shame for David Evans.

[bluemarlin08]

Totally agree with all that have posted. I don't know of any companies that do this any other way. I have watched my dad handle hundreds of claims with NYL, they get the checkbook and then advised to transfer to their bank. Where is the response from the insurance industry?

[LGilmore]

"Where is the response from the insurance industry?"

I don't know if one is necessary. When you respond in detail to what amounts to be a stupid report, you give it creditability. This really isn't a problem and to spend alot of time on it only confuses the public.

[nycagent]

just finished reading it. the whole thing was ridiculous. what it should have pointed out is the value that having an independent agent would have in a matter like this because he/she would be able to advise you on your options with the death benefit.

Not that i'm biased or anything....

[BNTRS]

Originally Posted by nycagent

just finished reading it. the whole thing was ridiculous. what it should have pointed out is the value that having an independent agent would have in a matter like this because he/she would be able to advise you on your options with the death benefit.

Not that i'm biased or anything....

But you see, the point of journalism is to cast doubt on the establishment. To rouse indignance in the common man, and leave him with the impression that the powers that be are wrong, corrupt, uncsrupulous, etc.

I know people who teach journalism who truly believe this. In fewer words, it's their job to pants the establishment.

[Robert Barney]

I thought this was the worst of it:

As time went on, she says, she tried to use one of the “checks” to buy a bed, and the salesman rejected it. That happened again this year, she says, when she went to a Target store to purchase a camera on Armed Forces Day, May 15.

I’m Shocked’

[dgoldenz]

I like how they had to point out that it was Armed Forces Day, like the guy at Target was supposed to know that and that the check she gave him was for her deceased son that was in the army. She must have been truly shocked, SHOCKED!

[Stonewall]

Agreed, this is ridiculous. They also didn't take into account that Prudential has been paying death claims and managing money since 1875. They have a lot more experience and success at this than the FDIC could ever dream about. They can make it out to sound crappy but you'll notice that Prudential immediately made the $400,000 available to this beneficiary. I'm sure most of us agree that Pru is just as safe or safer than FDIC money. Insurance companies are required to have a dollar for dollar reserve on cash they have loaned and/or are accountable. This is unlike banks that can lend on fractional reserve (16-1, I believe). This is simply silly!

[Larry Tew]

Another so-called "journalist" trying to make news where none exists.

[TXINSURANCE]

Socialist left wing media.

I guess capitalism is so evil. Cry babies. There is no story. This is complete garbage.

[SidecarDaddy]

ACLI News Release
Wednesday, July 28, 2010


ACLI Responds To Bloomberg Article On Retained Asset Accounts

The American Council of Life Insurers (ACLI) issued the following statement in response to an article from Bloomberg Markets magazine on life insurers’ retained asset accounts:

Washington, D.C. (July 28, 2010) -- "Recent news reports cast a negative light on retained asset accounts and give short shrift to the benefits these accounts have for beneficiaries.

"Beneficiaries have full access to the money in their retained asset account and can withdraw the full amount right away or at a later date. Moreover, retained assets are merely one option for beneficiaries to receive a death benefit. Other options include a lump sum or payment in a certain number of installments.

"Retained asset accounts provide a significant benefit to family members who are dealing with the emotional loss of a loved one. Not surprisingly, financial matters may not be the first thing on their minds and retained asset accounts provide a secure place for life insurance policy proceeds to be held until the money is needed.

"Life insurers invest assets for retained asset accounts in their general accounts, generally in low-risk, conservative investments, to ensure the money is available on demand. The rate earned by the account is comparable to similar on-demand accounts and is typically guaranteed by the insurer not to drop below a certain level. Beneficiaries can access their money at any time and transfer it to a bank account, CD or other investments with a higher interest rate.
"Retained asset accounts are backed by the full strength and claims-paying ability of the life insurance company. State insurance departments regulate life insurers’ investment practices and closely monitor life insurers’ financial strength. Regulators will act quickly to protect consumers at the slightest hint of financial difficulty.

"In 1994, the National Association of Insurance Commissioners developed and approved, with input from consumer groups and insurance industry representatives, a model bulletin for the treatment of retained asset accounts. The model sets forth insurance regulators' expectations for such accounts, including disclosure to consumers of the important features of the account, tax implications and interest rate payments. ACLI continues to fully support this model approach."

# # #

The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association with more than 300 legal reserve life insurer and fraternal benefit society member companies operating in the United States. ACLI members represent more than 90 percent of the assets and premiums of the life insurance and annuity industry. In addition to life insurance and annuities, ACLI member companies offer pensions, 401(k) and other retirement plans, long-term care and disability income insurance, and reinsurance. ACLI's public Web site can be accessed at ("Google" ACLI).

[Robert Barney]

Another liberal politician takes his que from the mainstream media:

Cuomo Probes Insurers' `Secret Profits' on Death Benefits of U.S. Soldiers - Bloomberg

Never let a good crisis go to waste.