by John Darer® CLU ChFC CSSC RSP
Thomas B. Considine, New Jersey's commissioner of banking and insurance, told the Wall Street Journal Journal that a Prudential Insurance Company letter dated August 4, 2010 satisfies the department that Prudential acted properly and further reassures this department of the value of 'retained asset accounts,'" the name for the money-market-like accounts set up for beneficiaries by many leading life insurance companies to assist with paying immediate expenses and to give vulnerable beneficiaries a "decision and pressure free zone".
Such accounts have been in existence for almost 25 years
A July 28, 2010 Bloomberg article suggested that insurers were profiting at the expense of grieving military families by holding onto the insurance proceeds in retained-asset accounts, triggering a media and regulatory frenzy. Bloomberg said the "funds allow more than 100 carriers to earn income on $28 billion owed to life insurance beneficiaries. New York-based MetLife Inc., the biggest U.S. life insurer, retains about $10 billion".
Given the same logic one wonders why there has been no mention about such innovations as using "stored value cards" for auto and property claims which provide a world of accounting benefits, ability to use automation and also permit insurers to retain assets until their insured actually spends money on the claim.
Is it possible that beneficiaries appreciate the retained asset accounts? Is it possible that consumers feel safer with insurers than banks? Even with FDIC protection let's face it there have been over 100 bank failures in 2010 and we're ahead of last years pace. The National Association of Insurance Commissioners (NAIC) is ramping of efforts to make sure that better efforts to educate consumers are implemented.
As I reported the other day the Bloomberg article fails to reveal that it has been the general practice of insurers to pay interest from the date of death to date of settlement of the life insurance claim.. If consumers aren't aware of this they should be informed. As someone who has filed death claims on behalf of clients in the past with Northwestern Mutual I can tell you first hand that at least in those cases, all options were disclosed in the letter that went out to the beneficiary.