Shortly before this issue went to press, a story broke in the mainstream media regarding retained asset accounts and the payment of death benefits to military veterans. In short, lots of soldiers in Iraq and Afghanistan are buying life insurance on themselves, and when they die, their families do not receive a death benefits payment, they receive a voucher book that looks like a checkbook. The family can cash out whenever it likes, and until it does, the money sits in an interest-bearing account. But, the story points out, the life insurers (mainly Prudential, but a few others as well) are earning even more while the money goes uncollected.
The story quotes distraught families of slain veterans, who are shocked– shocked, I say! — that insurers would dare to profit off the death of our soldiers. The “check books” are portrayed as nothing more than an effort to exploit families’ grief to delay death benefit payments, all while putting that money at risk by storing it in corporate accounts that are not insured by the FDIC. Conclusion? This is a huge betrayal of our brave soldiers by a greedy industry that needs to answer for it.
Now, forget for a moment that retained asset accounts are nothing new. Forget that there’s a certain hypocrisy among families who are angry at insurers for collecting interest for themselves. Forget that claims reserves have never been FDIC-insured. Forget that the same families who profess to be too distraught to cash a payment voucher would also be too distraught to run a mailed check to their local bank branch. Forget all of these things, if you can. They are just the details of a sensational story. There is a much bigger issue here.