Servicemembers' Group Life Insurance - US Military Life Insurance Lawsuit

US Military Life Insurance Lawsuit

In 2010, various media outlets noted allegations that the Prudential Life Insurance Company was manipulating the payout of life insurance benefits due to the families of American soldiers in order to gain extra profits. The company provided life insurance to people in the armed forces under a government contract. Rather than paying the full amount due to the families at once, the company would instead deposit the funds into a Prudential corporate account. These accounts are referred to as 'retained asset accounts' and are essentially an I.O.U. from the company to the payee (in many cases a fallen service members' family). While in early 2010 Prudential was making profits of up to 4.2% in its general account, they paid out 0.5% interest in these non-FDIC insured "Alliance" accounts. In some cases, when families requested to be sent a full payout in the form of a check, the family was sent a checkbook, rather than the amount due.

It is not clear if the practice was in violation of law or the contract. In August 2010, the company was sued by a number of the bereaved families. The company's response included an open letter to the military community in which it addressed what it characterized as "misinformation" about the nature of the accounts. Military Times noted that prior lawsuits against insurance companies pertaining to the use of retained asset accounts have been dismissed in federal courts without action.