'Secret Deal' Allowed Insurer to Profit on Military Deaths
The U.S. Department of Veterans Affairs struck a secret deal allowing Prudential Insurance to withhold hundreds of
millions of dollars in death benefits for fallen soldiers, according to a recent investigative report by David Evans of Bloomberg News.
Evans, pouring through documents obtained through a Freedom of Information Act request, found that the VA revised a contract with Prudential in 2009 that gave the insurer a go-ahead to send a checkbook, rather than a check, when a service member died. This is despite the fact that these families had requested lump sum benefits be paid in the event of death.
The practice allowed Prudential to delay paying death benefits to relatives, which provided the insurer a cheap source of cash to reinvest at a profit.
Based on Evans figures, the insurer was likely to reap profits of roughly $24.5 million annually by holding $662 million of survivor's money in the insurance company's "general account" and paying the survivors only a fraction of the interest Prudential earned on those funds.
Although the VA contract allowed this in 2009, the insurer was apparently pursuing this strategy for more than 10 years before the government signed off on the new written contract. That has Veterans groups up in arms and survivors pursuing a class action law suit.
Here's Evans talking about his story in Bloomberg Markets Magazine.
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