The Missouri and Kansas insurance departments said Tuesday that they were checking for complaints over a practice in which life insurance companies were reportedly profiting from the deaths of U.S. soldiers.
First revealed last week by Bloomberg News, the practice involves life insurers that reportedly earn millions in additional profits by holding a portion of the benefits from such policies and paying them out over time.
"It may be legal, but it's shameful, absolutely shameful," said Joe Davis, a spokesman for the Kansas City-based Veterans of Foreign Wars.
Prudential and MetLife lead the way in making hundreds of millions of dollars in additional profits from thousands of policies, including those covering soldiers killed in Iraq and Afghanistan, Bloomberg said.
Instead of paying out all the benefits, the companies offer to "hold" the money, sometimes in noninsured accounts, for families of grieving service members, Bloomberg said.
Bloomberg said that on an average death benefit of $400,000, Prudential stood to earn 4.8 percent in annual interest while paying survivors just 1 percent.
Such "retained asset accounts" have been an option for survivors for about 20 years, insurance experts say, but in the case of U.S. soldiers, the practice has been allowed by the Department of Veterans Affairs, which oversees policies that are part of the ServiceMembers' Group Life Insurance program.
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