Lawmaker questions management of soldiers’ life insurance funds

The company responsible for providing life insurance benefits to the families of fallen soldiers hasn't handled payouts properly and has failed to provide beneficiaries automatic cash payments, a Democratic lawmaker said on Tuesday.

In an Aug. 10 letter to Prudential Chairman and Chief Executive Officer John Strangfeld, Rep. Edolphus Towns, D-N.Y., expressed concern that families of participants in the Servicemembers Group Life Insurance program and the Veterans' Group Life Insurance program are not fully informed about the procedures for receiving benefits.

"I am particularly concerned that some families of soldiers killed while serving their country may not understand that they have the right to this money upfront," the chairman of the House Oversight and Government Reform Committee said in a statement. "It seems unjust that the insurance company can take control of this money without first being granted permission from those it belongs to."

The SGLI and VGLI programs feature retained-asset accounts, in which insurance benefits are paid not as a lump sum, but are held in an account from which beneficiaries can withdraw funds using what appear to be checks. The funds are not protected by the Federal Deposit Insurance Corporation, and a financial institution must cash the checks. The account management firm controls the money until beneficiaries cash out the accounts in full. Towns also noted that Prudential receives 4 percent interest on these accounts, but pays beneficiaries much less.

Though the funds earn more, Prudential pays beneficiaries 0.5 percent interest on deposits, a rate that is "commensurate and competitive" for this type of account, said Prudential spokesman Bob DeFillippo.

Participants in the Federal Employees' Group Life Insurance program also are paid through retained-asset accounts.

In the letter, Towns requested more information about Prudential's management of the insurance programs, including details on account security, checks provided to beneficiaries, investment decisions and interest rates. He also expressed interest in whether families were fully informed of their options, the money was adequately guaranteed and the interest paid was adequate. The letter requested a response by Aug. 24.

DeFillippo on Wednesday confirmed the company had received the letter.

"We're going to cooperate fully with the inquiry and welcome the opportunity to assure everyone that the insurance program for the military is being well-managed and is in the best interest of the beneficiaries," he said.

Prudential in July announced that it was in discussions with the Veterans Affairs Department to address concerns raised about the SGLI program.