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Life Insurance Companies Fuck Over Beneficiaries

AngelHedgieAngelHedgie Registered User regular
edited August 2010 in Debate and/or Discourse
Life insurance companies "pay out" using checkbooks of "accounts" they store in their unprotected general accounts.
The package arrived at Cindy Lohman’s home in Great Mills, Maryland, just two weeks after she learned that her son, Ryan, a 24-year-old Army sergeant, had been killed by a bomb in Afghanistan. It was a thick, 9-inch-by- 12-inch envelope from Prudential Financial Inc., which handles life insurance for the Department of Veterans Affairs.

Inside was a letter from Prudential about Ryan’s $400,000 policy. And there was something else, which looked like a checkbook. The letter told Lohman that the full amount of her payout would be placed in a convenient interest-bearing account, allowing her time to decide how to use the benefit.

“You can hold the money in the account for safekeeping for as long as you like,” the letter said. In tiny print, in a disclaimer that Lohman says she didn’t notice, Prudential disclosed that what it called its Alliance Account was not guaranteed by the Federal Deposit Insurance Corp., Bloomberg Markets magazine reports in its September issue.
Lohman, a public health nurse who helps special-needs children, says she had always believed that her son’s life insurance funds were in a bank insured by the FDIC. That money -- like $28 billion in 1 million death-benefit accounts managed by insurers -- wasn’t actually sitting in a bank.

It was being held in Prudential’s general corporate account, earning investment income for the insurer. Prudential paid survivors like Lohman 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings.

“I’m shocked,” says Lohman, breaking into tears as she learns how the Alliance Account works. “It’s a betrayal. It saddens me as an American that a company would stoop so low as to make a profit on the death of a soldier. Is there anything lower than that?”

Millions of bereaved Americans have unwittingly been placed in the same position by their insurance companies. The practice of issuing what they call “checkbooks” to survivors, instead of paying them lump sums, extends well beyond the military.

Yeah, this is pretty fucking ghoulish. Not to mention potentially illegal, as they are acting as a bank without the proper authorization. And of course, the funds aren't protected by FDIC, so if the insurer goes belly up, well...you're pretty much fucked.

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  • HenroidHenroid Mexican kicked from Immigration Thread Centrism is Racism :3Registered User regular
    edited July 2010
    Note to self: when it comes time to get life insurance policy, check for FDIC status.

    Henroid on
  • DetharinDetharin Registered User regular
    edited July 2010
    Personally I would have just written myself a check for the full amount, and deposited it into my bank.

    Sounds like, fully having that option at any time, she decided to assume that it was FDIC insured, even though it said it wasn't "in tiny print she didn't notice" and as opposed to researching things she just chose to ignore it for six months. Her big grief is that the company chose to keep that money in an account open to her at any time and paid her 1% interest while they earned 4.8% interest. How dare they profit on her not paying attention, not reading the packet they sent, and choosing to ignore the money for six months!

    Nor does the article state why the checks were declined, I would be interested in that detail.

    Really the entire article is just whining that they were never informed of all the options available to them, and they could not be bothered to do the research themselves.

    Detharin on
  • kildykildy Registered User regular
    edited July 2010
    That sounds like a scheme that got someone a pretty major promotion. "Hey guys, I think I figured out a way we can still make a shitload of money off actually paying these insurance amounts!"

    I'm also interested that they are giving out checkbooks that can't write checks (from the article, stores wouldn't accept them), and how they propose people USE these devices.

    kildy on
  • electricitylikesmeelectricitylikesme Registered User regular
    edited July 2010
    Presumably the only way to use them is to transfer the full amount to another bank account as soon as you get it.

    Still, this is pretty fucking low in a "shouldn't be allowed way". People fucking died.

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  • RiemannLivesRiemannLives Registered User regular
    edited July 2010
    So, this is exactly what every retail store in the country does with Gift Cards. Only the insurance company actually paid out 1% interest instead of none.

    Yes, yes, the whole life insurance angle makes it a bit goulish bit the headline is completely misleading.

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  • AngelHedgieAngelHedgie Registered User regular
    edited July 2010
    So, this is exactly what every retail store in the country does with Gift Cards. Only the insurance company actually paid out 1% interest instead of none.

    Yes, yes, the whole life insurance angle makes it a bit goulish bit the headline is completely misleading.

    It's nothing like gift cards. And it's rather offensive that you would think so.

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  • RiemannLivesRiemannLives Registered User regular
    edited July 2010
    Now that I think of it, how are insurance companies supposed to pay out a 400 grand settlement? A suitcase full of hundos?

    Seems like setting up an account that someone can access when they are ready to move the money isn't a terrible way to go about it.

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  • RiemannLivesRiemannLives Registered User regular
    edited July 2010
    So, this is exactly what every retail store in the country does with Gift Cards. Only the insurance company actually paid out 1% interest instead of none.

    Yes, yes, the whole life insurance angle makes it a bit goulish bit the headline is completely misleading.

    It's nothing like gift cards. And it's rather offensive that you would think so.

    Bullshit. This is utter bullshit.

    This is exactly why you seriously need to take a break from these forums man. It is not fucking "offensive" you just get off on taking offense.

    I could easily do a search of your recent posts and find a dozen of these half-assed non replies (or New Topics for that matter) that rely on feigned outrage over tiny little things instead of actual discussion.

    They are not denying these people their money. They are paying a small amount of interest on the balance while the beneficiary figures out what to do with the payment (setting up their own accounts and such).

    They are doing so in a rather tactless way, yes. But your post is framed horribly.

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  • AngelHedgieAngelHedgie Registered User regular
    edited July 2010
    Now that I think of it, how are insurance companies supposed to pay out a 400 grand settlement? A suitcase full of hundos?

    Seems like setting up an account that someone can access when they are ready to move the money isn't a terrible way to go about it.

    They pay it out in a lump sum check. Or if they want to set up an account, they could set one up in a federally backed bank.

    Why is this so fucking hard to comprehend?

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  • khainkhain Registered User regular
    edited July 2010
    So, this is exactly what every retail store in the country does with Gift Cards. Only the insurance company actually paid out 1% interest instead of none.

    Yes, yes, the whole life insurance angle makes it a bit goulish bit the headline is completely misleading.

    Except that retail stores don't give a gift card and then pretend it's a bank.
    Now that I think of it, how are insurance companies supposed to pay out a 400 grand settlement? A suitcase full of hundos?

    Seems like setting up an account that someone can access when they are ready to move the money isn't a terrible way to go about it.

    Either a single check for the amount or when you fill out the claim they have a space for a bank account number that they can deposit into. I believe the first is what happened when my grandfather died and we got the federal life insurance money.

    khain on
  • RiemannLivesRiemannLives Registered User regular
    edited July 2010
    khain wrote: »
    So, this is exactly what every retail store in the country does with Gift Cards. Only the insurance company actually paid out 1% interest instead of none.

    Yes, yes, the whole life insurance angle makes it a bit goulish bit the headline is completely misleading.

    Except that retail stores don't give a gift card and then pretend it's a bank.
    Now that I think of it, how are insurance companies supposed to pay out a 400 grand settlement? A suitcase full of hundos?

    Seems like setting up an account that someone can access when they are ready to move the money isn't a terrible way to go about it.

    Either a single check for the amount or when you fill out the claim they have a space for a bank account number that they can deposit into. I believe the first is what happened when my grandfather died and we got the federal life insurance money.

    The fake-outrage bullshit is a bit thick to cut through so maybe I missed something but is this company preventing any customer who gets their settlement in this way from immediately taking every cent out just as if they had handed them a check?

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  • AngelHedgieAngelHedgie Registered User regular
    edited July 2010
    khain wrote: »
    So, this is exactly what every retail store in the country does with Gift Cards. Only the insurance company actually paid out 1% interest instead of none.

    Yes, yes, the whole life insurance angle makes it a bit goulish bit the headline is completely misleading.

    Except that retail stores don't give a gift card and then pretend it's a bank.
    Now that I think of it, how are insurance companies supposed to pay out a 400 grand settlement? A suitcase full of hundos?

    Seems like setting up an account that someone can access when they are ready to move the money isn't a terrible way to go about it.

    Either a single check for the amount or when you fill out the claim they have a space for a bank account number that they can deposit into. I believe the first is what happened when my grandfather died and we got the federal life insurance money.

    The fake-outrage bullshit is a bit thick to cut through so maybe I missed something but is this company preventing any customer who gets their settlement in this way from immediately taking every cent out just as if they had handed them a check?

    What part of "they're acting like a bank without any of the regulations or protections of a bank" do you not understand?

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  • khainkhain Registered User regular
    edited July 2010
    So, this is exactly what every retail store in the country does with Gift Cards. Only the insurance company actually paid out 1% interest instead of none.

    Yes, yes, the whole life insurance angle makes it a bit goulish bit the headline is completely misleading.

    It's nothing like gift cards. And it's rather offensive that you would think so.

    Bullshit. This is utter bullshit.

    This is exactly why you seriously need to take a break from these forums man. It is not fucking "offensive" you just get off on taking offense.

    I could easily do a search of your recent posts and find a dozen of these half-assed non replies (or New Topics for that matter) that rely on feigned outrage over tiny little things instead of actual discussion.

    They are not denying these people their money. They are paying a small amount of interest on the balance while the beneficiary figures out what to do with the payment (setting up their own accounts and such).

    They are doing so in a rather tactless way, yes. But your post is framed horribly.

    Except that is it offensive. This company is taking advantage of people who've just had a loved one die and may not be making the most rational decisions and profiting from it. If the company was acting in good faith then there is absolutely no reason to not pay the lump sum directly to the person via a check or direct deposit instead they keep the money and setup essentially a fake bank account that isn't backed by the feds and while I'm sure all of this is in the fine print it seems somewhat unrealistic to expect someone who's just gone through a traumatic event to go through everything with a fine tooth comb.

    khain on
  • RiemannLivesRiemannLives Registered User regular
    edited July 2010
    If this really is about the lack of Federal Protection for the funds, then in the case listed here nearly half of them would not have been protected in a bank account either (well over the FDIC limit).

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  • DetharinDetharin Registered User regular
    edited July 2010
    They are also not claiming to have the protections of a bank. Their packet directly says "Not FDIC insured."

    What they offer is a packet and a checkbook that says you can at any time write a check up to 400k to yourself and move the money into your own personal account, at any time. If you choose not to do this we will pay you 1% interest until you do.

    Also wouldn't the FDIC only insure this up to 100k anyway?

    Detharin on
  • FirstComradeStalinFirstComradeStalin Registered User regular
    edited July 2010
    By law, the FDIC does not cover any type of insurance payout, and either way couldn't insure deposits over $250,000 (a limit that was 100,000 before 2008). Welcome to finance

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  • ScalfinScalfin __BANNED USERS regular
    edited July 2010
    Detharin wrote: »
    Personally I would have just written myself a check for the full amount, and deposited it into my bank.

    Sounds like, fully having that option at any time, she decided to assume that it was FDIC insured, even though it said it wasn't "in tiny print she didn't notice" and as opposed to researching things she just chose to ignore it for six months. Her big grief is that the company chose to keep that money in an account open to her at any time and paid her 1% interest while they earned 4.8% interest. How dare they profit on her not paying attention, not reading the packet they sent, and choosing to ignore the money for six months!

    Nor does the article state why the checks were declined, I would be interested in that detail.

    Really the entire article is just whining that they were never informed of all the options available to them, and they could not be bothered to do the research themselves.

    It's her money. They can't collect interest on someone else's money. That's stealing.

    Also, they profited off of deceiving their client, deliberately printing the lack of FDIC coverage in a way to avoid her noticing it and claiming that her money was being kept in a "high yield account" when it obviously wasn't. Would you be defending a toy company because they printed "may contain lead" on the inside of their die-cast Thomas trains?

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  • DetharinDetharin Registered User regular
    edited July 2010
    I knew it had been raised from 100k, but a quick google search said the 250k was retirement accounts.

    Either way the "But I thought it was FDIC insured ZOMG taking advantage of the dead" loses a bit of its punch when they amount they had would not have been insured anyway. I can understand not wanting to deal with things after the loss of a loved one, and dumping a check for 400k on someones lap and wandering off may, or may not be the best option.

    Personally I just do not see the problem with them saying we will manage the money for you, write any checks you need until you are ready to deal with it and then just cash it out. No having to set up bank accounts for people without them, no worrying about what type of account to put it in, just simply we will handle it for you until you are ready.

    Complaining they are making money off of it is just goofy, considering a bank would be doing the same damn thing. Oh but wait they are not a bank how dare they hold you money with your consent.

    EDIT

    The bank collects interest off my money all the time. Moreover I can collect interest with someone elses money if they allow me to, which she did. Almost sounds like an investment, albeit a bad one. Hey leave you 400k with us until you get it sorted out, and we will pay you 1% interest. Plus it is kinda hard to scream THEFT when she could have at any point written herself a check for the full amount.

    Detharin on
  • RiemannLivesRiemannLives Registered User regular
    edited July 2010
    Also, 1% is not great compared to (for example) a CD but it is a lot more than "real" banks pay on checking accounts.

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  • FirstComradeStalinFirstComradeStalin Registered User regular
    edited July 2010
    Scalfin wrote: »
    It's her money. They can't collect interest on someone else's money. That's stealing.

    What? What about savings accounts, mutual funds, dividend-paying stocks, etc? Making money off other people's money is the foundation of the financial sector.

    FirstComradeStalin on
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  • ScalfinScalfin __BANNED USERS regular
    edited July 2010
    Scalfin wrote: »
    It's her money. They can't collect interest on someone else's money. That's stealing.

    What? What about savings accounts, mutual funds, dividend-paying stocks, etc? Making money off other people's money is the foundation of the financial sector.

    Maybe I misread, but it looked like they were skimming off the interest paid by the account, which is different from how banks borrow your money and then lend it.

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  • DetharinDetharin Registered User regular
    edited July 2010
    From what I read it sounds like the entire sum is in one of their corporate accounts, not its own separate account, and that account is paid 4.8% interest by their bank.

    Detharin on
  • khainkhain Registered User regular
    edited July 2010
    By law, the FDIC does not cover any type of insurance payout, and either way couldn't insure deposits over $250,000 (a limit that was 100,000 before 2008). Welcome to finance

    The FDIC doesn't cover life insurance, however once the policy is paid and assuming you put it in a savings account the money would be covered just like anything else.

    khain on
  • AngelHedgieAngelHedgie Registered User regular
    edited July 2010
    Detharin wrote: »
    I knew it had been raised from 100k, but a quick google search said the 250k was retirement accounts.

    Either way the "But I thought it was FDIC insured ZOMG taking advantage of the dead" loses a bit of its punch when they amount they had would not have been insured anyway. I can understand not wanting to deal with things after the loss of a loved one, and dumping a check for 400k on someones lap and wandering off may, or may not be the best option.

    Personally I just do not see the problem with them saying we will manage the money for you, write any checks you need until you are ready to deal with it and then just cash it out. No having to set up bank accounts for people without them, no worrying about what type of account to put it in, just simply we will handle it for you until you are ready.

    Complaining they are making money off of it is just goofy, considering a bank would be doing the same damn thing. Oh but wait they are not a bank how dare they hold you money with your consent.

    EDIT

    The bank collects interest off my money all the time. Moreover I can collect interest with someone elses money if they allow me to, which she did. Almost sounds like an investment, albeit a bad one. Hey leave you 400k with us until you get it sorted out, and we will pay you 1% interest. Plus it is kinda hard to scream THEFT when she could have at any point written herself a check for the full amount.

    First off, any protection > zero protection.

    Second, they want to play bank, they can register as a bank, and abide by all the requirements of being one.

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  • kedinikkedinik Captain of Industry Registered User regular
    edited July 2010
    There is nothing even slightly unethical about this situation.

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  • DetharinDetharin Registered User regular
    edited July 2010
    First off, any protection > zero protection.

    Second, they want to play bank, they can register as a bank, and abide by all the requirements of being one.

    Actually what they want to play as is an investment firm, which they are. Taking her 400k and paying her interest was an investment, albeit a bad one. Had she wished a check for the full amount she had within her hands the capability of getting just that at any time.

    Did she lose any money? We know a couple checks were refused, but are not told why. Perhaps the sales person thought they were bad checks. Who knows, the article does not say. What it does say is that while no one has lost any money, someone might in the future if all of these people suddenly decide they need their money right now and the insurance company cannot pay immediately.

    In other news something you might enjoy in your every day life might at some point contain Anthrax, stay tuned to channel 5 at 11 to learn what.

    Detharin on
  • FirstComradeStalinFirstComradeStalin Registered User regular
    edited July 2010
    First off, any protection > zero protection.

    Second, they want to play bank, they can register as a bank, and abide by all the requirements of being one.

    Except that's not what's going on here. This is dealing with a payout that cannot, by law, be insured by the FDIC until it is moved to a proper savings account outside of the holdings of the insurance firm itself.

    Remember also that the "interest" Prudential accrued is not bank interest, rather a form of capital accrued because this lady decided not to pull out her money for a while, leaving it in a stagnant account that Prudential then gets to use for their own immediate expenses. Retained-asset accounts like this are also common in brokerages and mutual funds.

    Where you get into accusations is the gross amount of disinformation involved in this process. Any financial advisor worth their salt would have had that money in a proper account immediately, but this lady didn't know. Obviously, the facts were withheld from her. The insurance company does have a responsibility to inform their clients of all options.

    But to say that a financial instrument as basic as a money-market account for latent cash (something most financial firms are always desperate to tap into) should be considered entirely as a bank invites in a whole new world of regulation. Basically you'd ask for government financial backing for all insurance firms(and probably many brokerages, too), a task that would probably cause an outright libertarian riot

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  • AngelHedgieAngelHedgie Registered User regular
    edited July 2010
    Actually, brokerages have had limited federal backing for 40 years. Most brokerages in the US are required to be SIPC members.

    It's also important to note that one of the SIPC's requirements is a prohibition against commingling of investor and brokerage assets.

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  • SavantSavant Simply Barbaric Registered User regular
    edited July 2010
    Welcome to to the world of Shadow Banking. Enjoy your stay.

    There seems to be quite a bit of hyperbole in this story though. A lot of people are saying that the insurance company is "stealing" their money, is there any case where they couldn't transfer the whole sum of the money into their own bank account?

    If I'm understanding it right, the only problem I have with this setup would be the obfuscation or be misleading to the claimants, as many of them wouldn't be financially sophisticated enough to understand what is going on. I don't have a huge problem with the insurance company floating the IOU for you for a low interest rate as long as they make it clear that is what they are doing and don't make it difficult to side step or receive the money up front if desired. It seems rather weird to me for there to be an expectation that they are setting up a bonafide bank account for you on receiving the claim, much less a money market account (which wouldn't be FDIC protected either), but the misleading "checkbook" doesn't sound kosher.

    But this stuff basically sounds like it is only a couple steps removed from money market accounts, which are the backbone of the shadow banking system. The insurance company is just getting the short term funds out of the "accounts" of the claimants who hadn't transferred their money out yet, instead of going to the money markets to pay low rates to borrow on the short term there.

    I must say the guy for the VA on the insurance policy sounded pretty clueless in the article. And the people shouting about "stealing" sound like they don't have much sense about how the financial system works. You do realize that if you put your money in a bank, even with FDIC insurance, that they don't just "sit on it", right? They go and lend the bulk of it back out to try to make even more money off of it.

    Savant on
  • SavantSavant Simply Barbaric Registered User regular
    edited July 2010
    Detharin wrote: »
    First off, any protection > zero protection.

    Second, they want to play bank, they can register as a bank, and abide by all the requirements of being one.

    Actually what they want to play as is an investment firm, which they are. Taking her 400k and paying her interest was an investment, albeit a bad one. Had she wished a check for the full amount she had within her hands the capability of getting just that at any time.

    Did she lose any money? We know a couple checks were refused, but are not told why. Perhaps the sales person thought they were bad checks. Who knows, the article does not say. What it does say is that while no one has lost any money, someone might in the future if all of these people suddenly decide they need their money right now and the insurance company cannot pay immediately.

    In other news something you might enjoy in your every day life might at some point contain Anthrax, stay tuned to channel 5 at 11 to learn what.

    True checking accounts from banks in the US are prohibited from paying interest by Regulation Q, so a lot of the accounts that allow you to write checks on them try to sidestep this by being a slightly different kind of account, which have different rules. From digging around on the net, it seems like some of these other account types have rules limiting to the number of checks that can written on them per month. It's possible some of the checks of the person in the article were denied because of those rules and they wrote too many per month, but really the details in the article are pretty thin on that subject other than saying that the checks were really "drafts", without going into much detail as to what rules those followed. Draft is a more general term, and checks could be considered to be specific types of drafts depending upon which meaning you are using.

    I'd like to see if there are some other sources with more details as to the particulars as to why this is supposed to be so problematic, because the one in the OP seemed like it could have been at least somewhat misleading. For all the shit that the financial sector and the shadow banking system has pulled lately, this sounds like it is relatively low on the scale of egregiousness.

    Edit: Also, it'd be nice to see a picture of the "check/draft" things, to see how close to or far from regular checks they are.

    Savant on
  • AngelHedgieAngelHedgie Registered User regular
    edited August 2010
    The whole issue is that the life insurance companies are making a profit off of money that isn't theirs. And the way that they are doing it through deception and burying the details in the fine print. Not to mention that there is no obligation on the insurance company to make the account holders whole if there are losses against the holding account.

    NYS AG Cuomo has begun subpoenaing insurance carriers over this matter.

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  • CauldCauld Registered User regular
    edited August 2010
    The whole issue is that the life insurance companies are making a profit off of money that isn't theirs. And the way that they are doing it through deception and burying the details in the fine print. Not to mention that there is no obligation on the insurance company to make the account holders whole if there are losses against the holding account.

    NYS AG Cuomo has begun subpoenaing insurance carriers over this matter.

    Still not outraged. All insurance companies make money through investing their float or carry or whatever its called. The main business of insurance companies is investing. I'd guess most insurance companies make far more money on investing than they do on any of the actuarial math involved in most years.

    Cauld on
  • HamHamJHamHamJ Registered User regular
    edited August 2010
    Cauld wrote: »
    The whole issue is that the life insurance companies are making a profit off of money that isn't theirs. And the way that they are doing it through deception and burying the details in the fine print. Not to mention that there is no obligation on the insurance company to make the account holders whole if there are losses against the holding account.

    NYS AG Cuomo has begun subpoenaing insurance carriers over this matter.

    Still not outraged. All insurance companies make money through investing their float or carry or whatever its called. The main business of insurance companies is investing. I'd guess most insurance companies make far more money on investing than they do on any of the actuarial math involved in most years.

    So you are just fine with companies deliberately misleading their customers?

    HamHamJ on
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  • CauldCauld Registered User regular
    edited August 2010
    HamHamJ wrote: »
    Cauld wrote: »
    The whole issue is that the life insurance companies are making a profit off of money that isn't theirs. And the way that they are doing it through deception and burying the details in the fine print. Not to mention that there is no obligation on the insurance company to make the account holders whole if there are losses against the holding account.

    NYS AG Cuomo has begun subpoenaing insurance carriers over this matter.

    Still not outraged. All insurance companies make money through investing their float or carry or whatever its called. The main business of insurance companies is investing. I'd guess most insurance companies make far more money on investing than they do on any of the actuarial math involved in most years.

    So you are just fine with companies deliberately misleading their customers?

    They're not. They informed her in the fine print. I'm not saying its an ideal situation, I'm saying its not a terrible situation. Maybe the insurance company should be fined. I'm more upset over what the term 'overdraft protection' means than any of this.

    Cauld on
  • HamHamJHamHamJ Registered User regular
    edited August 2010
    Cauld wrote: »
    HamHamJ wrote: »
    Cauld wrote: »
    The whole issue is that the life insurance companies are making a profit off of money that isn't theirs. And the way that they are doing it through deception and burying the details in the fine print. Not to mention that there is no obligation on the insurance company to make the account holders whole if there are losses against the holding account.

    NYS AG Cuomo has begun subpoenaing insurance carriers over this matter.

    Still not outraged. All insurance companies make money through investing their float or carry or whatever its called. The main business of insurance companies is investing. I'd guess most insurance companies make far more money on investing than they do on any of the actuarial math involved in most years.

    So you are just fine with companies deliberately misleading their customers?

    They're not. They informed her in the fine print. I'm not saying its an ideal situation, I'm saying its not a terrible situation. Maybe the insurance company should be fined. I'm more upset over what the term 'overdraft protection' means than any of this.

    Fine print is a deliberate attempt to mislead the person reading. That's the only reason it exists.

    HamHamJ on
    While racing light mechs, your Urbanmech comes in second place, but only because it ran out of ammo.
  • AngelHedgieAngelHedgie Registered User regular
    edited August 2010
    Cauld wrote: »
    HamHamJ wrote: »
    Cauld wrote: »
    The whole issue is that the life insurance companies are making a profit off of money that isn't theirs. And the way that they are doing it through deception and burying the details in the fine print. Not to mention that there is no obligation on the insurance company to make the account holders whole if there are losses against the holding account.

    NYS AG Cuomo has begun subpoenaing insurance carriers over this matter.

    Still not outraged. All insurance companies make money through investing their float or carry or whatever its called. The main business of insurance companies is investing. I'd guess most insurance companies make far more money on investing than they do on any of the actuarial math involved in most years.

    So you are just fine with companies deliberately misleading their customers?

    They're not. They informed her in the fine print. I'm not saying its an ideal situation, I'm saying its not a terrible situation. Maybe the insurance company should be fined. I'm more upset over what the term 'overdraft protection' means than any of this.
    So,as long as they put it in the fine print, it's okay?

    And also note that they made sure not to inform her of the changes to the Roth laws that would have benefitted her...but not Prudential.

    Edit: There's also a vast difference between insurance companies investing using incoming fees, and them investing using paid out benefits.

    AngelHedgie on
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  • CidonaBoyCidonaBoy Registered User regular
    edited August 2010
    There's also a vast difference between insurance companies investing using incoming fees, and them investing using paid out benefits.

    What is the difference?

    CidonaBoy on
  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited August 2010
    Yeah, I'm not really seeing the cause for outrage here. The recipient can immediately cash the entire payout and invest it themselves, or not cash the entire payout - which of course entails leaving the money with the insurance company.

    I've got $100 in the bank. I write you a check for all $100 for some misc purchase; you take it and sit on it, deciding to cash it next week when you trot by the branch. In the meanwhile the bank pays me one cent in interest. What ghoulish, evil deed have I done?

    ronya on
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  • HamHamJHamHamJ Registered User regular
    edited August 2010
    ronya wrote: »
    Yeah, I'm not really seeing the cause for outrage here. The recipient can immediately cash the entire payout and invest it themselves, or not cash the entire payout - which of course entails leaving the money with the insurance company.

    One of these is obviously better for you, but the company is trying to trick you into doing the other.

    HamHamJ on
    While racing light mechs, your Urbanmech comes in second place, but only because it ran out of ammo.
  • ronyaronya Arrrrrf. the ivory tower's basementRegistered User regular
    edited August 2010
    HamHamJ wrote: »
    ronya wrote: »
    Yeah, I'm not really seeing the cause for outrage here. The recipient can immediately cash the entire payout and invest it themselves, or not cash the entire payout - which of course entails leaving the money with the insurance company.

    One of these is obviously better for you, but the company is trying to trick you into doing the other.

    Oddly enough, at current rates earning 1% really is probably better than dropping it in a personal account, which would earn 0.1% or thereabouts. You need a really gigantic fund to earn the article claims the companies earn.

    But that's not really relevant, I suppose. I'm not really seeing the part where the company lies to convince recipients that they can't withdraw the money instantly.

    ronya on
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