A potential class action lawsuit involving 60,000 military life insurance beneficiaries against Prudential Insurance Co. of America has been expanded to include claims of fraud, in addition to the previous claims of improperly collecting interest on unpaid veterans’ benefits. The case is Lucey v. Prudential Insurance Co. Of America, 10-30163, U.S. District Court, District of Massachusetts (Springfield).
The accusation is that, instead of paying beneficiaries a lump sum amount (as required by U.S. law and the policies’ language), Prudential encourages veterans’ beneficiaries to let their money remain in the company’s general accounts, thereby generating a small amount interest. According to the lawsuit, Prudential fraudulently informs beneficiaries that the company’s "Alliance Accounts" serve as lump sum payments. These "Alliance Accounts" pay .5% to 1.5% interest. Prudential invests the money at a higher rate and pockets the difference, paying its beneficiaries when it writes drafts on the account.
Prudential has been accused of profiting in the neighborhood of half a billion dollars from this scheme.
If true, it is this writer’s opinion that this is an awful and reprehensible practice by certain members of the insurance industry. Taking advantage of deceased soldiers’, sailors’, and airmen’s spouses and dependents is inexcusable. This may be insurance profiteering at its best and most creative – but I doubt it.