Prudential Responds to SGLI Controversy

Prudential letter responds to SGLI controversy

{Click on letter to enlarge, better read at site page}

Sep 24, 2010 - Prudential Financial has sent a letter to a number of military and veteran advocacy groups saying it “deeply resents” allegations that the company has devised “some elaborate scheme to make money from the deaths of fallen service members.”

“In fact, we have lost money under the SGLI contract over the last 10 years,” states the letter.

Prudential, which administers the Servicemembers’ Group Life Insurance program for the Veterans Affairs Department, has for more than a decade used “retained asset accounts” as an option for beneficiaries to receive their funds after a death.

Prudential officials note that kind of account, which the company calls an “Alliance Account,” is a widely accepted form of lump-sum distribution that is commonly used in the insurance industry. Funds are kept in a company in-house general account through which a company makes a wide range of short- and long-term investments, earning widely differing rates of return.

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Prudential officials state in their “Open Letter to the Military Community” that misinformation “threatens to eliminate an important benefit for the life insurance beneficiaries of our fallen service members.”

The reports “are causing unnecessary anxiety among the beneficiaries of our men and women in the armed forces, not to mention the millions of consumers who have used Alliance Accounts and been satisfied with them for decades,” officials said.

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Officials announced the week before that they would take steps to ensure that options for insurance payouts are made clearer for beneficiaries, and will no longer automatically placing SGLI payouts in retained asset accounts. VA will use new documents that ask a beneficiary to choose one payment option: a lump-sum check, deposit in a Prudential Alliance Account, or payment in 36 monthly installments. All of these options have been available before.

If a beneficiary chooses to have the proceeds deposited into an Alliance Account, information will be sent with the checkbook stating the current interest rate, and the fact that the rate may vary over time, said VA spokeswoman Katie Roberts.

Prudential said some media reports that have noted Alliance Accounts are not federally insured have failed to mention that the accounts are backed by Prudential, and by state guaranty funds. {read rest}

Call me skeptical while living in the new capitalism of benefiting the corporate executive mindset and investor time Only! That last sentence speaks, accounts not covered by FDIC but are there as long as the company stays solvent or doesn't have Any Problems at all and the State, in these times?, is totally solvent! Also no mention on what other purposes, benefiting the company, are those funds in use for while held by them!