Six Additional Life Insurers Receive Subpoenas from Cuomo in Probe

Published: Fri 30 Jul 2010

Perry Begay

New York Life, Unum Group, and Genworth Financial were among the life insurance companies recently subpoenaed by New York Attorney General Andrew Cuomo in his investigation of how life insurers distribute death benefits to beneficiaries of their policies.

Guardian Life Insurance, MONY Life Insurance, and Northwestern Mutual Life also were served with subpoenas, according to Richard Bamberger, a spokesperson for Cuomo.

On Thursday, the attorney general announced subpoenas for the two biggest U.S. life insurers-MetLife and Prudential.

Cuomo is looking into the practice of holding the funds of a beneficiary until he/she requests the money, and retaining it in accounts that produce yields similar to money-market accounts. The practice is fairly common, but not standard, in the life insurance business. By retaining the funds, life insurers can earn a better return on the money than they pay the beneficiaries in interest.

The CEO of MetLife, Robert Henrikson, said during a Friday conference call that his company had not yet received a subpoena. Spokespeople for Unum, Guardian, and Genworth said likewise.

The retained-asset accounts have existed for at least 20 years, and state insurance regulators who oversee the practice claim they can offer a useful alternative to consumers who are unready to make financial decisions immediately.

"RAAs have generated few if any complaints," explained Jane Cline, the president of the National Association of Insurance Commissioners, in a statement made Thursday. "The accounts were initially created at the request of consumers to provide options for receiving benefits from a life insurance policy."

Nevertheless, said Cline, her organization is reevaluating the rules that define what life insurers have to disclose about the retained asset accounts.

On Thursday, Cuomo said the practice has created "millions of secret profits" for life insurance companies. Cuomo began his probe after a magazine published a story about life insurers hoarding the death benefits of the families of fallen military men and women.