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NY AG announces probe of life insurance industry

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State Attorney General Andrew Cuomo said Thursday that he had opened a fraud investigation into how life insurers pay out benefits after policyholders die.

He said his office served subpoenas on Prudential Financial, Inc. and MetLife, Inc. as part of the probe, seeking information on life insurance policies. Cuomo, a candidate for governor, said his office is investigating the practice of some insurers that retain life insurance beneficiaries’ funds in company-controlled accounts, instead of paying out lump sums. He said the companies are apparently earning high rates of interest from the accounts, while paying out substantially lower yields to beneficiaries.

Cuomo also said the insurer-controlled accounts are potentially risky because they are not backed by the federal government. The investigation follows a recent Bloomberg Markets magazine report insurers holding death benefits to soldiers’ families in such corporate accounts. MetLife said it had not received Cuomo’s subpoena and could not comment on the investigation. However, the company issued a statement defending its so-called “retained asset accounts.”

The company said such accounts were “an attractive settlement option” and are “fully guaranteed” by Met Life’s financial strength. Prudential Financial spokesman Bob DeFillippo said the company would cooperate fully with the attorney general’s investigation. The company also said it would work with the Department of Veteran Affairs to resolve any questions about its policies for military personnel.