Aug 4, 2010
Senator John McCain said Congress will examine life insurance companies that profit from accounts that hold death benefits from policies of deceased U.S. soldiers and veterans.
“It’s disgraceful on the part of insurance companies,” the Arizona Republican and Vietnam War veteran said in an interview on Bloomberg Television. “We’ll obviously have to be looking into it.”
Bloomberg Markets magazine reported on July 28 that life insurance companies keep money in their own accounts, instead of paying a lump sum directly to survivors when a policy holder dies. The insurers pay uncompetitive interest rates and offer misleading guarantees about the safety of accounts that aren’t federally insured.
McCain called the practice “inexplicable.”
On the issue of extending the tax cuts enacted under former President George W. Bush, McCain said a compromise that would keep all the cuts for a year or two “may be something worth looking at.”
McCain, who voted against the cuts in 2001 and 2003, favors extending them, as do fellow Republicans in Congress. The cuts are set to expire at the end of the year.
Bush-era Tax Cuts
While Democrats and Republicans alike want to keep the 2001 and 2003 tax reductions for families earning up to $250,000, President Barack Obama and congressional Democrats want to end the break for those who earn more. Republicans, contending a recovery from recession is no time to raise taxes, insist on continuing the Bush-era cuts for high-income people as well.
“No matter who you increase taxes on it’s going to hurt the economy,” McCain said.
McCain’s comments on insurers’ handling of soldiers’ death benefits follow other lawmakers calling for action. Representative Debbie Halvorson, an Illinois Democrat, wants Congress to set new rules for life insurance companies that profit from the accounts.
She introduced legislation July 30 that would require companies such as Prudential Financial Inc. to tell beneficiaries how their money will be invested and how much the insurer stands to make from holding the funds.
Her legislation follows the start of a probe by the U.S. Department of Veterans Affairs into what has become a common industry practice. Officials at the Pentagon and the White House have said they’ll support that investigation.
In the Senate, New York Democrat Charles Schumer said he is drafting legislation that would require the VA and Office of Personnel Management to mandate that any life insurance company providing policies to military families must offer lump sum payments of death benefits.
To contact the reporters on this story: Catherine Dodge in Washington at cdodge1@bloomberg.net; Peter Cook in Washington at pcook6@bloomberg.net.
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