AG Wary Of ‘Checkbook’ Insurance

HARTFORD — Attorney General Richard Blumenthal has urged regulatory action by the state Department of Insurance (DOI) to stop misleading and deceptive practices by life insurance providers that may have deprived families — including military families — of potential benefit income.

Mr Blumenthal, who is also a Democratic candidate for the US Senate, cited recent reports that insurers are failing to make prompt full payment to beneficiaries on life insurance policies upon the death of the insured.

Instead, the insurers provide a “checkbook” allowing the beneficiary to write checks up to the amount of the death benefit.

These so-called “checkbooks” are not bank checks, and the funds are not being held in a federally insured depository, as consumers would expect of a “checkbook.” As a result, life insurance beneficiaries are paid far less in interest on their funds than the insurance company is making by holding those funds.

Mr Blumenthal said consumers are likely receiving far lower interest rates than they could receive in federally insured bank accounts, raising serious questions about whether life insurers are providing adequate disclosures to consumers about benefits.

“This practice appears to take advantage of consumers at a time — after the death of a loved one — when they are most vulnerable,” Mr Blumenthal said. “Even worse, it appears that this practice is often directed at the family members who are beneficiaries of life insurance policies insuring those killed in the course of military service to our country. At such a time, it is unlikely that they will read and understand fine print disclosures about their rights.

“Very simply, when death benefits are due, they should be paid, fully and promptly,” the AG said.