A recent posting on Robert Berg’s Class Action Blog suggests that life insurance companies are “secretly profiting” by providing beneficiaries with a checkbook from which they can draw on the proceeds over time, instead of paying a lump sum. Of course, unless there is some unusual provision in the life insurance policy to the contrary, the beneficiary could write a check for the full policy proceeds immediately and do whatever he or she pleases with them.
A similar issue is also reportedly involved in a pending class action against Prudential Insurance Company in Massachusetts federal court. The plaintiffs in that case are families of veterans who died while serving in the armed forces. The article reports that the case survived a motion to dismiss.
Perhaps this issue has more to it than I am seeing from these reports, but I have difficulty seeing how this is even a potentially viable claim for fraud. It appears that the policyholders have full access to all of the proceeds and are informed of the rate of return being paid by the insurer. If they want to take their money elsewhere they are free to do so at any time. Why can’t life insurers compete with banks, etc. in holding proceeds that policyholders do not have an immediate need for? Perhaps this issue has legs, but I am not seeing them.