Unum spokesman Jim Sabourin said Friday the insurance company received a subpoena from New York Attorney General Andrew Cuomo related to a fraud investigation into how life insurers pay out benefits after policyholders die.
Sabourin said Chattanooga-based Unum plans to cooperate “to the fullest extent” with the investigation, but that the company strongly disagrees with Cuomo’s characterization of the accounts.
Cuomo, a candidate for governor of New York, said in an Associated Press report that 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, according to The Associated Press.
Cuomo said the insurer-controlled accounts are potentially risky because they are not backed by the federal government.
“That’s a complete mischaracterization,” Sabourin said of the charges. “The media reports we’ve seen we believe are misleading, and we disagree with the way these accounts have been portrayed.”
Sabourin said the accounts and the wording of all information sent to beneficiaries are “approved by state insurance commissioners in advance,” and he said Unum has received “no material complaints” related to the accounts.
The National Association of Insurance Commissioners, a group representing the commissioners from all 50 states, issued a statement saying that the retained asset accounts were created two decades ago in response to consumer demand and are insured by individual states to protect policyholders instead of by the Federal Deposit Insurance Corp., which guarantees bank deposits.
“With proper disclosure, consumers have generally been happy with this flexibility,” said Jane Cline, president of the insurance group. “Traditionally, consumers earn interest under these accounts, allowing their benefit to grow without the need to make impulsive decisions about how to manage the benefit.”
Cuomo also served subpoenas on Prudential Financial Inc. and MetLife Inc. as part of the probe, according to the AP.
Sabourin said that compared to the other insurers included in the probe, Unum’s exposure was smaller, limited to about 17,000 accounts.
The investigation follows a recent Bloomberg Markets magazine report on insurers’ holding death benefits to soldiers’ families in such corporate accounts, but none of Unum’s accounts include the military and veterans associations that were the subject of these reports, Sabourin said.
The Associated Press contributed to this story.