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Veterans Affairs makes changes to clarify insurance program

From Jennifer Rizzo, CNN
STORY HIGHLIGHTS
  • NEW: The Veterans Affairs Department says the changes will be implemented immediately
  • The VA and Prudential will make changes in policy literature
  • The changes will ensure beneficiaries better understand the account options and details
  • Prudential says its accounts follow industry-wide practices

Washington (CNN) -- The Department of Veterans Affairs said Tuesday it will continue to use a controversial life insurance program, but will make sure beneficiaries better understand the accounts.

After a review of the program, the department and Prudential -- which administers the accounts -- will make changes to literature and customer service information so the options and details are easier to understand, a VA statement said. Those changes are effective immediately, the

VA added.

Prudential's Alliance Account insurance program came under fire earlier this year after a published report revealed that the cash payments from insurance policies for dead soldiers were being held in low-interest bearing accounts that were not always fully insured, as most bank accounts are.

Joe Davis, a spokesman for the group Veterans of Foreign Wars, is concerned that beneficiaries mistakenly believe all their funds are secured by the Federal Deposit Insurance Corporation.

"The literature has to be clearer and clarity is always a good thing when going through such a dramatic life moment," he said.

Critics said that Prudential was profiting by keeping the interest rates lower than rates for more traditional savings accounts.

Prudential maintains that this is an industry-wide practice.

"The most important thing we can do is ensure that beneficiaries have options that are clear, competitive, and come at no personal cost during a time of emotional stress," said Veterans Affairs Chief of Staff John R. Gingrich in a statement. "Providing clear and concise options for the beneficiary is a top priority."

Among the changes, the VA will increase the clarity of payment options by updating documents that ask beneficiaries to choose from a selection that includes receiving a lump-sum check or having the money deposited into a Prudential Alliance account. Beneficiaries are also able to choose to receive payments in 36 monthly installments.

In addition, website information, handbooks, and frequently-asked-question sections pertaining to the life insurance program will be modified to explain Alliance Account details, the VA said.

Peter Gaytan, executive director of the American Legion in Washington, said the group is "glad to see that VA is finally providing some much-needed clarity to the compensation provisions for SGLI and VGLI beneficiaries.

"We want those who lose their loved ones to be aware, from the very beginning, that they have the option to receive lump-sum payments from life insurance policies -- whether they be from Prudential or any other provider. VA's promised clarification of SGLI and VGLI options in its revised documents will do exactly that," Gaytan said.

Prudential worked with the department to address the concerns and will implement the changes, company spokesman Bob DeFillippo said.

"We are very supportive of the VA changes," DeFillippo said. "We are gratified that the Alliance Account is going to continue to be available to beneficiaries."

Prudential has said that initial reports regarding the account were distorted.

"If a beneficiary wants a lump-sum payment, all they ever had to do is write a check to themselves for the entire amount at the time they receive it," DeFillippo explained.

The VA is also requiring Prudential to reach out to beneficiaries whose accounts remain open after six months to confirm they understand the terms of the account.

Sen. Daniel Akaka, chair of the Senate Veterans' Affairs Committee, said he thinks that more transparency is needed "to ensure that surviving spouses and children can make informed financial decisions.

"We must protect these critical government benefits and ensure that surviving spouses and their children understand their options. I am writing to (Veterans Affairs Secretary Eric Shinseki) to get more information on the decision-making process behind these insurance benefits payments," said Akaka, D-Hawaii, who's also a veteran of World War II.

 
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