A lawsuit accusing Prudential Insurance Co. of America of improperly collecting interest on unpaid veterans’ life-insurance benefits was expanded to include claims of fraud.

The plaintiffs, seeking to have the case certified as a class action, or group, lawsuit, on behalf of 60,000 beneficiaries of military life insurance policies, filed an amended complaint yesterday adding the fraud claims and additional claimants. The case was originally filed July 29 in federal court in Springfield, Massachusetts.

The suit claims Prudential fails to pay beneficiaries in a lump sum as required by U.S. law and the language of the policies, instead encouraging them to leave the money in accounts with the company, which pays them a small amount of interest.

Prudential is believed to have made “half a billion dollars or more,” the amended complaint said.

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Insurance companies contracting with the Department of Veterans Affairs (VA) to provide life insurance to soldiers have been profiting off monies intended for survivors of those killed in Afghanistan or Iraq.

Instead of paying lump sums to beneficiaries of troops killed, companies like Prudential and MetLife provide them with “checkbooks,” giving parents and relatives the impression that the life insurance money has been put into a bank account for them to draw on whenever they like. In reality, the money sits in general corporate accounts earning Prudential 4.8%, while the beneficiaries receive maybe 1%.

In reality, survivors have the right to take all the money and then put it in money-market accounts that earn a higher rate of interest.

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The Financial Reform Bill, also known as the Dodd-Frank Act, has cleared congress and will go to the President for final approval this week.

The Act provides for 250 new regulations to be implemented by eleven different federal agencies. The rule-making process is designed to correct the most egregious practices in the financial sector in order to avoid the economic crisis that precipitated the collapse of many banks and financial products companies and was largely responsible for the current world recession.

Harry Reid, Senate Majority Leader, said, “Getting there hasn’t been easy. Wall Street doesn’t like this bill. Why would they want us to change the system they rigged? Their cronies in Washington don’t like it either.”

The Federal Insurance Office (FIO) will be established for oversight of the development of insurance-related laws. Its role will be advisory as opposed to being regulatory. Education is the central role of the FIO. Explaining how insurance is woven into the fabric of our nation’s financial system will be the primary focus.

The pending law will include a surplus lines insurance reform section that will streamline various regulations and make tax payment mechanisms more efficient.

The “proof in the pudding” will be just how effective, in the long run, the regulatory changes will be to guaranteeing that past harmful practices in the financial industry are never repeated.

Found here.

The U.S. House has approved an overhaul of the federal flood insurance program.

Among other things, the measure would delay mandatory insurance by five years in areas newly designated as flood hazard zones.

If the bill becomes law, it would provide relief to many home and business owners in the Metro East.

Levees there need major repairs; while a fix is underway, many residents fear the costs of a hazard zone designation from if the Federal Emergency Management Agency.

The legislation now goes to the Senate, where its fate is uncertain.

Found here.

Yet another state has enacted laws against habits that could lead to higher auto insurance rates.

With the stroke of Governor Jack Markell’s pen, Delaware became the 30th state in the country that has added restrictions against texting while driving. Texting while behind the wheel is also a primary offense, meaning law enforcement officers can pull someone over for it.

“Electronic devices are potentially lethal in the hands of any driver,” U.S. Transportation Secretary Ray LaHood said. “Thanks to Governor Markell, everyone who rides on Delaware’s roads will be safer due to enactment of this strong measure.”

According to the Department of Transportation, more than 200 pieces of legislation are being considered that involve distracted driving. Furthermore, the federal government has taken its own steps.

Those included a summit held by the Transportation Department last year to examine the problem of distracted driving, including its effect on younger people. The meetings led to President Barack Obama signing an executive order banning federal employees from taking part in the practice while behind the wheel of a government car.

Found here.

As oil keeps flowing from an uncapped well alongside the sunken hulk of the Deepwater Horizon, the insurance industry is becoming more concerned about the cost of the disaster.

At first, the industry focused on the rig itself. Transocean Ltd.  , its owner, has $560 million of insurance covering total loss and wreck removal. Several insurance industry executives have estimated this could be an $800 million to $900 million event.

But a much bigger hit could come from liability claims stemming from the oil spill. That’s especially true if lots of oil pollutes the shorelines of Florida and other states around the Gulf of Mexico.

“The flood of lawyers to Florida is probably equal to the flood of oil coming to the coast,” Mark Byrne, chairman of Flagstone Reinsurance Holdings , said during a conference call with analysts on Tuesday. “There are other possible losses out there, damage to shore line, damage to properties, business interruption caused by the slick.”

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The Oklahoma Legislature voted overwhelmingly Tuesday to override vetoes of two highly restrictive abortion measures, one making it a law that women undergo an ultrasound and listen to a detailed description of the fetus before having an abortion.

Though other states have passed similar measures forcing women to have ultrasounds, Oklahoma’s law goes further, requiring a doctor or technician to set up the monitor where the woman can see it and describe the heart, limbs and organs of the fetus. No exceptions are made for rape and incest victims.

The second measure passed into law Tuesday protects doctors from malpractice suits if they decide not to inform the parents of a unborn baby that the fetus has birth defects. The intent of the bill is to prevent parents from later suing doctors who withhold information to try to influence them against having an abortion.

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Property insurance in Florida, as Rep. Bill Proctor of St. Augustine says, is a house of cards. One major storm would blow it all away and with it the state’s economic future.

Legislation sponsored by Proctor would begin to establish a market-based foundation for the state’s property insurance.

Lawmakers and Gov. Charlie Crist should recognize its necessity.

The state’s Citizens Property Insurance Corp. and Hurricane Catastrophe Fund are gravely underfunded. Citizens has roughly $13 billion, though it’s estimated a major storm would cause at least $21 billion in residential damage to Citizens policyholders.

The Florida Hurricane Catastrophe Fund, which provides reimbursements to insurers for a portion of their catastrophic hurricane losses, has only about $6 billion on hand. A major hurricane would require an estimated $23 billion.

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Gov. Mike Rounds has succeeded in blocking a bill that sought to change South Dakota’s insurance law to give some injured people a better chance of receiving full compensation for their losses.

The Senate fell three votes short of the two-thirds majority of 24 needed to override the governor’s veto. The vote to override failed 21-13.

The bill dealt with situations in which people are injured as a result of someone else’s fault. An injured person’s own insurance company typically pays the medical bills until compensation is received from the person at fault. South Dakota law now allows the insurance company to be first in line to get money from that compensation to recover its expenses on those medical bills.

The measure would have required that injured people be fully compensated for all other losses, such as loss of income or property damage, before their own insurance companies could receive any of the money paid by the person at fault.

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A Missouri Senate panel responded quickly Monday to the passage of a federal health care overhaul by voting to expand a state ban on abortion coverage for basic health insurance policies.

Federal legislation passed Sunday night would let people buy health insurance through new state-based purchasing pools called exchanges. The federal bill says states can choose to exclude abortion coverage in plans offered through the new insurance exchanges.

Missouri is moving quickly to do so.

The state Senate Small Business, Insurance and Industry Committee voted 5-1 Monday for legislation would ban any health insurance exchange from offering policies covering elective abortions — even if women are willing to pay an extra premium for the coverage. The legislation now goes to the Missouri Senate.

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