One Houston law firm has begun a probe across the nation into banks they allegedly insure the lives of their employees without their knowledge or consent.
Bank of America, JP Morgan Chase, and other big banks have bought bank-owned life insurance policies, according to a statement from the Clearman Law Firm. Wells Fargo, Citi Group and Wachovia were also mentioned. With bank-owned life insurance, a bank names itself as the beneficiary of life insurance policies covering its employees, said the firm.
Typically, a bank will buy a policy on a smaller group of officers and directors, using the cash value and proceeds to recoup benefit expenses.
Almost half of all banks in the US own bank-owned life insurance policies, which amounts to around $120 billion in value. Many bank employees “have been laid off, and yet the bank still stand to benefit financially when those employees die,” said attorney Scott Clearman.
Wal-Mart got in trouble for this a few years ago. In fact, it’s a common corporate practice. While it seems distasteful, the truth is it’s just a form of investment. The employee on whom the policy is taken out is not exploited or endangered.
It would still be nice if employees could opt out, however.