Heavy Fallout From Times Articles

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Members of Congress and the life insurance industry were forced to scramble for cover last week after the practice of selling private insurance to members of the military, especially those sales involving young and uninformed recruits, came under fire in two articles in the New York Times.

Published on July 19 and 20, the articles mentioned several insurers, including some that have been disciplined by the military for the use of misleading and improper sales practice to persuade soldiers to purchase products that provide little use or value to them.

The Times articles prompted a swift response from lawmakers, as members of both the House and Senate requested hearings on the issue.

Rep. Rahm Emmanuel, D-Ill., a member of the House Financial Services Committee, asked chairman Michael Oxley, R-Ohio, to hold hearings on the issue “as soon as possible,” according to the paper, and the request is currently under review. In the Senate, Sen. Hillary Clinton, D-N.Y., who sits on the Senate Armed Services Committee, sent a letter to Defense Secretary Donald Rumsfeld asking for a Pentagon inquiry, and also to the committee leadership to request hearings as soon as Congress returns from the summer recess.

Clintons office also told the Times that she would try to remove language from the Defense Appropriations legislation the Senate was expected to act on last week that would bar the Pentagon from changing the regulations for on-base insurance sales until the General Accounting Office had completed an investigation into insurance industry complaints that some officers have interfered with insurance sales, either discouraging soldiers from making purchases or slowing the paperwork to have premiums deducted directly from their pay.

The American-Amicable Group, two of whose subsidiaries were mentioned in the article, posted a response to the articles, and specifically the first article, on its Web site. “The management of the American-Amicable group strongly disagrees with the content, misrepresentations and journalistic approach contained in the article,” the company said.

Two other companies mentioned in the articles, Florida-based American Fidelity Life Insurance Company and California-based Trans World Assurance Company, were unable to comment.

In addition to several companies, the articles also took aim at members of Congress who have been lobbying the Pentagon to maintain the current system of rules for life insurance sales at military bases and the life insurance trade associations that have donated to the reelection campaigns of those lawmakers.

Specifically, the articles mentioned Rep. Chet Edwards, R-Texas, who held a meeting for executives of American Amicable, and two senior Army officials as the company was facing a possible suspension from being allowed to sell its products at any U.S. military installation worldwide. Also mentioned were Reps. Ellen Tauscher, D-Calif., Jim Ryun, R-Kan., and Jim Cooper, D-Tenn. All three are members of the House Armed Forces Committee and co-signers of five letters to the Pentagon expressing opposition to any changes in the rules for insurance sales at military bases.

Edwards and Tauscher did not respond to messages left with their offices, but Nick Reid, a spokesman for Ryun, said the congressman “believes that GIs should have the same opportunities as any other American citizen to purchase private life insurance if they so choose.” Noting that the same comments had been given to the Times, which declined to include them, Reid said Ryun saw the issue as one of “equal access” and felt the options for military personnel shouldnt be any more limited than those for other citizens.

However, the article noted that the three committee members were also the recipients of donations from life insurance industry groups, including the American Council of Life Insurers and the National Association of Insurance and Financial Advisors.

Jack Dolan, a spokesman for the ACLI, noted that the Times did an “excellent job” reporting the story but defended the industrys stance on the sales practices.

“When illegal activity has taken place, we support and encourage the meting out of swift and appropriate justice,” he said, adding that while the ACLI believes troops “should have access to supplemental life insurance,” soldiers should also be “educated and informed” about the issues involved before they can make their purchases. Dolan also said soldiers “and indeed all consumers” should be allowed to make their insurance decisions free from “inappropriate persuasion.”

The ACLI and NAIFA also jointly responded in a “letter to the editor” to the Times, noting that the improper actions described in the article were those of the few rather than the many.

“The overwhelming majority of insurance companies and their representatives serve their customers with integrity, fairness and professionalism,” the groups wrote. “But insurance, like any large industry, can have its share of bad actors. Our industry supports decisive and rapid action by state regulators to clamp down on any unscrupulous activity.”


Reproduced from National Underwriter Edition, July 22, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.