Congress will act swiftly to begin discussions on alleged unscrupulous sales of life insurance products on military bases, with legislation addressing the issue already filed and a hearing scheduled for this week.
Additionally, some state regulators have taken notice of the recent increased media attention to military sales. Georgia Insurance Commissioner John Oxendine told the New York Times last week that his department has begun an investigation and has made contact with legal officers at every military installation in the state. Additionally, Oxendine said Georgia regulators will conduct an on-site examination at the home office of American Amicable Life Insurance Company, which has been mentioned in previous Times articles as one of the companies involved in military sales. Oxendine said he would also raise the issue of a possible multi-state action at the National Association of Insurance Commissioners fall meeting in Anchorage.
In Congress, a House Financial Services subcommittee has scheduled a hearing entitled “G.I. Finances: Protecting Those Who Protect Us.” Rep. Mike Oxley, R-Ohio, had promised a hearing on the issue during a television appearance over the summer recess, and Rep. Max Burns, R-Ga., had asked for one when he announced his intention to introduce a bill on the issue, the Military Personnel Financial Services Protection Act.
“I am outraged that our men and women in uniform are being unfairly targeted in the sale of dubious financial products,” Burns wrote in a letter asking his fellow lawmakers for their support.
Under Burns bill, state regulators would be given explicit authority over insurance activities taking place on military base grounds and federal lands in their states. The bill also would require insurance agents selling products on military bases to disclose that subsidized coverage might be available from the federal government, and it would ban outright the sale of mutual fund contractual plans.
Contractual plans impose front-end sales loads that can amount to as much as 50% of first-year contributions. Such products “virtually disappeared from the civilian market in the early 1980s after decades of sales abuses and regulatory crackdowns,” Burns wrote. “These plans are not recommended by any reputable independent financial advisor and are highly inappropriate for military personnel with short-term risk horizons.”
The military sales issue also has surfaced in the presidential election. A plan released by the Kerry/Edwards campaign to help middle class families save said that, if elected, Kerry would direct the Pentagon to establish new rules for sales of insurance on military bases that would require agents to fully disclose that they are not authorized or endorsed by the government. Additionally, the rules would require agents to explain in simple terms the nature of the product, such as whether it is insurance and not a mutual fund, and its actual value.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 3, 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.