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Feds Join Military Sales Probe

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In an apparent expansion of the investigation into the suitability of insurance sales to military personnel at bases throughout the country, the U.S. Attorney for the Eastern District of Pennsylvania has subpoenaed records dealing with such sales of American Amicable Life Insurance Company of Waco, Texas.

A staff official of the U.S. Attorneys office for the Eastern District of Pennsylvania said he could not comment as a matter of policy. But an official of American Amicable Life said the company “is working with the Department of Justice regarding a civil inquiry. Our desire is to respond responsibly to the U.S. Attorneys questions while continuing to provide solid, stable life insurance to our customers.”

In another development, the Georgia insurance department is moving to revoke the license of an insurance agency allegedly involved in inappropriate insurance sales to military personnel at Fort Stewart, Ga.

Legislation tightening up the oversight of insurance sales to military personnel passed the House overwhelmingly earlier this month, 396-2, but final action on such legislation is not likely until early next year. The legislation clarifies that insurance sales on military bases is subject to oversight by state insurance regulators, and the bill also imposes disclosure and other requirements on agents and companies selling these products.

Georgia Commissioner John Oxendine disclosed that his office has scheduled a show-cause hearing in Hinesville, Ga., where Fort Stewart is located, for Associates Financial Group, a full service agency based there, for the purposes of revoking the agencys license. Also cited was its general agent, Jacques Frym. Oxendine said he was made aware of the federal probe Oct. 18, but was given no details and has not been contacted by federal officials.

Oxendine also said the National Association of Insurance Commissioners has created an informal working group to deal with the growing criticism of unsuitable sales on military bases. Texas is an equal partner in the probe, Oxendine said, with Florida and Illinois monitoring it closely. Other states expressing interest are Washington, Utah, Nevada, Kansas and New York, he said.

Frym would not confirm the hearing, but Joseph Cragan, a lawyer at Morris Manning Martin in Atlanta, did. “The commissioner issued a proposed order against Associates Financial Corp. which cannot be enforced until there is a hearing,” Cragan said.

According to Cragan, Associates Financial represents American Amicable, among 12 to 15 insurance companies. American Amicable is among 3 companies involved in the investigation since it began in July.

The insurer made a decision in September to refund premiums paid for the controversial policies to soldiers at Fort Benning, Ga. The investigation at Fort Benning continues, Oxendine said, with the Judge Advocate Generals Office at Fort Benning cooperating in every way with the investigation.

The commissioner said he met Oct. 15 with lawyers at the base. “We agreed on an extremely high level of cooperation with the base personnel,” Oxendine said. “They are rapidly arranging for sworn statements by my staff of various soldiers at Fort Benning,” he said. Arrangements for taking sworn statements from personnel at Fort Stewart already have been made, the commissioner said. “Fort Benning lawyers also have turned over extensive documents to us, and we are sharing documents back and forth on this issue,” he said.

Oxendine said the Department of Defense has promised that an overall policy regarding sales of insurance on bases is being developed, but until then each base involved in the probe is free to develop its own policy on how it will oversee sales on military bases in the interim.

Oxendine said he is continuing his market conduct investigation into American Amicable; an affiliate, Pioneer American Life, also of Waco; Trans World Assurance of San Mateo, Calif., an affiliate, American Fidelity Life Insurance Co. of Pensacola, Fla.; and the Madison National Life Insurance Company of Middleton, Wis.

Already, American Amicable has fired 3 agents, placed another on probation, rescinded a promotion to regional director of another agent, and barred an agency that has been selling its products from selling insurance on-site at military bases, Oxendine said.

Reproduced from National Underwriter Edition, October 21, 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.