The House passed legislation last week by a vote of 405-2 that imposes tighter standards on sales of insurance products to military personnel on bases.
However, action in the Senate will not occur until the fall, when a report on sales practices on military bases sought by the leadership of the Banking Committee is due to be completed, according to a staff official representing Sen. Richard Shelby, R-Ala., chairman of the committee.
After the House vote, Rep. Mike Oxley, R-Ohio, chairman of the House Financial Services Committee, said, “The legislation will address this critical issue by helping to put an end to the long-standing problem of unscrupulous securities and life insurance firms which have been taking financial advantage of the men and women in our armed forces.
“There is no reason that any company selling these questionable plans can’t replace them with more reputable products as sold in the civilian market,” Oxley added.
Frank Keating, president and CEO of the American Council of Life Insurers, said, “House approval of this bill signals strong bipartisan support for curtailing abusive life insurance and mutual fund sales practices at military installations.”
David F. Woods, CEO of the National Association of Insurance and Financial Advisors, said, “NAIFA supports H.R. 458 and is encouraged that the bill mandates coordination with the state regulators.”
The bill “helps to free military personnel from predatory sales practices that NAIFA condemns while assuring that those who are serving our nation will have access to insurance products to protect themselves and their families,” said Woods.
The bill clarifies that state insurance regulators have jurisdiction over insurance sales on military bases within their states. It also bans sales of contractual mutual funds and requires that military personnel be told about government life insurance programs before buying private life insurance.
This bill also would allow military post commanders to ban unscrupulous agents from their bases and posts and forward a list of these banned agents to the Department of Defense. At the same time, it gives the DOD authority to send these lists to state insurance departments for further investigation.
The DOD is also acting independently to tighten up its oversight of sales of financial products to personnel on military bases.
The proposed regulations require closer cooperation between military authorities and civilian regulators, including insurance commissioners. They also require the DOD to create and maintain a master list of disciplinary actions taken against agents at military bases and that such a list be made available to legal personnel at all bases.
The proposed regulations also would impose higher standards than at present on the type of products sold, how personnel are solicited on bases, and on the companies and agents that sell these products on bases.
At the same time, state regulators are proceeding against insurance companies and related brokers based in Texas and California for alleged violations of state law and federal securities regulations in sales of insurance products on military bases.
One insurer, American Amicable Life Insurance Company of Texas, already has agreed to refund $1.3 million in life insurance premiums paid by certain active-duty soldiers trained at Fort Benning, Ga.
Georgia Insurance Commissioner John Oxendine also is considering enforcement action against Associates Financial Group and agents Jacques A. Frym and Daiana Frym, who own and operate it from multiple locations in the state. Oxendine held hearings in Georgia to probe Associates Financial Group’s practices in selling insurance products to military personnel.
Oxendine also is considering enforcement actions against First Command Financial Services, Inc., a Texas-based insurer, in connection with its sale of insurance products on bases in Georgia.
Georgia department officials said Oxendine is close to a final settlement on enforcement actions against American Amicable.
Military personnel would have to be told about government life insurance programs before buying private life insurance, under legislation passed by the House.