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Military Clashes With GAO Over Life Sales Violation Reporting

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Officials at the U.S. Government Accountability Office and the U.S. Department of Defense disagree about how much military base commanders should tell state regulators about problems with life insurance agents.[@@]

GAO officials are recommending in a new report on the supplemental life market for servicemembers that military base commanders tell state regulators whenever life agents on military bases violate Defense Department, service branch or base rules.

GAO officials also want the Defense Department to improve tracking of servicemembers who pay for supplemental life products through the military payroll deduction system, by creating specific payroll codes that would distinguish payroll deductions for life policies from payroll deductions for other types of insurance policies.

Today, using the Defense Department’s current payroll systems, the department “cannot identify the extent to which life insurance agents are violating solicitation policies or procedures, [or the] the types, severity, or patterns of violations,” according to the GAO report, which was signed by Derek Stewart, a GAO director.

Charles Abell, a principal deputy at the Defense Department who handles personnel and readiness issues, writes in a letter accompanying the department’s response to the GAO report that the department disagrees with some of the GAO’s recommendations.

The Defense Department believes the report “contains misrepresentations and factual errors,” Abell writes.

For one thing, Abell writes, the Defense Department has far more information about the extent of personnel solicitation policy violations than the GAO acknowledges.

Abell notes that the GAO expanded the scope of its study to deal with overall Defense Department oversight of supplemental life sales on military bases.

Originally, Abell writes, insurers and a national insurance group had asked Congress to commission the GAO study for another reason: To investigate reports that military base commanders had interfered with servicemembers’ ability to buy supplemental life policies, and that some of those servicemembers had later died in action. The GAO was unable to substantiate those allegations and makes only minor mention of that fact in its report, Abell writes.

The Defense Department itself says its official comments on the GAO report that it would like to create a supplemental life payroll deduction code but cannot do so because it is in the middle of developing a complicated new payroll system. The department says it hopes to add a supplemental life payroll deduction code once the system is completed.

The department disagrees with the idea of requiring military base commanders to report all life insurance agent rules violations to state regulators. H.R. 458, a military life sales bill pending in Congress, would require base commanders only to report agents who were suspended or barred from selling financial products on military bases, and the department wants to model its rules on those in H.R. 458, the Defense Department says.

The department says H.R. 458 would require life insurers to take responsibility for telling state regulators about any agents who are the targets of disciplinary actions related to insurance sales on military bases.

The complete GAO report, including the Defense Department response, is on the Web at //


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