Panel criticizes insurance sales to military personnel
House Financial Services Committee members on Thursday criticized the continued sale of contractual mutual insurance policies to soldiers on military bases, noting those products have largely disappeared from the civilian market because of their costly fees and low value.
"It is an outrage that financial products that were found so disreputable that they disappeared from the civilian market 20 years ago have continued to survive on-post, by being pawned off on unsuspecting young service people as part of 'approved' savings and insurance plans," Rep. Max Burns, R-Ga., said in a statement. "In addition, we have far too many unscrupulous insurance companies using federal military property to dodge state insurance commissioners and sell overpriced policies with virtually no oversight."
Financial Services Chairman Michael Oxley, R-Ohio, said he does not support a complete ban on financial product sales on bases.
"But Republicans and Democrats in Congress can no longer pretend this is about a few bad apples," he told a panel of witnesses comprised of representatives of the life insurance industry, financial planners and experts, as well as an Army soldier who said he was a victim of an insurance scam.
Burns introduced legislation Thursday that would prevent the sale of questionable financial products on U.S. military installations, unveiling his bill during the hearing chaired by House Financial Services Capital Markets Subcommittee Chairman Richard Baker, R-La.
The proposal, one of a handful under the subcommittee's consideration, is aimed at protecting young and financially inexperienced military personnel from unethical sales tactics employed by some life insurance agents. His bill, dubbed the "Military Personnel Financial Services Protection Act," would ban the sale of mutual fund contractual plans on military installations and ensure full regulation of life insurance and other financial products sold on military bases.
Frank Keating, president and chief executive officer of the American Council of Life Insurers, told the subcommittee that while he supports the spirit of Burns' legislation, the bill's description of contractual mutual funds is too broad and would prohibit "all kinds of insurance and annuities that have a variable element in them."
Keating also took issue with language in the bill that asks 50 state insurance regulators to implement new standards to protect military personnel from insurance sales misconduct, asserting the mandate is unnecessary and probably unwanted by regulators. He also said existing regulations have not been enforced well, leading to "cracks through which misbehavior has reportedly taken root." And, Keating said, it is important to remember that members of the military are mature enough to make their own decisions, and that while the environment in which those decisions are made differs from that of consumers in the civilian market, "an 18-year-old in this country is an adult."