DoD plan to ban life insurance sales draws fire

Two life insurance companies, dogged by accusations that their sales practices have misled military personnel, are girding for battle with the Defense Department.

As the Pentagon considers a ban on the sale of life insurance products on military bases, the American Fidelity Life Insurance Co. and Trans World Assurance Co. have hired Frederick H. Graefe, a Washington lobbyist with the Cleveland-based law firm of Baker & Hostetler, and Michael Frisby of Porter Novelli.

According to Graefe, his clients have sold insurance on military bases for 40 years, and "99.9 percent of that history is exemplary." Because the companies only sell life insurance to military personnel, the proposal would put them out of business, he added.

Graefe said he has met with "one very high-ranking DOD official" and plans to discuss the issue with members of the House and Senate Armed Services committees.

In 1998, both life insurance companies settled a federal lawsuit filed in Washington state by agreeing to offer refunds to military personnel who had purchased life insurance policies that were unfairly promoted as investments.

Bernard Rostker, the undersecretary of Defense for personnel and readiness, is reviewing a Pentagon-commissioned study that recommended the ban on life insurance sales. Graefe disputes the study's accuracy.

"Certain low-ranking Pentagon officials have been conducting a smear campaign," he said.

The DOD-funded newspaper, Stars and Stripes, fomented the controversy by running one-sided stories, Graefe charged.