Soldiers Targeted: Ga. Regulator Expanding Life Insurance Sales Probe

September 27, 2004

A probe into improper sales of life insurance products to soldiers at Fort Benning, Ga. is expanding to other bases, other states, and as many as five companies, according to Georgia Insurance Commissioner John Oxendine.

The investigation was sparked by reports of sales of whole and term-life protection policies — written by American-Amicable Life Insurance Company of Texas and affiliate Pioneer American Insurance Co. — to hundreds of soldiers at Fort Benning, in violation of Department of Defense rules. Oxendine said the five-week-old probe initially expanded to include full-blown market-conduct reviews of five companies from three insurance groups.

“We’ve started taken sworn statements and depositions from soldiers, first at Fort Benning but also at other places in Georgia where these sales took place,” Oxendine said. “The case is enlarging and the scope of it is growing, because as we investigate, we’re finding more areas of concern.”

According to the Georgia Department of Insurance, in addition to American-Amicable, the company is looking at transactions by Trans World Assurance of San Mateo, Calif. and affiliate American Fidelity Life Insurance Co. of Pensacola, Fla., as well as Madison National Life Insurance Co. of Middleton, Wis.

Oxendine added that his investigation has expanded to include sales at Georgia’s Fort Gordon, Fort Stewart, Hunter Army Airfield and King’s Bay Naval Station.

For its part, American-Amicable, which traditionally has focused on military personnel as its life products don’t contain war clauses, has offered refunds to the soldiers at Fort Benning and terminated contracts with three of the agents involved in the sales, according to spokesman Mark Palmer, who added that a fourth agent has resigned.

“It came to our attention that some independent agents selling American-Amicable products sold those products in a manner which was inconsistent both with the company’s operating procedure and with the Department of Defense requirements for selling products on base,” Palmer said. “We’ve conducted an internal investigation, and our investigation found that, in fact, some agents did behave inappropriately, so we have taken disciplinary action against those agents.”

Contrary to some reports that characterized the policies as “high cost,” Palmer said the company believes “the product is a good product” that was sold inappropriately, adding that the insurer is working with Oxendine’s office to coordinate the refunds.

However, Oxendine said the company, as well as the others under review, still may face disciplinary action.

“We’ve made it clear that refunds are just one step,” Oxendine said. “I in no way think that refunds necessarily get anybody off the hook. We have agents that have done things inappropriately, and we’re determining what involvement, if any, the company may have had.”

According to the commissioner, Texas Insurance Commissioner Jose Montemayor, Florida Director of Insurance Kevin McCarty and Chief Financial Officer Tom Gallagher, and Acting Illinois Insurance Commissioner Deirdre Manna all have become involved, and the various state departments are sharing information about potential violations at military facilities in their jurisdictions.

“Traditionally, we would probably do the whole case and get the lump sum of money that would be refunded,” Oxendine said. “Because these are young soldiers involved, obviously not paid as much as they deserve, and some of them, God forbid, will be put in harm’s way and we don’t know what might happen, we decided that as we identify areas, let’s go ahead and start doing refunds piecemeal to get that money back to the soldiers.”

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