WASHINGTON — Under new regulations, the Defense Department would track problematic insurance agents and bar deceptive sales campaigns from military installations in an effort to protect servicemembers from insurance and investment scams.
Pentagon officials and industry representatives will discuss the policy changes at a public hearing Friday in Arlington, Va. The proposals mirror legislation being considered in Congress, introduced in response to complaints from servicemembers about confusing and sometimes predatory sales practices.
Col. Michael Pachuta, director of the department’s Morale, Welfare and Recreation policy office, said several of the new regulations are simply updates of existing policy.
“But what we had seen before was spotty enforcement of some of these rules,” he said. “Now that there’s more focus on the issue, we’re seeing better response at the installation level.”
The policy reiterates that troops in the three lowest ranks must undergo counseling during a seven-day waiting period before buying insurance other than Servicemen’s Group Life Insurance, and reminds installation commanders to make independent financial counseling available to all personnel.
It also mandates a new database to track problems with sales agents and requires all salespeople to give customers an optional survey to be returned to base officials, so military researchers can make sure agents are following procedures.
“We’ll be able to maintain a roster of information on these agents,” Pachuta said. “Installations will be able to look at an agent’s track record, where they’ve been, before making a decision on whether they’ll be allowed on the base.”
In January, American-Amicable Life Insurance announced it would pay about $1.3 million to more than 900 servicemembers who were sold policies while training in Georgia, which is prohibited by Department of Defense policies and state law.
The proposed solicitation rules do not contain guidance relating to instant loan companies, which offer high-interest, short-term loans and have been criticized as taking advantage of naïve servicemembers.
Pachuta said that problem is a separate issue that is more difficult for the department to deal with directly.
“This regulation only controls solicitations on bases, and usually [the instant loan companies] operate just off base,” he said. “If they do attempt to solicit on base, we can control that. But lot of that issue is still going to fall on state regulatory agencies.”
The changes received praise from the Defense Credit Union Council, whose members serve military personnel and defense employees. CEO Roland Artega said the financial education piece in particular is critical, to help troops find answers before they run into financial trouble.
Public comment on the issue must be received by June 20 and can be sent to: michael.pachuta@osd.mil. Officials hope to enact the new policy this fall.
(Click here to access the Federal Register notice of the proposed rule, in PDF format.)
