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WASHINGTON — Defense officials, in a written response to a government report, said the Pentagon in January will issue new guidelines on reporting insurance marketing to military personnel, to help federal regulators crack down on improper and illegal sales.

The Defense Department also told the Government Accountability Office it will mandate more financial management training for new recruits starting next summer. GAO researchers had recommended both actions in response to a series of questionable insurance sales targeting troops in recent years.

Last week John Molino, deputy undersecretary for military community and family policy, testified on Capitol Hill that defense officials are working to “protect military members from superfluous products and predatory sales practices” while ensuring that reputable insurance companies can still conduct business with troops.

“Servicemembers are typically young and inexperienced,” he said. “They are often motivated by idealism and cannot imagine that their fellow citizens … would take advantage of them.

“The confluence of these otherwise noble characteristics makes servicemembers subject to swindlers and fast-talking salesmen and women.”

The GAO, in a study released last week, said state and federal regulators are only now reacting to the problem of military insurance scams because of poor reporting by defense officials.

It recommended new systems to ensure that servicemembers’ complaints are reported not just within in the chain of command but also to appropriate civilian authorities, to keep other military families from being hurt by misleading insurance salesmen.

All troops may pay into the Servicemembers Group Life Insurance plan and receive a $400,000 policy for $26 a month. The GAO report said many young troops don’t understand that plan, and believe they need additional life insurance sold through private companies.

The Senate Committee on Banking, Housing and Urban Affairs, which asked for the GAO study, also heard last Thursday from securities watchdogs about their plans to deal with insurance scams.

And last week, the Senate added an amendment to the 2006 Defense Authorization Bill to provide consumer education on insurance for military personnel and their families.

Andrew Gray, spokesman for the banking committee, said the senators are considering several other legislative measures to put stricter limits on what type and how insurance products can be offered to military personnel, but he did not expect any further action on the issue before next year.

However, he did say the issue would be a top priority for the committee next year.

The GAO report also recommends banning contractual mutual fund plans, policies with high up-front costs and multiyear enrollment requirements. Researchers found such plans being sold at military installations in 46 states, as well as some overseas bases.

Last December, First Command Financial Planning announced it would drop its systemic investment plans after federal regulators hit the company with $12 million in fines for improperly marketing the policies as more beneficial to military personnel.


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