Laws fall short in protecting troops from unsavory insurance agents
KAISERSLAUTERN, Germany — U.S. military personnel on a handful of bases on Okinawa and in South Korea and the United States are still being persuaded to buy life insurance policies they can’t afford or don’t need, despite laws to protect them, a Defense Department report says.
The DOD inspector general found junior enlisted troops had purchased insurance from agents who used prohibited sales practices both on and off U.S. military installations, including soliciting in barracks, day rooms and unit areas, disguising insurance products as investments, and suggesting or giving the appearance of DOD sponsorship.
The report also found that military officials at some bases did not follow already-established solicitation policies intended to mitigate financial risk for servicemembers, and that junior enlisted personnel inappropriately used myPay to begin automatic payments for insurance products.
“Although DOD and some States initiated actions against insurance agents and companies, junior enlisted Service members at the installations visited continue to purchase high-cost life insurance products considered unsuitable for most military personnel and which may threaten their financial stability,” the report said.
In 2005, the federal government increased death benefits and life insurance coverage for military personnel, providing survivors of deceased servicemembers with a $100,000 benefit and offering servicemembers up to $400,000 in low-cost life insurance coverage through the government-sponsored Servicemembers Group Life Insurance, commonly known as SGLI. Some military members and their families also choose to purchase supplemental life insurance from private insurance companies, notes a 2009 Government Accountability Office report.
After finding that certain life insurance products were improperly marketed as investment opportunities and provided minimal death benefits in exchange for excessive premiums, Congress in 2006 passed legislation to protect military personnel from unscrupulous selling of insurance, financial and investment products.
For the Pentagon’s latest audit, the third in a series of reports studying the impact of those legislative reforms, inspectors visited six U.S. military bases, including Marine Corps camps in Okinawa and Army garrisons in South Korea.
They found insurance agents for two companies made improper insurance sales on or near five of the six installations visited.
In one example, a Marine at Camp Kinser said that two agents approached Marines while they were in formation. The agents said they would provide the Marines information about military benefits if the Marines gave them their contact information.
“The Marine stated that while it ‘appeared voluntary’ to provide the contact information, the Marines were not allowed out of formation until they provided it,” the report stated.
In another instance, a soldier from U.S. Army Garrison Yongsan said an insurance agent approached him and another soldier while they were shopping in the post exchange and began discussing the benefits of the GI Bill. The agent made an appointment to meet them the next day in the barracks and provided them with an endorsement letter signed by six retired four-star generals and admirals, which led to his purchase of what he thought was an investment, according to the report. Using the agent’s laptop, the soldier accessed myPay — DOD’s automated pay system — to purchase the insurance, which is prohibited for personnel in pay grades E-4 and below. The soldier said he canceled the allotment — an automatic deduction — after a month or two because the company did not contact him regarding questions he had about the product.
Analyzing financial records, the IG found that servicemembers in ranks E-1 to E-4 stopped 10,480 out of 15,484 (68 percent) insurance allotments, with a majority stopped within 12 months.
“Although junior enlisted Service members stopped the allotments, they have potentially paid more than $6 million into life insurance policy premiums, and because many Service members did not file complaints, it is unclear whether they obtained refunds,” the report said.
Military members paid an average of $130.78 per month for the life insurance products.
The report suggests that DOD should improve its information collecting and sharing of life insurance violations against military personnel.
“DOD lacked adequate information about agents and companies debarred, banned, or limited from solicitation on DOD installations,” the report said. It also recommends military services be required to update financial training to increase servicemembers’ awareness.