Insurer to Refund Money To Soldiers Who Bought High-Cost Life Policies

The New York Times
September 23, 2004

Hundreds of soldiers who unwittingly signed up for high-cost life insurance during basic training at Fort Benning, Ga., will receive full cash refunds from the insurance company whose agents sold the policies, a spokesman for the company confirmed yesterday.

And those refunds may be just the beginning, according to a state insurance regulator who is investigating whether similar refunds may be justified for soldiers who bought policies at other bases in Georgia.

The refunds, unusual in the insurance market, are being offered by the American Amicable Life Insurance Company of Waco, Tex.

Three agents who sold the policies have been dismissed by the company, and a fourth has resigned, according to a spokesman, Mark Palmer.

The refunds are being coordinated with the Georgia insurance commissioner, who said yesterday that his continuing investigation of military insurance sales has now widened to include at least four other insurers selling on military bases in that state.

The insurance commissioner, John W. Oxendine, said his staff had decided to make formal ''market conduct'' examinations of Pioneer American Life Insurance, a sister company to American Amicable in Waco; Trans World Assurance of San Mateo, Calif.; an affiliate, the American Fidelity Life Insurance Company of Pensacola, Fla.; and the Madison National Life Insurance Company of Middleton, Wis.

Fred Graefe, a lawyer for Trans World and American Fidelity, said yesterday that the companies had ''been in close contact'' with the Georgia insurance department for several weeks and had ''complied fully with all its requests.''

The administrative support staff for both companies, in Pensacola, is still digging out from the devastation of Hurricane Ivan last week, he said, but hope to be able to deal with any additional requests from regulators soon.

Larry Graber, the president of Madison National, said yesterday that he had not yet received any formal notice of a market conduct inquiry by the Georgia regulators, but that he would check into it.

Mr. Oxendine said the Georgia department was also ''discussing the appropriateness'' of American Amicable offering refunds to soldiers at other bases in Georgia, but he cautioned that refunds alone would not ''get them off the hook'' with regulators. ''There is also the issue of appropriate punishment,'' he said, ''and making sure that this does not happen again.''

Mr. Oxendine's investigation was begun in late July as a result of a series in The New York Times on the problems of abusive sales practices and unsuitable insurance and investment products in the military market.

He said he could not estimate when it might conclude, because it is ''growing broader and deeper every day.''

News of the pending refunds by American Amicable was greeted with cheers by some of the soldiers who purchased the policies in late 2002 and early 2003 at classroom briefings on financial management during their basic training at Fort Benning.

''It is fair, first of all, and well deserved by the soldiers who were misled into investing in this stuff,'' said Army Specialist Brendan Conger of Fort Bragg, N.C., who recently testified about his experience at Fort Benning before a Congressional subcommittee. ''I'm a soldier 24/7, and there just wouldn't have been any time for me to go through the process of trying to get my money back on my own.''

Specialist Nicholas Stachler, who also serves at Fort Bragg, said he was ''completely and utterly excited'' about the refunds. ''I thought it was going to be a long drawn-out thing,'' he said yesterday. ''It's just really cool that it went through. It's awesome.''

It is also fairly unusual, at least on this scale, said Joseph M. Belth, emeritus professor of insurance at Indiana University and editor of The Insurance Forum, an independent periodical.

''Certainly, it is out of the ordinary to be giving refunds out to that many people, firstly, and, secondly, without any legal action on the part of the policyholders,'' he said.

The Georgia investigation ''also raises all kinds of questions about what's going on in the rest of the country,'' he added, noting that other state commissioners should be examining practices at their own military bases as well.

Hundreds of young soldiers could be eligible for the refunds on the Fort Benning policies, people working on the plan said, although the exact number and the amount of money involved have not been determined.

Many young soldiers, like Specialists Stachler and Conger, had $100 a month in premiums deducted from their paychecks for the policies during their yearlong tours of duty in Iraq last year. For them, the refunds could total more than $1,200, or about a month's base salary for soldiers in the lowest ranks.

''I'm very pleased, and applaud American Amicable Life Insurance for doing the right and just thing,'' said Pamela Stachler, Specialist Stachler's mother, in Athens, Ohio. ''However, there needs to be policies in place with our military so this does not happen anymore, not even one more time.''

The search for legislative ways to prevent future problems is continuing in Congress, where the House Financial Services Committee is considering legislation to address the problem.

And yesterday, the Republican chairman and the ranking Democrat on the Senate Banking Committee added their names to the growing roster of lawmakers asking the Government Accountability Office to examine aspects of the issue.

The accountability office is already working on an examination of the military financial services market. But the two senators -- the banking committee chairman, Richard C. Shelby, an Alabama Republican, and Paul S. Sarbanes, a Maryland Democrat -- asked the G.A.O. to broaden that study further.

Specifically, the senators asked that the audit agency assess the regulatory oversight that governs the sale of financial products on military installations, compare those protections with those in the civilian marketplace and rate the quality and variety of financial products being sold on military bases.

Correction: September 25, 2004, Saturday An article in Business Day on Thursday about an insurance company's plans to give refunds to soldiers who bought high-cost policies at Fort Benning, Ga., misstated the given name of one soldier. He is Specialist Brandon Conger, not Brendan.

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