When two abiding American traits—the capitalist ethos and near universal respect accorded members of the armed forces—intersect, the results are not always pretty. While no one begrudges life insurers and agents for making a profit while providing a needed product to soldiers, sailors and airmen, the use of deceptive practices to elicit that business is sure to bring trouble.
Three insurance agents from the Chicago area found that out in a big way when the Illinois Department of Insurance revoked their insurance producer licenses on Thursday for the improper marketing and sale of life insurance to military personnel at Great Lakes Naval Air Station in North Chicago. According to the Department’s investigation, Lake Bluff, Ill.-based American Mutual of Illinois, and the agents, Andrew Haley, Joseph Haley and Jamie Polec, violated numerous life insurance solicitation rules regarding sales to military personnel.
Specifically, the department says the trio misrepresented the life insurance as a “savings plan” to the service members, and failed to tell them that any money deposited into the account would be used to pay life insurance premiums. In addition to an emergency temporary off-limits order banning the agents from entering the base, the three face heavy fines.
Large life insurers also are coming under renewed scrutiny for their interactions with the families of deceased service members. Wednesday, Bloomberg ran an article detailing the frustrations of the beneficiaries of deceased service members who opt to receive lump sum payments from MetLife Inc. and Prudential. The lump sum money is deposited into a “checkbook” that the beneficiaries can draw from, while the insurer deposits the money into its general fund and gleans return rates usually far above the nominal interest rates assigned to the checkbook.
While the practice of insurers reinvesting monies in order to profit is, by itself, not likely to bring condemnation, add grieving widows, parents and families to the mix and you have the makings of a public relations disaster of the first order. No carefully worded, technical explanation of the practice stands a chance in the court of public opinion when juxtaposed against the palpable anguish of these families.
Moreover, such arcane practices make insurers a handy political piñata. Picking up the stick today was New York Attorney General Andrew Cuomo who said his office has launched a probe into the practice.
“It is shocking and plain wrong for these multi-national life insurance companies to pocket hundreds of millions in profits that really belong to those who have lost family members and have already suffered immensely,” Cuomo said. “To make matters worse, the insurance industry appears to be hoarding millions that belong to military families whose loved ones have made the ultimate sacrifice for our country.”
Even if insurers are holding the legal high ground in the matter, defending it without sacrificing their reputations sounds more like a forlorn hope.
Bill Kenealy is a senior editor with Insurance Networking News.
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