House Panel Moves To Reform Insurance Sales To Military
Washington
Reflecting deep congressional concern over alleged abuses in the sale of insurance on military bases, the House Financial Services Committee reported out legislation last week that would substantively tighten the rules on sales of insurance to military personnel.
The vote, 68-0, said everything about the depth of congressional concern about the issue in the wake of a series of articles in the New York Times in July about the sales of high markup products by agents, many of them former military personnel, on military bases, especially Fort Benning, Ga. Despite the overwhelming vote, the outlook for passage in the Congress this year is cloudy.
Given that Congress has a heavy agenda, wants to leave by Oct. 8 and the Senate has not indicated it will act on such legislation, it is unlikely it will be enacted this year. However, given the fact the bill clearly has overwhelming support in Congress, and the industry supports the bill and had a hand in drafting its strongest components, it is likely Congress will move early next year to pass it.
The legislation bars sales of contractual mutual funds on military bases and proposes a broad range of changes in oversight by both federal and state regulators. On the federal level, it mandates that the Securities and Exchange Commission, the National Association of Securities Dealers, which oversees securities sales practices, and the Department of Defense increase scrutiny of those selling insurance on military bases, and requires prompt disclosure by the agencies of disciplinary actions taken against both carriers and producers for alleged abuses in sales of these instruments on military bases.
It also says "it is congressional intent" that the states undertake certain actions to improve oversight of sales on military bases within 12 months.
Georgia Insurance Commissioner John Oxendine, who has been conducting an intensive market conduct examination for the past 6 weeks of 3 carriers who sell insurance to personnel at Fort Benning, said the requests made by Congress shouldnt prove overly burdensome on state regulators. Oxendine said many states already have standards for sales to some degree but that there has not been a great deal of communication between military bases and state regulators.
"It probably wouldnt occur to them" to file a complaint with a state department of insurance, he said, noting that regulators cant act on what hasnt been reported to them. "We only can address something thats been brought to our attention."
While a coordinated effort with the Pentagon has not yet been established, Oxendine said his office has been in communication with the SEC and the Government Accountability Office, which has been asked by members of Congress to provide detailed information about the alleged abuses and what is involved in the sale of insurance on military bases. He also noted that the NAIC has begun work on the issue. Oxendine said he gave a commissioners-only briefing on the issue during the most recent quarterly NAIC meeting and has formed what he called an "informal working group" including representatives from Georgia, Texas, Florida and Illinois.
Communication also would be a part of complying with an amendment to the bill mandating that states keep a list of agents barred from military bases in their states and that those lists be shared between state regulators and the DOD, Oxendine said.
