By
Washington
The House last week voted overwhelmingly to approve legislation that clarifies the jurisdiction of state regulators over sales of insurance products on military bases and protects enlistees from inappropriate sales practices and products.
The vote was 396-2, with 2 conservative Republicans, Reps. Jeff Flake, Ariz., and Ron Paul, Texas, the only ones to vote no.
"This is an important step in guaranteeing that our young service members are protected from investment products with exorbitant commissions and from life insurance agents who push our soldiers into unnecessary and high-priced policies, frequently while trying to circumvent state regulation," said Rep. Max Burns, R-Ga., who introduced the bill. "Theres no reason that any company selling these questionable plans cant replace them with reputable products, as was the case in the civilian market."
Under the bill, H.R. 5011, the "Military Personnel Financial Services Protection Act," jurisdiction over sales of life insurance products on military bases would fall to the state regulator where the base was located. For sales occurring overseas, the state where the agent involved was issued a resident license would have jurisdiction, or if the sale was directly between a consumer and an insurance company, the state where that company is domiciled.
The bill also would bar the sales of contract mutual funds, a product that lawmakers noted virtually has disappeared from the civilian market.
Rep. Rahm Emanuel, D-Ill., said during debate on the bill that the Securities and Exchange Commission had, in the past, recommended a congressional ban of contract mutual funds but that the product faded from the civilian market without Congress taking action. Currently, he said, "up to north of 95% of them," are within the military market.
"The question we have to ask ourselves, if contractual mutual funds are not good for the civilian market, in fact, the SEC discourages them, why would we allow them to be sold and marketed to our troops?" Emanuel said. "If we want to allow access to the military bases, fine, for other types of financial needs for the financial security of our enlistees, but our young men and women are not to be seen as ATM fee-generating machines for the financial services industry."
The bill also requires that agents disclose that neither they nor their products are endorsed by the U.S. government or military. Additionally, the bill requires the Department of Defense and state regulators to maintain lists of banned agents and to share those lists with each other.
The majority of industry groups affected by the bill, representing both agents and life insurers, voiced strong support for the House action.
