Insurance Issues for Military Personnel
Report to Congress
Letter to Senator Richard Shelby Regarding Suitability Standards for Military Life Insurance
(03/05/06 - John Oxendine; Alessandro Iuppa)
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A 2004 investigative report by the New York Times revealed that some soldiers on military bases were being sold unnecessary insurance policies that were actually contractual plan mutual funds. Included in the reports were descriptions of meetings—sometimes compulsory—where soldiers allegedly were encouraged to purchase high-cost products from salesmen who gave the appearance of being independent financial planners working on the soldiers' behalf.
The Military Personnel Financial Services Protection Act (S. 418), which was signed into law on September 29, 2006, protects members of the Armed Forces from unscrupulous practices regarding sales of insurance, financial and investment products. The bill bans the sale of contractual mutual funds on military bases and grants state insurance commissioners explicit authority in federal law to regulate insurance sales to military personnel, on bases in the United States and abroad, unless state regulations directly conflict with federal law or would not apply to sales conducted on state lands.
As part of this Act, Congress required that the states collectively work with the Secretary of Defense to ensure implementation of appropriate standards to protect members of the Armed Forces from dishonest and predatory insurance sales practices while on a military installation. State insurance regulators—along with state legislatures, the U.S. Congress and the Department of Defense—took swift action to draft and implement the NAIC Military Sales Practices Model Regulation and other protective measures. Adopted in June 2007, the Model Regulation creates standards for products specifically designed to meet the particular needs of members of the Armed Forces and addresses Congressional findings regarding suitability and product standards.
Pursuant to Section 9 of the Act, on September 29, 2007, the NAIC released its second and final report on implementation efforts to the U.S. Congress. The report, entitled “Life Insurance Sales to Members of the Armed Forces,” provides an overview of the states’ collective work to protect American military personnel and their families from predatory life insurance sales. In addition, the NAIC developed the Military Sales Online Reporting System (MSORS), a Web-based application for reporting disciplinary actions taken against those soliciting life insurance sales on U.S. military installations.