Insurer agrees to deceptive sales settlement

New Hampshire is among 42 states that are taking part in an agreement that will result in payment of up to $70 million by a Texas-based insurance company to settle state and federal complaints that it used deceptive sales practices to sell improper nsurance products to thousands of service members.

Under the agreement – which also included the District of Columbia and Guam — Waco, Texas-based American Amicable Life Insurance Company will pay $10 million in cash refunds to 57,000 current and former service members who bought its products after Dec. 31, 1999. The rest of the money represents the potential cost of raising the future cash value of policies sold to 13,000 other military customers and 22,000 civilians. The final cost will be based on how many of those policies are held to maturity.

The company also agreed to a five-year ban from sales on any military base, one of the longest suspensions ever imposed in the military insurance market.

While the company neither admitted or denied wrongdoing in the case, spokesman Mark Palmer said that “moving forward is in the best interests of our customers, our agents and our employees.”

According to state Insurance Commissioner Roger Sevigny, the settlement is the result of a 20-month joint investigation into the sales practices of American-Amicable, Pioneer American Insurance Company and Pioneer Security Life Insurance Company, all of which are based in Waco.

State regulators, led by insurance officials in Texas and Georgia, and federal agencies claim that the firms’ marketing practices targeted young recruits and misled them into believing they were buying an investment product when in fact they were buying an expensive term life product that was coupled with a side fund and styled the “Wealth Builder” or “Horizon Life.” Nearly all of the soldiers already had up to $250,000 in low-cost term life insurance provided and partially subsidized by the federal government through the Servicemembers’ Group Life Insurance Program, said Sevigny.

The 20-year term policy featured an expensive death premium with a slow-growing “savings fund” whose value did not surpass the accumulated premiums on the policy until the last years of its life.

While none of the policies involved in the case were sold in New Hampshire, state Insurance Commissioner Roger Sevigny said he decided to join in the settlement “to ensure that New Hampshire servicemen and women stationed elsewhere will benefit from the settlement, either by receiving cash refunds or by the prospective benefit of halting these practices in future sales.”

The investigations were launched in 2004, after a series of articles in The New York Times documented widespread and longstanding abuses in the sale of insurance, mutual funds and other financial products to young service members.

The settlement agreement can be found at — JEFF FEINGOLD

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