NYT: Basic Training Doesn't Guard Against Insurance Pitch to G.I.'s

[punpirate]

In short, insurance companies' representatives have been ignoring DoD rules for solicitation of policies and investment funds with very expensive front-loading and low cash payouts after long terms of investment. This is a long article in a continuing series, but it's well worth the read:

http://www.nytimes.com/2004/07/20/business/20military.html?pagewanted=1&hp

Excerpts:

"A gentle, trusting man, {Nicholas Stachler} had only weeks earlier graduated from high school with a handful of trophies in hockey and soccer, middling grades and hardly a clue about how to handle his money. He had held only casual jobs baby-sitting and mowing lawns and had never opened a checking account. The bus trip to boot camp, from the foothills of the Appalachians in southern Ohio to the kudzu-covered fields of western Georgia, took him farther from home than he had ever been.

"About six weeks into his training - six weeks of combat drills and drummed-in lessons in Army ways - he tasted one of the less-honorable traditions of military life: a compulsory classroom briefing on personal finance that was a life insurance sales pitch in disguise.

"As he remembers the class and as base investigative records show, two insurance agents quick-stepped him and his classmates through a stack of paperwork, pointing out where they should sign their names, where they should scribble their initials. They were given no time to read the documents and no copies to keep.

"Specialist Stachler says he thought he had arranged to have $100 a month deducted from his pay for some sort of Army-endorsed savings plan or mutual fund. When he returned from Iraq, he found that he had not been saving the money at all. He had been paying $100 a month in premiums for an insurance policy that promised him some cash value far down the road and a death benefit that was almost certainly less than $44,000, a small amount compared with the $250,000 in life insurance he had through a military-sponsored plan that cost him $16.25 a month."


There's a lot, lot more about business practices which teeter on the edge of fraud, and are solidly in the midst of misrepresentation, have been going on for thirty years or more, and yet, late in the article, it is mentioned that one of the recommendations of a group studying the problem was that all insurance/mutual fund sales be barred on all military installations, but that the Pentagon backed down under industry and Congressional pressure and did not implement those rules.

While the article suggests this has been going on for thirty years, possibly more, it had to have been happening after 1970, the time I left the service. I was never solicited by insurance agents on post, and never received "mandatory" financial planning training (as is described in the article). The extent of my involvement was whether or not to spend the $2 per month on military life insurance.

This sounds exceptionally smelly, considering how few companies are involved, and that their practices are unchanged over decades, and that they still seem to operate with impunity on many bases.


Edit for those pesky brackets.

[lazarus]

1. Hmm

Didn't happen to me, when I went into the Air Force in 1984. Is this just Army?

[punpirate]

2. Dunno, but there is an Air Force couple mentioned...

... well into the article. The emphasis, however, and the greater number of examples, seem to be from the Army and Marines; repeatedly throughout the article, there's mention of, particularly, Marines described as being signed up for such plans at a time in their training when they do what they're told by any figure of authority, because that's what they've been trained to do.

Cheers.