Volume 3 Number 32
August 7, 2006

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MULTI-STATE SETTLEMENT ANNOUNCED TOTALING $70 MILLION TO BENEFIT MILITARY PERSONNEL

A multi-state settlement concerning the improper sale of insurance and investment products to U.S. military personnel has been announced. The American-Amicable Life Insurance Company of Waco, Texas, and its affiliates will be required to provide immediate cash refunds and increased policy benefits totaling $70 million under the settlement agreement.

“Our soldiers are fighting and dying overseas to protect our country and fight terrorism,” said Chief Financial Officer Tom Gallagher, whose office will be assisting the affected soldiers. “To think these men and women were knowingly ripped-off is unconscionable.”

As a result of the investigation, approximately 57,000 current and former service members will receive refunds and modifications to their existing insurance policies, and an additional 13,000 service members and 22,000 civilians will receive increased cash surrender benefits. 

“While this is great news to the service men and women who were victimized, it does little to mask the bad taste left by the actions of these entities. Our military men and women deserve to be honored, not taken advantage of,” said Kevin McCarty, Florida's insurance commissioner.

More than 5,000 consumers who purchased their policies in Florida will be covered under the agreement. Nearly all of the soldiers already had $250,000 in low-cost life insurance provided and partially subsidized by the federal government. Therefore, it was doubtful whether they needed even more insurance, so the term-life policies were often represented as investment vehicles that would return money rather than polices that would only pay off upon the death of the insured.

In addition to the penalties, the companies are banned from military bases for five years, and are prohibited from any military personnel membership listings for sales or solicitation purposes, as well as other restrictions on sales and contracts with military personnel.

The settlement alleges that the American-Amicable companies violated insurance and consumer protection statutes in the sale and marketing of certain life insurance products to U.S. service members. The term life policies, marketed as “Wealth Builder” or “Horizon Life,” were sold primarily to military personnel and were often represented as investment products.

The companies included in the settlement are American-Amicable Life Insurance Company of Texas, Pioneer American Insurance Company, and Pioneer Security Life Insurance Company. To date, 42 states, the District of Columbia and Guam have signed on to the agreement.

Under the settlement, the companies will be required to:

To make cash payments to former and current service members who were issued a “Horizon Life” policy from January 1, 2000, through July 28, 2006. Approximately 57,000 service members, including 5,000 in Florida, are eligible to receive this relief.

To increase the cash surrender value for all in-force “Horizon Life” and “Wealth Builder” policies regardless of when the policy was issued or military status. Approximately 53,000 current policyholders will receive this benefit.

Cease soliciting or selling any insurance product on any military installation for five years. Additionally the companies are prohibited from transacting insurance with any active duty military personnel for two years within the state of Florida.

Immediately terminate any agent discovered selling company products on a military installation.

Not accept any insurance applications for Army enlisted personnel with the rank of E-1 through E-3 without proof the applicant has been counseled by a superior officer.

Not offer any gift with a value greater than $5.00 to any individual who has direct command authority over service members who rank between E-1 and E-4.

Not participate in or assist with any class, seminar, or other training for service members who rank between E-1 and E-4.

Not participate in or assist with any class, seminar, or other training for service members regarding personal finance when such class, seminar, or other training occurs on a military base, installation, or reservation.

The settlement agreement can be found at www.floir.com. Consumers who have questions regarding the settlement can call the Department of Financial Services consumer hotline at 1-800-342-2762 or the companies’ consumer service center at 1-800-736-7311.