Aug. 04, 2006                                                         Contact:Lucas Hamilton

MORRISON ANNOUNCES $70 MILLION MULTI-STATE SETTLEMENT INVOLVING QUESTIONABLE INSURANCE SALES TO MEMBERS OF THE US MILITARY


      Montana Military Personnel to Benefit from Settlement
      Montana State Auditor John Morrison announced today a federal and multi-state settlement agreement resolving allegations of improper sales practices in the sale of life insurance products to members of the United States military. Under the agreement, 92,000 consumers nationwide, including 70,000 service members, will receive cash or other benefits totaling $70 million. The federal settlement agreements with the U.S. Department of Justice and the Securities and Exchange Commission provide common relief to those in the multi-state settlement agreement. In Montana 348 consumers, including 336 service members, will benefit from the settlement.
      “This settlement agreement serves to remind the insurance industry that protecting consumers is our number one priority,” said Morrison. “Unfair sales practices won’t be tolerated. Federal and state regulators across the nation stand united in protecting our military personnel, many of whom are young and financially inexperienced, from deceptive business practices.”
      Morrison said approximately 57,000 current and former service members will receive cash refunds and modifications to their existing insurance policies, if active.  An additional 13,000 service members and 22,000 civilians will receive increased cash surrender benefits for a total of 92,000 policyholders who will benefit from this settlement.
      The American-Amicable Life Insurance Company, Pioneer American Insurance and Pioneer Security Life Insurance Company, all of Waco, Texas will be required to provide immediate cash refunds and increased policy benefits totaling $70 million.
      In addition, the companies will be banned from military bases for five years, may not to use any military personnel membership listings for sales or solicitation purposes, as well as other restrictions on sales and contact 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 were sold primarily to military personnel, and were often represented as investment products.
      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 nationally 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.
      In addition to economic relief, the companies will also be required, among other things, to:
  • Stop soliciting or selling any insurance product on any military installation for five years.
  • Immediately terminate any agent discovered selling company products on a military installation.
  • Not accept any insurance application for Army enlisted personnel with the rank of E-1 through E-3 without proof the applicant has been counseled by a superior officer as required by Army Regulations.
  • Not possess, complete, submit, or process or assist in the submission or processing of any DD Form 2558 (Authorization to Start, Stop of Change Allotment).
  • Not establish any account or fictitious account in the name of its applicant/insured service member at a depository institution for the purpose of receiving funds for the payment of premium or use Treasury Form 1199A (Direct Deposit Sign Up).
  • 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 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.mt.gov/sao. Consumers who have questions regarding the settlement can call the companies’ consumer service center at 1-800-736-7311.
      If service members need individual financial counseling, they can contact a personal financial counselor at their installation’s Family Support Center or Army Community Support Center.