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Airmen must navigate financial mind fields

EGLIN AIR FORCE BASE, Fla. --

Scams do not die, they hibernate. The best way to protect one’s self when they arise again is to know what they were like before they went into hibernation.

Military members will always be a target for insurance scammers. As a Better Business Bureau president once said, “The sharks are circling the bases. Individually our soldiers don’t make a lot of money. Collectively, it’s a big payroll.”

A decade ago, insurance scams targeting military members, particularly the newest and youngest members, gained national attention. In a 2004 interview on PBS’s Newshour, a New York Times reporter explained that her newspaper’s investigation found a “long-standing and deeply rooted problem of sales agents [for] mutual funds and insurance products getting access to soldiers . . . and selling them products that they don’t understand, may not need and [that] may not be suitable for them at all.”

The New York Times profiled a military member whose entire company was marched to a classroom during basic training and given a “personal finance” briefing hosted by two insurance salesmen who convinced everyone in attendance to buy insurance products that offered minimal value beyond their SGLI, notwithstanding their much higher costs.

Under public scrutiny, the Department of Defense and many state insurance departments imposed stricter limits on insurers’ access to military installations and new restrictions on the sales of policies to the youngest (and usually most vulnerable) military members. One company involved paid $12 million in fines and another paid out $70 million in refunds. Since that time, however, the insurance scam issue has reared its ugly head again on many military installations.

Common Insurance Scams:

Common insurance scams often begin with a statement that the military member’s SGLI benefits are insufficient or insecure. For many military members, however, SGLI provides a sufficient amount of coverage and protection to meet their actual needs. A former Georgia Insurance Commissioner told Kiplinger magazine that “SGLI is a phenomenal insurance product, and it’s a great price.” SGLI is so well thought of by insurance regulators that Texas warned military members, in a “Red Flag” notice, to be wary of insurance sales pitches that “say or imply that SGLI might not always pay.”

Other red flags identified by the Texas Department of Insurance include:

• Being approached by someone or receiving a card or mailer “offering information on your military or VA benefits, or about a military service organization, only later to receive a sales pitch for insurance, investments, savings or retirement.”

• Being offered free pizza, movie tickets, or another freebie to attend a meeting on or off the installation where you received a sales pitch for insurance, investments, savings or retirement.

• Sales pitches that focus on tax-deferred savings paying a high rate of interest, particularly where life insurance is mentioned.

• Being asked how much you could afford to “save” each month, instead of how much life insurance you need.

• Being pressured to sign up now or rushed through the application.

• Being asked to show your CAC or to access “your myPay account to set up payments to a bank or someone you’ve never done business with.”

According to the Texas Department of Insurance, another common trap for military members is insurers mislead them into believing they are buying a “pure investment or savings plan,” when they are actually acquiring “an expensive life insurance policy with a small death benefit, combined with a ‘side’ or ‘accumulation fund.’” “Congress has declared these ‘side fund’ products ‘entirely inappropriate for most military personnel.’”

A study by Mother Jones identified another common insurance scam. Major insurance companies were withholding payouts to the families of deceased military members. Instead of paying out the entire value of the life insurance policies to the beneficiaries, the insurers were instead issuing “check books” to the beneficiaries, holding the funds on the beneficiaries’ behalf, but in theory allowing them to write checks on the account. In reality, the “check books” were merely IOUs and were routinely refused by merchants. The insurers earned five percent interest or more on the proceeds of the policies, but paid the families only one to three percent interest and pocketed the rest.

Thanks to the light shed on this issue over the past decade, there is far greater awareness of and vigilance for insurance scams, particularly among insurance regulators and military installations. Unfortunately, it is impossible to completely prevent insurance scams, and those that exist often claim multiple victims before they come to the attention of regulators and base leadership.

Another important step is to check any potential insurer with your state’s insurance commissioner. The Florida Office of Insurance Regulation (www.floir.com) makes it easy for consumers to find what they need to know about the various insurance types and to look up firms to determine if they are licensed to sell insurance in Florida. (There is a “How do I?” button in the middle of their homepage that you can click to go to a “How Do I . . .” index of their website’s most useful features for consumers.)

What is perhaps most frustrating about these scams is that while military members make attractive targets for scammers, they also have access to high-quality, no-cost resources that average consumers do not. Military OneSource provides free, basic financial counseling over the phone (800-342-9647). The Airman & Family Readiness Center provides Personal Financial Readiness counseling. And military members who believe they may have fallen victim to a scam can speak to a legal assistance attorney at the Eglin Legal Office for advice.

Military members are an attractive target for insurance scammers. If a member ever sees or falls victim to one, they should reach out to a helping agency quickly. Doing so not only gives everyone more time to assist before the problem gets too big, but also enables the installation and, if necessary, state and federal officials, to shut down the scam before it spreads. When it comes to insurance scams, when in doubt, reach out.