Financial Product Sales: Actions Needed to Protect Military Members Page: 3 of 28
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Mr. Chairman and Members of the Subcommittee:
I am pleased to be here to discuss GAO's work on the sales of financial
products to members of the U.S. military. In 2004, a series of media reports
highlighted allegations of financial firms marketing expensive and
potentially unnecessary insurance and other financial products to
members of the military. These accounts included claims of insurance
companies improperly selling insurance as investment products and
broker-dealer firms marketing a mutual fund product with high upfront
sales charges that was rarely being offered to civilians. These media
reports raised concerns within Congress and elsewhere over whether the
men and women in the armed services were as adequately protected from
inappropriate financial product sales as their civilian counterparts.
Today, I will summarize the results from the report being released today
that we prepared at this committee's request, which is entitled Financial
Product Sales: Actions Needed to Better Protect Military Members.
Specifically, I will discuss (1) the insurance and securities products that
were being sold primarily to military members and how these products
were being marketed, and (2) the ability of financial regulators and the
Department of Defense (DOD) to oversee the sales of insurance and
securities products to military members. Where applicable, I will also
present results from a related report entitled Military Personnel: DOD
Needs Better Controls over Supplemental Life Insurance Solicitation
Policies Involving Servicemembers.2
A limited number of firms accused of using deceptive sales practices are
targeting costly financial products to military members with features that
reduce their benefits to military purchasers. About six insurance
companies are marketing products that combine high-cost insurance with
a savings component. Although some service members and their survivors
have benefited from these products, many have not. Most of the
purchasers of these products were unmarried individuals with no
dependents and thus may have had little need for more coverage beyond
that already provided through the low-cost government insurance offered
to service members. In addition, these products also appeared to be a poor
1GAO-06-23 (Washington, D.C.: Nov. 2, 2005).
2See GAO-05-696 (Washington, D.C.: June 29, 2005).
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United States. Government Accountability Office. Financial Product Sales: Actions Needed to Protect Military Members, text, November 17, 2005; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc292981/m1/3/: accessed April 26, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.