DOD Does Not Know the Extent of Solicitation Violations and Does Not Disseminate Information on All Confirmed Violations

DOD does not know the extent to which life insurance agents are violating  regulations pertaining to on-installation personal commercial solicitation,  and it does not actively disseminate information about all confirmed  violations to other portions of DOD and state insurance regulators. The absence of evaluative and reporting requirements in the  solicitation directive, as well as ambiguity in the directive about the  dissemination of information, are some of the reasons for these situations  that limit DOD’s ability to provide oversight of supplemental life insurance  solicitation on installations and prevent violators from having access to  servicemembers on installations. DOD Does Not Know the Extent to Which Life Insurance Agents Have Violated Solicitation Policies on Domestic Installations

Because of the absence of evaluation and reporting requirements, DOD has  not collected the data that it needs to monitor the number, types, and  severity of life insurance agents’ violations of DOD’s regulations regarding  on-installation solicitation. A survey of personal financial management program managers on  installations in the United States indicated that six types of prohibited  solicitation practices were perceived to have occurred with varying  frequency on their installations during the prior 12 months. More than  one-third of the managers indicated that misleading sales presentations  regarding supplemental life insurance had occurred occasionally or  routinely on their installations, and more than one-quarter said that four of  the other five prohibited practices had occurred at least occasionally (see  fig. Without  knowing the extent of the problem, DOD cannot develop an effective and  efficient strategy for curbing the violations. DOD Does Not Disseminate Information about All Confirmed Violations and Enforcement Actions to Other Parts of DOD or to State Life Insurance Regulators

The DOD policy office responsible for oversight of supplemental life  insurance solicitation on installations does not routinely disseminate  information on all confirmed violations to installations, to the services, or  to state life insurance regulators. Data on Payroll Allotments for Supplemental Life Insurance Unreliable and Procedures for Submitting Such Allotments Are Not Always Being Followed

We could not determine the extent to which servicemembers follow DOD’s  and the services’ allotment processing policies when purchasing  supplemental life insurance because of limitations in the allotment  databases and the different ways that finance offices were accepting forms  to start the allotments. We could not substantiate insurance officials’ and agents’  assertion that servicemembers were being prevented from using allotments  to purchase life insurance. For example:  A life insurance agent is alleged to have submitted allotment forms at  Fort Bragg for servicemembers who later said they had not wanted the  policies for which they were paying. DOD’s Revised Directive Adds New Requirements, but Does Not Fully Address Oversight Deficiencies

DOD’s revised directive on personal commercial solicitation practices on  DOD installations incorporates new requirements, but does not address all  oversight problems. Some  interim policy and practices that are currently in place have been  incorporated into the draft revision. Two sets of proposed changes add requirements for gathering and  disseminating information about violations on banned agents. As we noted  earlier, continued gathering and disseminating information on only those  violations severe enough to result in banning an agent will result in DOD’s  continuing to be unable to (1) identify the number, types, and severity of all  violations and (2) recognize patterns of violations. 3. To assess the extent to which the draft revision of DOD’s directive will  address ongoing problems with supplemental life insurance policies on  DOD installations, we reviewed the Department of Defense Appropriations  Act for Fiscal Year 2005 to determine the restrictions on when the draft  directive could be issued. Additional information, such as direct deposit  forms, was also obtained.
Why GAO Did This Study

Servicemembers are engaged overseas in hostile actions that threaten their lives and possibly the future financial security of their families, should they die. To address their financial security needs, some servicemembers have purchased additional life insurance to supplement that offered by the government. Concerns have been raised, though, about solicitation violations, as well as problems in the system for setting up payroll allotments for such insurance. The Department of Defense (DOD) recently published a revised draft directive on solicitation but will not implement the directive until at least 90 days following this GAO report. GAO addressed three primary issues: (1) the extent to which DOD solicitation regulations are being violated; (2) the extent to which DOD personnel are adhering to allotment regulations for the purchase of supplemental life insurance; and (3) the extent to which the new directive addresses ongoing problems in supplemental life insurance solicitation policies.

What GAO Found

DOD does not know the extent to which life insurance agents violate on-installation commercial solicitation regulations and does not actively disseminate information on all confirmed violations to other parts of DOD or to state insurance regulators. GAO found that violations are occurring. For example, in responses to GAO's 2004 survey of personal financial management program managers, one-quarter said prohibited practices such as misleading sales presentations had occurred occasionally or routinely on their installations in the prior 12 months. Also, between October 2001 and October 2004, DOD revoked agents' on-installation solicitation approval at least 26 times. The reason DOD does not have complete data on violations is that it does not have adequate mechanisms for ensuring the systematic tracking of violations. The dissemination problem is attributable to a lack of oversight by the DOD policy office and an ambiguity in its guidance. DOD cannot develop an effective and efficient process for curbing violations without maintaining accurate data on the number, types, and severity of violations and disseminating confirmed violation data to relevant parties. DOD cannot determine the extent to which DOD personnel adhere to allotment regulations because of problems with DOD's payroll databases and the different ways in which regulations are implemented. DOD's Financial Management Regulations, among other things, restrict who can submit an allotment form for supplemental life insurance. GAO could not determine the number of servicemembers with supplemental life insurance allotments due to database limitations, such as all insurance allotments (for example, for life and automobile) sharing the same code. Contrary to regulations, GAO found finance personnel accepting allotment forms without confirming they came from authorized sources. Some said they did this to ensure that policies started promptly. Database problems limit DOD's visibility over prohibited practices, such as those for group solicitation and the acceptance of allotment forms without proper authorization. In addition, GAO could not substantiate the assertion that servicemembers are prevented from using allotments to purchase supplemental life insurance and has identified reasons why this is probably not a widespread problem. DOD's revised directive on commercial insurance solicitation practices on DOD installations adds new requirements, but does not fully address oversight deficiencies. The revised directive will incorporate the interim policy and practices now in place and, to partially address the problems cited above, will add requirements for gathering and disseminating information on confirmed violations. Those requirements, however, will focus on banned agents only, rather than all confirmed violations. The result will be DOD's continuing inability to identify the number, types, and severity of all violations, or to recognize patterns of violations. The directive will also add requirements that installation commanders inquire into alleged violations of the solicitation regulation.