The Honorable Robert M. Gates Secretary United States Department of Defense The Pentagon, Room 3E880 Washington, DC 20301

Dear Secretary Gates:

The attached Bloomberg article, “Fallen Soldiers’ Families Denied Cash Payout as Insurers Profit,” identifies a serious problem affecting the families of servicemen and women who have died fighting for this nation. According to the report, some of these service members are being denied immediate access to life insurance proceeds that they should receive.

Rather than transferring the insurance funds that they owe military families directly into their bank accounts, life insurance companies are depositing this money into their own accounts and sending “checkbooks” to the families. This is a very misleading tactic because checkbooks don’t contain live checks. They are essentially IOUs. This means that the money is not insured by the FDIC, and that it will generate interest that the insurer can take as a profit while paying out a paltry interest to military families. These funds could also be unrecoverable if the insurer goes out of business. (Some life insurers are presently in serious financial shape due to significant investments in commercial mortgages and other adverse impacts from the economic situation.)

I urge you to contact the National Association of Insurance Commissioners and ask them to initiate fast regulatory action to prohibit this practice in the future and to ensure that the families of service members are being treated properly in all respects when a life insurance payout is due. In the meantime, I urge you to immediately issue an order prohibiting any life insurance company that is participating in this scheme from selling any type of insurance on military bases until: (1) they stop the practice, and (2) they pay the amounts due to families that are currently held in their accounts. I would also suggest disallowing these insurers from any type of marketing of insurance products directed at service members until they take the above two actions.

If I or the Consumer Federation of America can be of any assistance, please do not hesitate to call upon us. I served as Federal Insurance Administrator under Presidents Ford and Carter and as Texas Insurance Commissioner, so I would be more than happy to assist if you need any advice.

Yours truly, J. Robert Hunter Director of Insurance (207) 864-3953