[Congressional Record Volume 140, Number 50 (Monday, May 2, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 2, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
       SALES PRACTICES OF THE METROPOLITAN LIFE INSURANCE COMPANY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
February 11, 1994, and there being no designee of the minority leader, 
the gentlewoman from Illinois [Mrs. Collins] is recognized for 10 
minutes as the designee of the majority leader.
  Mrs. COLLINS of Illinois. Mr. Speaker, I seldom come to the floor to 
discuss matters being considered in the Commerce Subcommittee that I 
chair. The only other time that I have done so was where our hearings 
and our investigations and discussions surrounded the North American 
Free-Trade Agreement that everybody was interested in.
  I do so today, however, Mr. Speaker, because I believe this body 
ought to be made aware, and the Congressional Record ought to record, 
how one of our country's major insurance companies ignored rules and 
regulations governing the insurance industry and continued to shaft 
their consumers.
  On Thursday, April 28, the Subcommittee of Commerce, Consumer 
Protection, and Competitiveness held a hearing to investigate reports 
of widespread problems in sales practices of the Metropolitan Life 
Insurance Co., also known as MetLife, in marketing whole life insurance 
policies in Florida and nationwide.
  In 1990, the Tampa sales office of MetLife began a nationwide mailing 
campaign that promoted whole life insurance policies as ``retirement 
savings plans.'' The Tampa letters failed to identify the product being 
sold as an insurance policy and the sales persons sending the letters 
did not identify themselves as insurance agents or insurance 
representatives. It is estimated that, during the period 1990 to 1993, 
MetLife agents knowingly misled over 60,000 consumers, many of them 
nurses, into buying life insurance policies disguised as retirement 
savings plans.
  Although the Tampa marketing scheme was very successful from 
MetLife's point of view, the insurance policies being sold were often 
not the best purchase for some consumers--many of whom did not realize 
that over 50 percent of the premiums that they would be paying during 
the first year of what they believed to be their retirement savings 
plan would go to the insurance agent as his/her commission.
  Those same consumers probably did not realize that if they failed to 
maintain their so-called retirement savings plan for at least 2 years, 
they would lose all the money they had paid in premiums. A purchaser of 
this plan would have to maintain one of these policies for 5 years in 
order to get back at least as much money as he or she had paid in.
  Despite the fact that the life insurance policies are not primarily 
savings policies, MetLife sales agents in the Tampa office did not 
simply encourage consumers to purchase these insurance policies, but 
they even unleashed an extremely aggressive sales campaign in order to 
achieve this as a means of having them buy this so-called savings for 
their retirement plan.
  Because some policyholders did not realize they had purchased 
insurance, they unfortunately did allow their policy to lapse before 
the 5 years had passed and ended up losing all of the money they 
believed they had set aside for retirement.
  Evidence uncovered by the investigation by the Florida insurance 
department suggests that senior management personnel at MetLife knew of 
these deceptive practices but made little or no effort at all to end 
them or to compensate the dissatisfied consumers until, in 1993, the 
State of Florida, which is to be commended, threatened to revoke 
MetLife's license.
  According to an investigation by Thomas Tew of the Florida Insurance 
Commission, complaints about the practices were received from the 
insurance commissions of Texas, North Carolina, and Tennessee in 1990. 
An internal audit, on November 8, 1991, found that the Tampa office was 
using misleading brochures and the auditors advised the Tampa office 
that similar complaints had also been received from Florida and 
Virginia.
  Meanwhile, the home office was providing the Tampa office with a $1 
million budget for postage to mail out this misleading literature.
  The legal department of MetLife kept raising the problem of deceptive 
literature but the issue did not come to a head until a July 15, 1993, 
meeting at which the MetLife president, Mr. Ted Athanassiades, was 
asked to mediate hostilities between MetLife marketing and the legal 
departments.

                              {time}  1220

  According to the Tew report, MetLife executives at that meeting chose 
to ignore the problem, like an ostrich burying its head in the sand. 
``MetLife focused only on [the Tampa Office's] profitability * * * Were 
it not for the kick delivered by [the show cause order by the Florida 
Insurance Commissioner], Met would have taken no action in response to 
the [Tampa office] situation, would not have sanctioned anyone, and 
would not have made policyholders whole.''
  At last Thursday's subcommittee hearing, Mr. Tew and Mr. Daniel 
Sumner, representing the Florida insurance commissioner's office, 
provided us with information on the operations of the Tampa office and 
with their insights into what went wrong at MetLife and even offered 
suggestions of what could be done to protect our consumers against 
similar schemes in the future. Mr. Tew and Mr. Sumner were helpful and 
informative and I certainly thank them for appearing.
  MetLife was also invited by the subcommittee to provide witnesses who 
could shed some light on what happened in Tampa and what could be done 
to improve consumer protection. The subcommittee placed no limitations 
on who they could provide as witnesses and, indeed, welcomed MetLife to 
bring in one or more people who could provide their side of the story.
  Instead of arranging for the appearance of corporate managers who 
could assist the subcommittee in its investigation, MetLife chose to 
send two senior vice presidents who had no connection to the Tampa 
office situation. One witness was a vice president for external 
affairs, while the other had been in charge of Canadian operations. 
According to their own testimony, although both were employed by 
MetLife during the period in question, neither of them had any direct 
knowledge of what had happened in the Tampa office.
  Neither witness was involved in the company's internal investigations 
into the misrepresentation occurring nationwide. Neither witness was 
able to tell us first hand what the deceptive materials looked like or 
what was contained in the misleading sales pitch given by Tampa sales 
personnel. Neither of them could answer questions on what actions were 
taken by State insurance commissioners in response to consumer 
complaints or whether or how company personnel responded to State 
complaints.
  In short, when invited to provide witnesses to explain to this 
Congress and the American people what had happened, the Metropolitan 
Life Insurance Co. elected to send representatives who could provide 
almost no answers to any of the questions they were asked.
  Who does know the answers to these questions? I believe that a number 
of MetLife employees have valuable information about the Tampa 
incident. An audit report issued in November 1991 clearly outlines the 
existence of a problem with sales practices in the Tampa sales office. 
That report, which was reproduced in the Tew Report, was distributed to 
at least 12 MetLife executives, some of whom were based in the New York 
home office.
  An appearance by any of these individuals could have increased the 
subcommittee's understanding of the Tampa incident and provided us with 
guidance on how to reduce the probability of any similar problems 
arising in the future.
  Among those individuals were the following senior management 
individuals:
  Ted Athanassiades, president of MetLife: According to the Tew report, 
Mr. Athanassiades chaired the famed July 15, 1993, meeting at which the 
Tampa office received absolution and no effort was made to correct the 
problem.
  Harry Kamen, chairman of the board and chief executive officer: 
According to the Tew Report, Kamen received a letter from a 
whistleblower in February, 1993, describing the problems, but nothing 
was done.
  Robert J. Crimmins, executive vice president and head of personal 
insurance: According to the Tew report, by 1990, Crimmins ``was aware 
of the problems with the unauthorized sales literature, and personally 
intervened to make sure that the Tampa office's selection as Office of 
the Year for 1990 did not embarrass Met * * * There is no evidence that 
Crimmins took any direct action to curtail the improper marketing 
practices of [the Tampa Office.'' Also, according to Tew, when Crimmins 
was informed by Randy Holtzman, a MetLife branch manager in 1992 that 
the Tampa office had intruded into his sales area with the 
objectionable nurses preapproach letter, Holtzman ended up being 
criticized for allowing the intrusion.
  The subcommittee was told by the MetLife witnesses that, although a 
number of MetLife employees associated with the nurses retirement 
savings plan have been relieved of their duties or have retired, there 
are at least some current employees who are able to speak to this 
issue. We have reason to believe that some of those persons are among 
those listed above.
  I intend to call another hearing of the subcommittee to explore the 
nurses retirement savings plan scam. MetLife will once again be invited 
to provide witnesses. I fully expect that, this time, the subcommittee 
will get the answers it seeks and that those who were in charge of this 
scam will at least come but from under the rug and be willing to face 
this Congress and tell us what happened there.

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