[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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