a

GAO

United States Government Accountability Office

Report to Congressional Requesters

June 2005 MILITARY 

PERSONNEL

DOD Needs Better 

Controls over 

Supplemental Life 

Insurance Solicitation 

Policies Involving 

Servicemembers

GAO-05-696
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-696.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Derek Stewart 

at (202) 512-5559 or stewartd@gao.gov. 

Highlights of GAO-05-696, a report to

congressional requesters 

June 2005

MILITARY PERSONNEL

DOD Needs Better Controls over 

Supplemental Life Insurance Solicitation 

Policies Involving Servicemembers 

DOD does not know the extent to which life insurance agents violate oninstallation 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. 

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 Recommends

GAO is making five 

recommendations to improve 

DOD’s oversight of its solicitation 

and allotment policies. DOD 

concurred with GAO’s 

recommendations. 
Page i GAO-05-696 Servicemember Insurance

Contents

Letter 1

Results in Brief 5

Background 7

DOD Does Not Know the Extent of Solicitation Violations and Does 

Not Disseminate Information on All Confirmed Violations 12

Data on Payroll Allotments for Supplemental Life Insurance 

Unreliable and Procedures for Submitting Such Allotments Are 

Not Always Being Followed 23

DOD’s Revised Directive Adds New Requirements, but Does Not 

Fully Address Oversight Deficiencies 32

Conclusions 36

Recommendations for Executive Action 37

Agency Comments and Our Evaluation 39

Appendixes

Appendix I: Scope and Methodology 45

Appendix II: Details on Selected Recent In-Depth Investigations 50

Appendix III: Allotment Forms 58

Appendix IV: Comments from the Department of Defense 60

Appendix V: GAO Contact and Staff Acknowledgments 65

Related GAO Products 66

Tables Table 1: 14 Practices Prohibited by the DOD Directive on Personal 

Commercial Solicitation on DOD Installations 9

Table 2: Locations and Years That Commanders Banned Agents 

from an Installation—October 2001 through October 

2004 16

Table 3: Installations in the United States where GAO Conducted 

Site Visits from July to December 2004 46

Figures Figure 1: Personal Financial Management Program Managers’ 

Perceptions of the Frequency with Which Selected 

Solicitation Prohibitions Were Violated on Their 

Installation from January through December 2004 14
Contents

Page ii GAO-05-696 Servicemember Insurance

Figure 2: States Where Installation Commanders Banned Agents 

from October 2001 through October 2004, States 

Reporting Ongoing Investigations of Supplemental Life 

Insurance Solicitation to Servicemembers in December 

2004, and the Number of Active Duty Servicemembers in 

the States 21

Abbreviations

DFAS Defense Finance and Accounting Service

DOD Department of Defense

DODIG Department of Defense Inspector General 

SGLI Servicemembers’ Group Life Insurance

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.
Page 1 GAO-05-696 Servicemember Insurance

United States Government Accountability Office

Washington, D.C. 20548

A

June 29, 2005 Letr

Congressional Requesters

Military personnel are engaged overseas in hostile actions that threaten 

their lives and possibly the future financial security of their families, should 

they die. As a result, some servicemembers purchase additional life 

insurance to supplement the benefits available through the governmentoffered Servicemembers’ Group Life Insurance (SGLI) and other programs. 

In July 2004, we reported on the lump sum benefits and annuities available 

to servicemembers’ survivors as well as the survivors of personnel 

employed by federal, state, and large municipal governments.1

 Recently, 

legislation was enacted to increase the maximum SGLI coverage to 

$400,000 and the death gratuity payment from $12,420 to $100,000.2

 With 

the enactment of this legislation, the number of policies and amounts of 

supplemental life insurance sold to servicemembers could change from 

current levels.

The Department of Defense (DOD) and the services have regulations to 

govern on-installation solicitation for supplemental life insurance, as well 

as other types of commercial products. Among other things, an installation 

must approve agents before they are allowed to solicit, and the agents must 

agree to abide by regulations that include prohibitions of 14 types of 

practices. Violation of the regulations can result in the denial, suspension, 

or revocation of agents’ or companies’ approvals to solicit on the 

installation. Hereafter such agents are referred to as banned agents.

Servicemembers who elect to supplement SGLI’s coverage may purchase 

their additional coverage using payroll allotments or other types of 

payments such as checks or electronic transfers from checking or savings 

accounts. An important feature of the allotment process is a DOD-wide 

regulation that requires either the servicemembers or their representatives 

1

 See GAO, Military Personnel: Survivor Benefits for Servicemembers and Federal, State, 

and City Government Employees, GAO-04-814 (Washington, D.C.: July 15, 2004). Additional 

information on the benefits provided to survivors of deceased servicemembers is available 

in Congressional Research Service, Military Death Benefits: Status and Proposals, 

RL32769 (Washington, D.C.: Feb. 16, 2005).

2

 Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and 

Tsunami Relief, for the Fiscal Year Ending September 30, 2005, Pub. L. No. 109-13, sec. 1012-

1013 (May 11, 2005).
Page 2 GAO-05-696 Servicemember Insurance

with a special power of attorney to submit the allotment form for 

supplemental life insurance.

Some servicemembers have reported experiencing problems when 

purchasing supplemental life insurance. For example, a soldier described 

misleading sales presentations and other concerns during congressional 

hearings in 2004. Similarly, DOD reports in 1999 and 2000 cited problems 

that included deceptive sales practices, violations of DOD policies 

regarding on-installation insurance solicitation, ineffective state insurance 

regulation programs, and inadequate safeguards in the allotment system 

used to pay for the supplemental life insurance.3

 Negative effects 

associated with activities such as misleading sales presentations could 

include servicemembers’ purchasing a product that either can be bought 

elsewhere more cheaply or does not meet their life insurance needs.

Recently, a different type of life insurance-related concern has also been 

voiced. Some life insurance officials have asserted that servicemembers’ 

chains of command have prevented personnel who wanted additional life 

insurance from actually purchasing it when they attempted to set up a 

payroll allotment.4

 If servicemembers who truly want supplemental life 

insurance are prevented from obtaining it, they may have less than their 

desired level of coverage.

The Office of the Under Secretary of Defense for Personnel and Readiness 

is responsible for developing the policies and procedures governing 

personal commercial solicitation; and the heads of DOD components, or 

their designees, are responsible for ensuring implementation of the 

regulations and compliance with their provisions. The Defense Finance and 

Accounting Service (DFAS) oversees the financial management regulations 

and the payroll computer systems and databases.

3

 See Final Report: Insurance Solicitation Practices on Department of Defense 

Installations (May 15, 2000), and DOD Office of the Inspector General, Commercial Life 

Insurance Sales Procedures in DOD, Report No. 99-106 (Arlington, Va.: Mar. 10, 1999).

4

 See, for example, Amy Klamper, “Life Insurance for Troops in Iraq Nixed,” National 

Journal (Apr. 3, 2004).
Page 3 GAO-05-696 Servicemember Insurance

In response to earlier problems and recommendations for change, the 

Office of Morale, Welfare, and Recreation Policy—within the Office of the 

Under Secretary of Defense for Personnel and Readiness—has been 

revising the DOD directive that governs the marketing and sale of life 

insurance and other commercial products on DOD installations.5

 The 

Department of Defense Appropriations Act for Fiscal Year 2005 contained 

provisions indicating that the revised directive cannot be implemented 

until at least 90 days after we issue the present report.

As agreed with your offices, this report addresses three issues: (1) the 

extent to which agents are violating DOD’s policies governing the 

solicitation of supplemental life insurance to active duty servicemembers 

on domestic installations; (2) the extent to which DOD personnel are 

adhering to regulations that govern how active duty servicemembers 

establish payroll allotments to purchase supplemental life insurance; and 

(3) the extent to which the new directive addresses ongoing problems in 

supplemental life insurance solicitation policies.

5

 DOD Directive 1344.7, Personal Commercial Solicitation on DOD Installations (Feb. 13, 

1986).
Page 4 GAO-05-696 Servicemember Insurance

In conducting this review, we limited the scope of our work to 

supplemental life insurance solicitations occurring on installations in the 

United States and to active duty servicemembers.6

 Additional emphasis 

was given to findings pertaining to junior enlisted servicemembers because 

DOD and insurance officials have indicated that this subgroup is more 

likely to encounter problems with the marketing and sale of supplemental 

life insurance as well as with establishing payroll allotments for such 

purchases. Numerous methods were used to gather and assess information 

for this review. We examined DOD, service, and selected installation 

policies on personal commercial solicitation on installations and the 

establishment of allotments for supplemental life insurance, as well as 

oversight management principles identified in the Government 

Performance and Results Act of 1993.7

 We also reviewed GAO, DOD, life 

insurance industry, and other reports. We interviewed officials from DOD, 

life insurance companies and associations, and other organizations such as 

the Consumer Federation of America to identify the many perspectives on 

the issues being studied. In conjunction with our work on another report, 

we sent a survey to all 175 managers of DOD’s personal financial 

management programs on installations in the United States.8

 We also 

surveyed the insurance commissioners for the 50 states, the District of 

Columbia, and four territories: American Samoa, Guam, Puerto Rico, and 

the Virgin Islands. In addition, we interviewed personnel from the state 

insurance commissioner’s office for 4 of the 6 states in which we conducted 

site visits to military installations, as well as personnel from the state 

insurance commissioner’s office in Georgia. We also asked insurance 

companies and two national insurance associations to identify agents and 

company representatives who could be interviewed about solicitation and 

allotment practices at locations near the six installations we visited.

During our six site visits, we requested materials related to the marketing 

and sale of supplemental life insurance and the establishment of allotments 

for that purpose. Those materials included a list of life insurance agents 

approved for on-installation solicitation, handouts distributed to assist 

servicemembers in determining their need for supplemental life insurance, 

6

 An ongoing GAO effort is examining the characteristics of the commercial products being 

marketed to servicemembers and the regulation of those products.

7

 Pub. L. No. 103-62 (Aug. 3, 1993).

8

 See GAO, Military Personnel: More DOD Actions Needed to Address Servicemembers’ 

Personal Financial Management Issues, GAO-05-348 (Washington, D.C.: Apr. 26, 2005).
Page 5 GAO-05-696 Servicemember Insurance

documentation of violations of personal commercial solicitation and 

insurance-related policies, and complaints related to insurance solicitation 

and allotment processing. While on site visits, we conducted interviews or 

focus groups with installation leaders; the coordinator for the installation’s 

personal commercial solicitation program; servicemembers; legal 

assistance attorneys from the Judge Advocate General corps; finance 

department personnel who managed and processed allotments; family 

support center staff responsible for personal financial management 

training and counseling activities; staff from morale, welfare, and 

recreation; and representatives of on-installation banks and credit unions. 

We observed the methods used to process and enter allotments for 

supplemental life insurance into the pay system. We assessed the reliability 

of allotment databases, and we later note in this report, limitations 

associated with the databases that prevented us from accurately estimating 

the number of allotments or amount of payments for supplemental life 

insurance. We performed our work from May 2004 through May 2005 in 

accordance with generally accepted governmental auditing standards. 

Additional information on our scope and methodology can be found in 

appendix I.

Results in Brief DOD does not know the extent to which agents are violating DOD’s 

regulations governing the solicitation of supplemental life insurance to 

active duty servicemembers on installations in the United States and does 

not actively disseminate information on all confirmed violations to other 

interested parties. DOD had not collected information on the number, 

types, and severity of violations. Data from our survey of all DOD personal 

financial program managers on domestic installations, our interviews 

conducted on six installations, and cases where life insurance agents had 

been banned from installations indicate that solicitation violations are 

occurring. In response to our 2004 survey, at least one-quarter of financial 

program managers responding to our survey indicated that five types of 

prohibited life insurance practices (such as providing misleading sales 

presentations) occasionally or routinely occurred on their installation 

during the preceding 12 months. Also, at least 26 cases of banning agents 

for violations occurred between October 2001 and October 2004. Prior to 

our request for DOD to determine the number of enforcement actions when 

agents had been banned, DOD had not actively disseminated violation 

information to other parts of DOD or to state regulators. The absence of 

evaluative and reporting requirements in DOD’s solicitation directive 

contributed to DOD’s failure to assemble and disseminate such data. 

Failure to gather comprehensive information on all violators and 
Page 6 GAO-05-696 Servicemember Insurance

disseminate it to all parts of DOD and appropriate state regulators limits 

the military’s ability to effectively and efficiently identify problem agents or 

companies as well as patterns of violations.

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 regulations are implemented. Database constraints 

prevented us from determining the number of servicemembers using 

supplemental life insurance allotments or the amount of money being paid 

to companies. We were unable to develop reliable estimates because of 

database quality concerns that we have previously documented as well as 

problems with the allotment forms. These problems limit the visibility that 

DOD and the installations have over the perceived need by servicemembers 

for supplemental life insurance. Second, contrary to DFAS regulations, 

some finance personnel have accepted forms to start the allotments 

without verifying that the person submitting the form was authorized to do 

so. Finance personnel said they do so to ensure that policies start promptly, 

but starting allotments without servicemembers’ awareness can negatively 

affect members’ finances and their unit’s morale and readiness. The DOD 

solicitation directive discusses a 7-day “cooling-off” period between when 

E1s, E2s, and E3s sign a supplemental life insurance application and when 

finance personnel certify the allotment. But ambiguity in the requirement 

and the use of generic allotment forms can result in inconsistent 

enforcement of this requirement. Finally, some insurance officials maintain 

that chains of command prevent servicemembers from purchasing life 

insurance by not processing their allotments. We were unable to 

substantiate that assertion, based on our inability to obtain sufficient 

participation in our servicemember focus groups. Servicemembers may 

have decided not to purchase a particular policy for other reasons such as 

buyer’s remorse or finding a more economically priced policy.

DOD’s revised directive on personal commercial solicitation on DOD 

installations adds new requirements, but does not fully address oversight 

problems. The draft directive incorporates existing interim guidance on 

financial education and current procedures pertaining to advertising and 

commercial sponsorship by solicitors. The draft directive also adds new 

requirements for gathering and disseminating data on solicitation 

violations, including maintaining a list of banned agents and disseminating 

such information to state regulators. However, the focus of the new 

requirements is on banned agents only. As was noted earlier, however, 

gathering and disseminating only the information concerning violations 

severe enough to cause the banning of agents will prevent DOD from 
Page 7 GAO-05-696 Servicemember Insurance

identifying the number, types, and severity of all confirmed violations, or to 

recognize patterns of violations. The proposed new requirements also 

include having installation commanders inquire into any alleged violations 

of the solicitation regulation, and having insurance agents provide 

servicemembers with a DOD-wide questionnaire to evaluate their 

solicitation experience. The installation commander’s inquiries could 

improve DOD’s oversight of solicitation violations if an additional 

requirement existed for reporting all confirmed violations to higher-level 

commands. The questionnaire may be of limited value because it 

documents interactions that were not described as problems during our 

site visits—that is, insurance agents complying with requirements by 

soliciting in one-on-one prearranged appointments with servicemembers. 

An additional change in the directive, requiring insurance agents to clearly 

identify insurance products, could result in servicemembers’ having better 

information for making decisions on purchasing supplemental life 

insurance.

We are making five recommendations to improve DOD’s policies and 

practices regarding supplemental life insurance solicitation on bases in the 

United States and the allotment process to purchase such products. Our 

recommendations pertain to enhancements to oversight requirements for 

evaluation and reporting violations, clarifications of ambiguous 

requirements, and improvements to the procedures used for allotments to 

purchase supplemental life insurance. In commenting on a draft of this 

report, DOD concurred with our recommendations.

Background DOD’s directive on personal commercial solicitation establishes the 

policies and practices governing supplemental life insurance sales on 

installations in the United States and overseas.9

 Each service provides 

additional policies and practices regarding on-installation commercial 

solicitation, and some installations further specify how these DOD and 

service policies and practices will be implemented locally.10 Importantly, 

DOD and the service policies do not cover supplemental life insurance 

9

 DOD Directive 1344.7, Personal Commercial Solicitation on DOD Installations (Feb. 13, 

1986).

10 Army Regulation 210.7, Commercial Solicitation on Army Installations (Apr. 22, 1986); 

Secretary of the Navy Instruction 1740.2D, Solicitation and Conduct of Personal 

Commercial Affairs (Apr. 27, 1987) for the Navy and the Marine Corps; and Air Force Policy 

Directive 36-29, Military Standards (June 1, 1996).
Page 8 GAO-05-696 Servicemember Insurance

solicitation that occurs off an installation. For example, servicemembers 

can obtain life insurance through the Internet or from companies that 

advertise in private-sector publications aimed at military personnel. Also, 

some life insurance agents might sell supplemental life insurance off the 

installation after (1) the agents initially generated leads on potential 

customers through on-installation efforts such as sponsorship of morale, 

welfare, and recreation events; or (2) other types of initial contacts that 

include offering servicemembers a free meal at a local restaurant.

Although the steps used to obtain permission to solicit on an installation 

may vary, the DOD directive notes that solicitors must meet the following 

requirements: be duly licensed, have the permission of the installation 

commander, and have made a specific appointment with a servicemember 

and conduct it in family quarters or other areas designated by the 

installation commander. The supplemental life insurance products offered 

on installations in the United States must comply with the insurance laws 

for the applicable state, contain no restrictions by reason of military 

service or occupation unless the restrictions are clearly stated on the face 

of the contract, plainly indicate any extra premium charges if they are 

imposed for reasons of military service or occupation, and contain no 

variation in the amount of death benefit or premium based on the length of 

time the contract has been in force unless the variations are clearly 

described therein.

In addition to specifying requirements for the solicitors and the life 

insurance products, the DOD directive identifies the 14 prohibited 

practices, shown in table 1.11 Committing any of the prohibited practices 

can result in an agent or an agent’s affiliated insurance company being 

banned. Among the other grounds for banning agents are failure to be duly 

licensed to sell insurance products under applicable federal, state, or local 

municipal laws; personal misconduct while on the installation; possession 

or attempted possession of allotment forms or their facsimiles;12 and 

substantiated complaints or adverse reports regarding goods or services 

and the manner in which they are offered.

11 DOD Directive 1344.7, sec. 6.4.

12 DOD Directive 1344.7, sec. 6.5. This DOD directive authorizes an installation commander 

to deny or revoke permission to an insurance agent or affiliated insurance company in 

possession of or attempting to possess allotment forms or their facsimiles to solicit on 

military installations. 
Page 9 GAO-05-696 Servicemember Insurance

Table 1: 14 Practices Prohibited by the DOD Directive on Personal Commercial 

Solicitation on DOD Installations

Source: DOD Directive 1344.7.

Prohibited Practices

Solicitation of recruits, trainees, and transient personnel in a mass or captive audience.

Making appointments with or soliciting military personnel who are in on-duty status.

Soliciting without appointment in areas utilized for housing or processing of transient 

personnel, barracks areas used as quarters, unit areas, family quarters, and areas 

provided by installation commanders for appointed interviews.

se of official identification cards by retired or reserve members of the military services to 

gain access to installations for the purpose of soliciting.

UProcuring, attempting to procure, or supplying roster listings of DOD personnel for 

commercial solicitation purposes.

Offering unfair, improper, and deceptive inducements to purchase or trade.

Using rebates to facilitate transactions or to eliminate competition.

Using manipulative, deceptive, or fraudulent devices, schemes, or artifices, including 

misleading advertising and sales literature.

Using oral or written representations to suggest or give the appearance that DOD 

sponsors or endorses any particular company, its agents, or the goods, services, and 

commodities it sells.

Full-time DOD personnel making personal commercial solicitations or sales to DOD 

personnel who are junior in rank or grade.

Entering into any unauthorized or restricted area.

Using any portion of installation facilities, including quarters, as a showroom or store for 

the sales of goods and services, unless otherwise authorized.

Using any portion of installation facilities, including quarters, as a showroom or store for 

the sales of goods and services, unless otherwise authorized.

Advertising addresses or telephone numbers of commercial sales activities conducted on 

the installation, except authorized activities conducted by family members of military 

families residing in military housing.
Page 10 GAO-05-696 Servicemember Insurance

During the past decade, DOD issued two reports that addressed problems 

with on-installation supplemental life insurance solicitation. In March 1999, 

the DOD Inspector General (DODIG) found that improper solicitation 

practices occurred at all 11 of the sampled installations.13 The improper 

practices included presentations by unauthorized personnel, presentations 

to captive audiences, solicitation during duty hours, solicitation in the 

barracks, and subjecting servicemembers to sales pressure and misleading 

sales presentations. The DODIG noted that the personal commercial 

solicitation directive was adequate but that additional controls were 

needed to administer and enforce the solicitation process. Among other 

things, the DODIG suggested there was a need for improved oversight at 

the installation level, stricter enforcement procedures when improper 

solicitation practices are substantiated, and additional interface with state 

regulatory authorities. In May 2000, a report commissioned by the Office of 

the Under Secretary of Defense for Personnel and Readiness reviewed 

insurance solicitation practices on DOD installations and identified many 

of the same concerns and recommendations contained in the DODIG 

report.14 In September 2000, DOD’s Office of Force Management Policy 

established an insurance solicitation oversight working group to develop a 

strategy for eliminating prohibited life insurance solicitation practices on 

DOD installations. The working group’s recommended improvements were 

included in a draft revision of the directive on personal commercial 

solicitation, and this draft revision was published for public comment in 

August 2003.

An important step in purchasing supplemental life insurance is making the 

arrangement to pay for it. Some servicemembers pay for the insurance with 

a payroll allotment,15 a process that is governed by the DOD’s Financial 

Management Regulation and individual service policies and is under the 

responsibility of DFAS. While the process for starting an allotment for 

supplemental life insurance varies across services and installations, it can 

be summarized in three steps:

13 See DODIG, Report No. 99-106.

14 See Final Report: Insurance Solicitation Practices on Department of Defense 

Installations.

15 DOD, Financial Management Regulation 7000.14-R, Vol. 7A, Definitions, page xliv, 

indicates that an allotment is the definite portion of the pay and allowance of a person in the 

military service, which DFAS is authorized to pay directly to a person or an institution.
Page 11 GAO-05-696 Servicemember Insurance

1. Servicemembers or their representatives with a special power of 

attorney complete an allotment form and submit it either directly to the 

installation finance office or to the finance office through the 

servicemembers’ unit administrative office.

2. The installation finance office processes the allotment requests and 

electronically submits them to DFAS.

3. The first monthly payments are made to vendors more than a month 

after the forms are submitted, because the processing of the allotment 

requests takes time and the once-a-month payments result in the need 

to wait for half of the payments to be taken out of each of the 

servicemembers’ next two payroll deposits.

The allotments for all types of commercial insurance are supposed to be 

coded as an AI discretionary allotment when they are entered into a DFAS 

database.16 The procedure for purchasing SGLI with an allotment is 

different from that used to purchase private supplemental life insurance 

with an allotment. One reason is active duty servicemembers are 

automatically insured for the maximum SGLI coverage. Servicemembers 

may subsequently elect to reduce their SGLI coverage, or to cancel it 

entirely.

DOD’s effort to revise the directive began in 2002 after reports17 in 1999 and 

2000 documented problems with supplemental life insurance solicitation 

on installations and made recommendations for improvement. In 2003, 

DOD obtained public comments on a draft directive during a public forum 

available to interested parties. Those comments and other input from 

sources such as DOD’s general counsel served as the basis for a draft 

directive published in the Federal Register on April 19, 2005, and discussed 

during a public hearing held on May 6, 2005, to obtain additional comments.

16 DOD, Financial Management Regulation 7000.14-R, Vol. 7A, Chapters 41 and 42 

(February 2002), contains the policies and procedures for allotments. Each military service 

also has additional allotment processing policies and practices. See, for example, Army 

Regulation 37-104-4, Military Pay and Allowances Policy and Procedures—Active 

Component, Chapter 24 (Sept. 30, 1994).

17 DODIG, Report No. 99-106, and Final Report: Insurance Solicitation Practices on 

Department of Defense Installations.
Page 12 GAO-05-696 Servicemember Insurance

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 

violations18 to other portions of DOD and state insurance regulators. 

Although many of the sources that we contacted for our review identified 

violations, DOD does not know how widespread the violations are because 

it has not collected information on the number, types, and severity of the 

violations. Even when violations have been severe enough to result in 

commanders banning agents from their installation, DOD did not actively 

provide that information to other installations or to 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. But data from our review suggest that the 

violations are not restricted to a few installations. Our data regarding 

alleged violations of the 14 prohibited practices identified in DOD’s 

commercial solicitation directive came from multiple sources: perceptions 

expressed in a DOD-wide survey and numerous interviews at six 

installations; information on the number and geographical dispersion of 

cases where installation commanders had banned agents during the past 

3 years because of violations; and a review of in-depth documentation for 

four of the cases serious enough to result in banning agents.

18 Confirmed violations are acts that an installation commander has determined, after 

consideration of the entire record to include any information submitted by the insurance 

company(s) and agent(s) involved, are violations of DOD’s commercial solicitation policies 

and procedures. 
Page 13 GAO-05-696 Servicemember Insurance

A survey of personal financial management program managers19 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.20 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. 1). In interviews conducted during our visits to six installations, 

multiple sources—for example, solicitation coordinators, legal assistance 

attorneys, servicemembers, and insurance agents—indicated that the types 

of violations shown in figure 1 had occurred on their installations. For 

three or more of the six installations, multiple sources told us of agents 

inappropriately using their military retiree credentials to gain access to 

servicemembers for life insurance solicitation purposes, life insurance 

agents possessing or processing allotment forms, and life insurance agents 

participating in military-sponsored training. The installations had little or 

no documentation to show that the violations identified in the interviews 

had been reported or investigated.

19 The personal financial management program manager is a professional staff member 

designated and trained to organize and execute financial planning and counseling programs 

for the military community. See GAO-05-348 for additional details on the managers, the 

program, and other findings from the survey.

20 The six types of violations used as survey items were based on findings from the 1999 

DODIG report (see DODIG, Report No. 99-106). The report showed that seven types of 

prohibited practices occurred on the studied installations. Because supplemental life 

insurance solicitation was one of many issues covered in our survey, the other types of 

violations were excluded to limit the time required to answer the survey.
Page 14 GAO-05-696 Servicemember Insurance

Figure 1: Personal Financial Management Program Managers’ Perceptions of the Frequency with Which Selected Solicitation 

Prohibitions Were Violated on Their Installation from January through December 2004

0 20 40 60 80 100

Required attendance at life insurance presentations

Presentations to groups by life insurance personnel

Presentations by unauthorized personnel

Solicitation during duty hours

Solicitation in the barracks

Misleading sales presentations

In percent

42.7 24.8 20.5 12.0

46.0 22.1 23.9 8.0

47.4 19.8 23.3 9.5

49.2 21.2 20.3 9.3

50.4 18.5 21.9 9.2

73.5 9.4 13.7 3.4

Source: GAO.

Never

Seldom

Occasionally

Routinely
Page 15 GAO-05-696 Servicemember Insurance

After we asked DOD if it had a list of insurance agents and companies 

whose solicitation privileges had been withdrawn, DOD requested the 

information from the services and installations.21 As of April 2005, DOD’s 

request for information identified 51 cases that occurred on installations in 

the United States from April 1998 through October 2004. Some installations 

supplied information on enforcement actions that did not result in the 

banishment of agents or companies. Table 2 provides information on 26 

cases in which commanders banned agents—25 from DOD’s list and one 

additional case we later identified—from October 2001 through October 

2004.22 Examining only the more recent cases minimizes the possibility that 

a case would have been the basis for findings in the 1999 and 2000 DOD 

reports on supplemental life insurance. Table 2 shows that the 26 cases 

occurred on 11 installations in eight states. Our analysis additionally 

revealed that agents from one life insurance company were involved in 9 

(about 35 percent) of the 26 cases, and agents from another company were 

involved in 6 (about 23 percent) of the cases.

21 After gathering the data for this review, DOD posted information about the 51 cases on a 

DOD Web site. 

22 It is likely that more than 26 enforcement actions resulted in commanders banning agents 

from their installation during the period of interest. DOD acknowledged that its list was 

probably incomplete; and we found an additional case at Fort Bliss, Texas. Also, 6 of the 51 

cases did not include a date for the commander’s actions, but the actions may have occurred 

during our restricted period of interest. In addition, some of the cases in DOD’s list, such as 

those at Beale Air Force Base, California, indicate that events occurred in multiple years, 

but we only counted the events as one case. Finally, since DOD told us that its request for 

information pertained to banned agents only, additional cases would probably result if DOD 

made another request for all enforcement actions.
Page 16 GAO-05-696 Servicemember Insurance

Table 2: Locations and Years That Commanders Banned Agents from an 

Installation—October 2001 through October 2004

Source: DOD data, and GAO analysis.

Our review also examined the in-depth documentation for two cases from 

Camp Pendleton, California, and two cases at Fort Benning, Georgia, both 

of which are listed in table 2. The documentation, sometimes more than 200 

pages, illustrates the situations that led to the violations, the types of 

violations occurring, and the amount of effort required to conduct the 

investigations. The cases are summarized as follows, and additional details 

on each are provided in appendix II.

State Installation, listed by separate action Year

California Beale Air Force Base 2003

Beale Air Force Base 2003

Camp Pendleton Marine Corps Base 2003

Camp Pendleton Marine Corps Base 2003

Georgia Fort Benning 2003

Fort Benning 2004

Fort Benning 2004

Fort Benning 2004

Fort Benning 2004

Fort Benning 2004

Fort Benning 2004

Fort Gordon 2003

Fort Gordon 2003

Fort Gordon 2003

Fort Gordon 2003

Fort Gordon 2004

Kansas McConnell Air Force Base 2002

Illinois Naval Station Great Lakes 2001

Mississippi Naval Construction Battalion Center Gulfport 2003

North Carolina Fort Bragg 2004

Fort Bragg 2004

Texas Fort Bliss 2003

Virginia Fort Eustis 2002

Fort Eustis 2002

Fort Eustis 2004

Naval Amphibious Base Little Creek 2003
Page 17 GAO-05-696 Servicemember Insurance

• Camp Pendleton: In 2003, an insurance agent requested and obtained 

authorization to teach a class on veterans’ affairs benefits and financial 

planning to Marines. During the class, the agent said very little about 

veterans’ benefits but spoke at length about investments. The agent 

distributed cards for Marines to provide contact information. Using this 

information, the agent later sold Marines insurance policies at their 

homes and on duty, sometimes without appointments. During the 

meetings, Marines were given the impression that the agent represented 

the Department of Veterans Affairs. This agent’s solicitation privileges 

were suspended for 2 years by the installation.

• Camp Pendleton: In 2003, insurance agents requested and obtained 

permission to teach veterans’ affairs classes to Marines fresh from boot 

camp. The classes, with required attendance, started as veterans’ 

benefits discussions but shifted to investment sales pitches after noncommissioned officers left the classrooms. Agents distributed 

applications, allotment forms, and statements of understanding, 

encouraging participants to sign quickly, not read the forms, leave the 

dollar amount lines blank, and provide signed photocopies of their 

identification cards. The Marines were not allowed to take any 

paperwork with them and were told that copies would be sent to their 

home of record. The agents, including at least one retired Marine, were 

fired by their employer. Refunds were offered to those who purchased 

policies.

• Fort Benning: In 2003 and 2004, agents accessed soldiers in a basic 

combat training brigade through unit non-commissioned officers for the 

express purpose of providing financial planning classes. In unit 

classrooms, the agents discussed the value of investing. At the end of 

the presentations, soldiers who desired additional information 

completed a form. Weeks later, the agents met with soldiers individually 

or in small groups in the unit’s area. The agents were fired from the 

companies they represented, and several officers and enlisted personnel 

involved in arranging the presentations were reprimanded. The manager 

for DOD’s personal commercial solicitation program said that he was 

unaware of any other instance where enforcement included punishment 

of installation personnel, but added that his office does not track such 

information.

• Fort Benning: In 2002, two agents accessed soldiers in the infantry 

training brigade through unit non-commissioned officers for the express 

purpose of providing financial management classes. The classes were 
Page 18 GAO-05-696 Servicemember Insurance

included on the training scheduled in conjunction with other personal 

financial affairs presentations and were conducted in unit classrooms. 

Non-commissioned officers escorted the soldiers to the classrooms. 

According to the investigation, some of the non-commissioned officers 

had knowledge of the solicitation actions taking place. These agents 

later had their solicitation privileges revoked by the installation, and 

refunds were provided to those who purchased policies. 

DOD-wide, service-specific, and installation-level factors contribute to the 

lack of information on violations. The absence of evaluation and reporting 

requirements in DOD’s directive on personal commercial solicitation is a 

primary reason why the services and installations do not emphasize 

assessment and why DOD cannot estimate the extent to which life 

insurance agents are violating the 14 proscribed practices and other parts 

of the directive.23 The absence at the installation level of documentation of 

confirmed violations by life insurance agents is also caused by several 

other factors, including: (1) the time it takes for personnel to lodge a 

complaint and other personnel to investigate it; (2) reluctance to get either 

the agents or installation personnel in trouble, especially when the agents 

appear to have the support of someone in the chain of command; and 

(3) the lack of knowledge about permitted and prohibited practices by both 

individuals being solicited and other servicemembers who allow life 

insurance agents to conduct financial training or perform other prohibited 

practices.

The lack of documentation on confirmed violations can result in negative 

outcomes for both DOD and the life insurance industry. For instance, DOD 

is unable to identify the extent of specific types or patterns of problems, 

such as multiple instances of the same violation for agents from a single 

insurance company. Furthermore, DOD cannot determine whether there 

are many agents violating the regulations on a few occasions; a small 

number of agents violating the regulations on many occasions; or many 

people talking about a relatively few, well-publicized violations. Without 

knowing the extent of the problem, DOD cannot develop an effective and 

efficient strategy for curbing the violations. The lack of documentation 

could also negatively affect the life insurance industry and its agents. 

“Broad brush” complaints create a negative image of the industry. Some of 

the agents we interviewed were concerned that the highly publicized cases 

23 The Army is the only service with a regulation requiring that violations be reported to the 

service level.
Page 19 GAO-05-696 Servicemember Insurance

are painting a negative picture of them and their profession, even though 

they said they had not violated the regulations on personal commercial 

solicitation.

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. Although the DOD solicitation directive 

provides installation commanders with discretionary authority to report 

banned agents to their military department, they are not obliged to do so. 

Specifically, if installation commanders believe it is warranted, they can 

recommend extending or lifting actions taken against life insurance agents 

on other installations to their respective military departments. Additionally, 

the Office of the Secretary of Defense for Personnel and Readiness could, 

when appropriate, extend or lift the actions for other military 

departments.24 Notably, the current solicitation directive does not require 

the installation commander to routinely report information on all 

confirmed violations to state insurance regulators.25 It merely requires 

installations to notify appropriate state licensing authorities if the grounds 

for withdrawing solicitation privileges involve the eligibility of the agent or 

company to hold a state license or meet other regulatory requirements.26

One indication that installation commanders and DOD policy officials have 

had only limited communications about violations was the absence of a 

DOD list of cases where agents had been banned from installations for 

violating the personal commercial solicitation directive. The DOD policy 

office did not generate its list of cases until we requested the information 

for this review. This lack of information sharing occurred even when policy 

violations were severe enough to warrant the banning of agents. These 

communications-related problems continued despite three 

recommendations in the 1999 DODIG report: (1) require that all 

24 DOD Directive 1344.7, sec. 6.5.2.4.

25 It is important to involve state insurance authorities because in accordance with the 

McCarran Ferguson Act, 15 U.S.C. sec. 1011-1015 (1948), the life insurance industry 

generally is regulated under state laws. The Military Personnel Financial Services Protection 

Act, S. 418, 109th Congress, sec. 6 (2005) was introduced in Congress this year and would, if 

enacted into law, make it clear that state law shall apply to insurance activities conducted 

on military installations.

26 DOD Directive 1344.7, sec. 6.5.2.2.
Page 20 GAO-05-696 Servicemember Insurance

installations in the local area and the services’ higher commands be 

notified of “any adverse actions” taken against an insurance agent; (2) 

require the services to track such actions and report the information to the 

office with oversight responsibility; and (3) increase the interaction with 

state life insurance regulators. During our visits to six installations, 

solicitation coordinators told us that they did not routinely interact with 

their counterparts on other installations, but several of the insurance 

agents that we interviewed said they were approved to solicit on multiple 

bases in multiple states.

We found a similar lack of communication between the various parts of 

DOD and state insurance regulators. In our December 2004 survey of all 

state insurance commissioners’ offices, only one state reported that DOD 

had notified it of disciplinary actions taken against a life insurance agent 

during the prior 12 months, even though several of the 26 cases in table 2 

occurred during the same period. Our survey also revealed that 100 percent 

of the life insurance commissioners’ offices responding to our survey said it 

would be a good practice if DOD were to notify their offices whenever it 

took a disciplinary action against a life insurance agent, and 68 percent said 

they would like more communications with the military.

Figure 2 shows the states where installation commanders took 26 

enforcement actions to ban agents from October 2001 through October 

2004; states where regulators indicated on our survey that the office had an 

ongoing investigation involving life insurance sales to servicemembers; and 

the number of active duty servicemembers in the states. State regulators 

reported in our survey that they had ongoing investigations in nine states: 

Alaska, California, Colorado, Georgia, Illinois, Iowa, Kentucky, New York, 

and Texas. Regulators’ investigations were occurring in four states 

(California, Georgia, Kentucky, and Texas) that have at least 30,000 

servicemembers in them. Four states (California, Georgia, Illinois, and 

Texas) had both an ongoing investigation by the state insurance regulators 

in December 2004 and an installation where an agent had been banned 

between October 2001 and October 2004.
Page 21 GAO-05-696 Servicemember Insurance

Figure 2: States Where Installation Commanders Banned Agents from October 2001 through October 2004, States Reporting 

Ongoing Investigations of Supplemental Life Insurance Solicitation to Servicemembers in December 2004, and the Number of 

Active Duty Servicemembers in the States

Note: We do not display results for the District of Columbia or for the four territories because (1) state 

regulators indicated that they had no ongoing investigations or they did not respond and (2) DOD’s list 

did not include banned agents in the five locations. 

0 - 4,999 active duty servicemembers

5,000 - 29,000 active duty servicemembers

30,000 or more active duty servicemembers

State regulators reporting ongoing investigations as of Dec. 2004

DOD reporting of agents banned from military installations since Oct. 2001

Reporting of both investigations and banned agents

Source: DOD for the number of servicemembers and banned life insurance agents, and GAO for ongoing investigations 

by state regulators.

S.C.

Va.

N.C.

Fla.

N.H.

Mass.

R.I.

Conn.

N.J.

Del.

Md.

D.C.

Alaska

Hawaii Ala.

Ariz.

Ark.

Calif. Colo.

Ga.

Idaho

Ill. Ind.

Iowa

Kans.

La.

Maine

Mich.

Minn.

Mo.

Mont.

Nebr. Nev.

N.Mex.

N.Y.

N.Dak.

Okla.

Oreg.

Pa.

S.Dak.

Tenn.

Tex.

Utah

Wash.

W.Va.

Wisc.

Wyo.

Miss.

Ohio

Ky.

Vt.
Page 22 GAO-05-696 Servicemember Insurance

Since the DODIG made recommendations to improve information sharing 

6 years earlier that were not implemented, the absence of oversight by the 

DOD policy office appears to be the primary reason for the past lack of 

DOD-wide information sharing on banned agents and the continued lack of 

information sharing on lesser confirmed violations. Ambiguity in the 

solicitation directive about who should disseminate violations-related 

information to state regulators and the types of information that should be 

disseminated may have contributed to a lack of information sharing. 

Another reason for the lack of contact relates to uncertainty regarding the 

states’ ability to govern what occurs on an installation. Several state 

regulatory officials stated that they were uncertain about whether they had 

jurisdiction over life insurance sales on military installations. DOD officials 

informed us that they began meeting with the National Association of 

Insurance Commissioners in May 2005 to address some of these issues, and 

legislation27 has been introduced in Congress to require greater 

communication between DOD and the association. Additionally, several 

installation officials stated that their office considered the involvement of 

state regulators only for serious complaints or problems that involved life 

insurance products.

The failure to disseminate information to other parts of DOD or to state 

insurance regulators about agents and companies who violate the 

solicitation policy—especially when the violations were serious enough to 

ban agents—can enable violators to continue operating on other 

installations. State insurance regulators in North Carolina told us that by 

not reporting violations to state regulators, installations prevent the state 

regulators from determining whether further actions, such as revocation of 

licenses, are warranted. Maintaining a list only of banned agents does not 

allow DOD or state regulators to spot patterns of violations by agents or 

companies that may have committed multiple lesser violations on multiple 

installations. If present, such patterns would be detectable only when 

solicitation coordinators are able (1) to identify the other installations 

where the agents or companies are approved to operate and (2) to 

communicate with their peers on the other installations about violations 

committed there by the agents or companies. Limited communications 

between installations also hinders the promotion of best practices. For 

example, other installations might be interested in Camp Pendleton’s 

testing of agents before approving them for on-installation solicitation. 

When determining whether to ban some agents from Camp Pendleton, 

27 Military Personnel Financial Services Protection Act, S. 418, 109th Congress, sec. 6 (2005).
Page 23 GAO-05-696 Servicemember Insurance

investigators were able to show that the agents correctly answered test 

questions about prohibited practices— yet still committed the prohibited 

practices.

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. Even with DFAS assistance, we could not generate 

reliable monthly estimates of the number of servicemembers with, or the 

amount of money allotted for, supplemental life insurance. The unreliability 

of estimates stemmed from longstanding database and computer system 

constraints, such as the coding used when gathering and entering the life 

insurance allotments into the databases and computer problems that we 

have documented in prior reports. Another problem area with 

supplemental life insurance allotments is the lack of certification that 

occurred when allotment forms were submitted to and processed by some 

finance offices. Contrary to financial management regulations, some 

finance personnel were accepting allotment forms through the mail or from 

individuals without verifying that the submitter was either the 

servicemember or that person’s representative with a special power of 

attorney. We could not substantiate insurance officials’ and agents’ 

assertion that servicemembers were being prevented from using allotments 

to purchase life insurance. Several factors suggest that all servicemembers 

who want to obtain supplemental life insurance can do so.
Page 24 GAO-05-696 Servicemember Insurance

Databases of Allotment 

Information Cannot Be 

Utilized to Monitor 

Servicemembers’ Use of or 

Perceived Need for 

Supplemental Life 

Insurance

We, with assistance from DFAS, attempted but could not determine with 

sufficient reliability either the number of servicemembers who have 

allotments for supplemental life insurance products or the number of 

dollars that servicemembers pay as allotments to life insurance companies 

each month. Although DOD’s Financial Management Regulation28 supplies 

the primary guidance governing the procedures used to gather allotment 

information and then electronically enter and store the information, each 

service has a policy and procedures directing how to implement the DOD 

regulations. Among other things, the military services’ policies and 

procedures specify how allotments for supplemental life insurance and 

other products or services are to be coded, the number of discretionary 

allotments that each servicemember is allowed, and which forms can be 

used to initiate allotments. Allotments to purchase life insurance are also 

governed by the DOD directive on personal commercial solicitation. The 

directive requires a 7-day cooling-off period between the time when E1s 

through E3s sign a supplemental life insurance application and the time the 

allotment is certified.29

A variety of DFAS database-related constraints limit the visibility that the 

DOD solicitation policy office, the services, and installations have over 

servicemembers’ use of and perceived need for supplemental life 

insurance. These constraints include the following:

• Although the databases can be used to identify servicemembers with an 

insurance allotment (an AI code), the allotment could be for 

servicemembers’ or family members’ life, health, automobile, or other 

insurance. Conversely, other servicemembers’ insurance allotments are 

not detectable if they are coded for savings (an AS code) or other types 

of accounts that the servicemembers also have with the company 

providing supplemental life insurance.

• Servicemembers are limited to six allotments in total and one 

discretionary allotment per company, even if they have multiple 

28 DOD, Financial Management Regulation 7000.14-R Vol. 7A, Chapters 41 and 42; DFASINM (Army), Part 6, Chapter 1; DFAS–DE (Air Force) Manual 7073-1, Chapter 57; DJMS 

Procedures Training Guide (Navy), Part 6; DFAS-KC 7220.31-R (Marine Corps), Chapters 23-

25 and appendixes N, O, P, and Q.

29 DOD Directive 1344.7, encl. E3.3.2.
Page 25 GAO-05-696 Servicemember Insurance

accounts (supplemental life insurance, savings, and so forth) with a 

company.

• DOD and service regulations permit the use of at least seven different 

allotment forms, but forms such as the government-wide Standard Form 

1199A or DOD-wide DD Form 2558 do not ask whether the allotment is 

for supplemental life insurance. (See app. III for a copy of each form.)

• The payroll databases cannot tell how many servicemembers pay 

insurance companies directly by checks, electronic withdrawals from 

personal accounts, and so forth.

• DFAS maintains separate databases for the different military services, 

and the code used to identify an insurance company is not the same for 

all services. Creating a DOD-wide list requires additional work to merge 

the resulting information.

DOD was informed about some of these database constraints in the 1999 

DODIG report, in which analysts noted that they could not determine what 

portion of the allotments were made specifically for life insurance.

A major cause of these database-related problems is DOD’s systems 

supporting servicemembers’ pay. In our earlier reports, we documented 

serious problems with these systems, noting that they were prone to error 

and required manual data reconciliation, correction, and entry across 

nonintegrated systems.30 While a significant system enhancement project is 

under way to improve the administration of military pay, DOD is likely to 

continue operating with existing system constraints for several years. The 

continued use of forms that do not require information and coding specific 

to life insurance could cause allotment data to continue to be unreliable for 

oversight purposes, even when the new computer system becomes 

operational. Information obtained during interviews indicated another 

cause for data unreliability. Some interviewees suggested that 

servicemembers might use codes other than AI to avoid the additional 

requirements encountered when starting allotments for supplemental life 

insurance. The additional requirements include the cooling-off period and 

30 See GAO, DOD Systems Modernization: Management of Integrated Military Human 

Capital Program Needs Additional Improvement, GAO-05-189 (Washington, D.C.: Feb. 11, 

2005), and GAO, Military Pay: Army National Guard Personnel Mobilized to Active Duty 

Experienced Significant Pay Problems, GAO-04-89 (Washington, D.C.: Nov. 13, 2003).
Page 26 GAO-05-696 Servicemember Insurance

the requirement to submit a paper form for all supplemental life insurance 

allotments, rather than using the electronic MyPay system.

The absence of data regarding which servicemembers do or do not carry 

supplemental life insurance limits the oversight that DOD policy officials 

and installation solicitation coordinators can exert. For example, the 

inability to obtain accurate data prevents the DOD policy office from 

monitoring increased or decreased perceived needs for supplemental life 

insurance, an important issue now that new legislation has been enacted to 

almost double the lump sum death benefits offered through the 

government. Also, the lack of accurate data prevents the solicitation 

coordinators from easily checking whether servicemembers on an 

installation submitted an unusually large number of new allotments for 

supplemental life insurance during a short period, a possible sign of mass 

solicitation to recruits or trainees or other prohibited practices.

Allotments for 

Supplemental Life 

Insurance Have Been 

Started without Verifying 

Required Authorization and 

the Elapse of the 

Cooling-Off Period

Contrary to regulations, some finance personnel have accepted allotment 

forms to start supplemental life insurance without verifying that the person 

submitting the form is authorized to do so or, if applicable, that a 

cooling-off period has occurred. According to DOD’s Financial 

Management Regulation, establishment of, discontinuance of, or changes 

to existing allotments for supplemental life insurance are to be based on a 

written request by a servicemember or someone with a special power of 

attorney on behalf of the servicemember.31 For junior enlisted 

servicemembers, the DOD directive on personal commercial solicitation 

provides an additional requirement: “For personnel in pay grades E-1, E-2, 

and E-3, at least seven days shall elapse for counseling between the signing 

of a life insurance application and the certification of an allotment. The 

purchaser’s commanding officer may grant a waiver of this requirement for 

good cause, such as the purchaser’s imminent permanent change of 

station.”

31 DOD, Financial Management Regulation 7000.14-R, Vol. 7A, Chapter 41, sec. 410801. This 

regulation allows most financial allotments to be established though MyPay, DOD’s 

automated payroll program. MyPay allows servicemembers to start, stop, or change 

allotments with financial institutions when the funds are directed to be sent to a savings or 

checking account. MyPay is not intended to be used for allotments to purchase 

supplemental life insurance. Use of MyPay to establish a supplemental insurance allotment 

makes it impossible for installation officials to monitor or enforce the proper use of 

insurance allotments and other parts of the on-installation personal commercial solicitation 

requirements.
Page 27 GAO-05-696 Servicemember Insurance

Nonetheless, DOD personnel and insurance agents indicated that some 

offices accepted allotment forms personally submitted by insurance agents 

or through the mail with only the signature on the form serving as proof 

that the servicemember wanted to start an allotment for supplemental 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.

• Finance office personnel at Naval Station Great Lakes said that about 

half of all insurance allotment forms submitted to and processed by 

their office came from insurance agents.

• DFAS representatives who process allotments for Marines stated that 

they accepted and processed allotment forms submitted directly from 

Marines through the mail without the required certification.

• Finance office personnel at Lackland Air Force Base were concerned 

about the high number of mailed allotment forms from insurance 

companies or otherwise on behalf of servicemembers and requested 

DFAS guidance on processing such forms.

Several reasons were suggested for DOD personnel’s acceptance of 

allotment forms that were not submitted personally by the servicemembers 

or their representatives with a special power of attorney. DFAS personnel 

representing the Marines said that they accepted and processed mailed 

insurance allotment forms from Marines who, due to their transitional 

status, were unable to properly certify the forms, but wished to promptly 

initiate policies or to keep policies from lapsing. In addition, Air Force 

personnel said that servicemembers have tight training schedules that 

make it more convenient to mail the forms than to hand carry them to the 

finance office. The Air Force has recently clarified its policies to require 

contacting servicemembers and verifying the request when allotment forms 

are received by mail.

The causes are different for noncompliance with the requirement to have 

7 days elapse between the time junior enlisted servicemembers sign a life 

insurance application and the time an allotment is certified. On allotment 

forms such as the governmentwide Standard Form 1199A or the DOD-wide 

DD Form 2558, no one is asked to certify that the required cooling-off 

period and, possibly, counseling have occurred. Therefore, these forms do 
Page 28 GAO-05-696 Servicemember Insurance

not require finance personnel to determine whether the full 7 days have 

elapsed before they certify the allotment. Other causes for noncompliance 

with the required cooling-off period are ambiguities in the directive. First, 

the requirement for a cooling-off period may be for all life insurance 

allotments started by junior enlisted servicemembers, but its inclusion in a 

directive governing only on-installation solicitation could cause finance 

officials to interpret the requirement as applying only to those allotments 

for supplemental life insurance sold on an installation to junior enlisted 

servicemembers. Second, it is unclear whether the counseling is required 

or optional during the cooling-off period. Further, the directive and the 

standard allotment forms do not contain procedures for documenting 

whether the counseling took place. Third, it is unclear when the 

commanding officer must sign a waiver for the cooling-off period and/or 

counseling.

Starting a supplemental life insurance allotment for servicemembers who 

do not want one or were not required to allow the cooling-off period to 

elapse can result in extra expenses for servicemembers who may already 

be financially challenged. Even if servicemembers receive premium 

reimbursements like those promised by insurance companies following the 

incidents at Fort Benning, Fort Bragg, Camp Pendleton, and possibly other 

places, months can pass between the paying for the allotments and the 

reimbursements. During that time, servicemembers are without a portion 

of their income, and this decreased income could result in budgeting 

difficulties and fees for such things as bounced checks and late payments. 

As we pointed out in our April 2005 report on the financial conditions of 

servicemembers and their families,32 pressure from creditors, falling behind 

in paying bills, and bouncing two or more checks were negative financial 

events reported by approximately one-eighth to one-fifth of 

servicemembers on a 2003 DOD-wide survey.33 In addition, more than 10 

percent of servicemembers answered “in over your head” or “tough to 

make ends meet but keep your head above water” when the survey asked 

them to characterize their financial condition. For servicemembers who 

32 See GAO-05-348.

33 Sampling errors of estimates for servicemembers do not exceed +/- 5 percentage points. 

These sampling errors do not include errors due to other sources, such as potential bias 

attributable to the overall 35 percent response rate. DOD conducted research to assess the 

impact of this response rate on overall estimates. We have no reason to believe that 

potential non-response bias in the estimates not otherwise accounted for by DOD’s research 

is substantial for the variables we studied in our earlier 2005 report.
Page 29 GAO-05-696 Servicemember Insurance

were already having financial difficulties, unplanned allotments and any 

extra expenses could result in debt and bad credit histories for 

servicemembers, as well as adversely affect unit readiness and morale as 

the chain of command attempts to address any resulting financial 

problems.

Assertion That 

Servicemembers Are 

Prevented from Purchasing 

Supplemental Life 

Insurance Could Not Be 

Substantiated

Some insurance officials and agents asserted that chains of command 

prevent servicemembers from purchasing supplemental life insurance, but 

we were unable to substantiate the assertion. As we have previously 

mentioned, DOD’s Financial Management Regulation requires that 

servicemembers or their representative with a special power of attorney 

complete and submit an allotment form if the supplemental life insurance is 

to be purchased with a payroll deduction. Also, the previously discussed 

requirement for a cooling-off period and possibly counseling for junior 

enlisted personnel is important to examining the life insurance officials’ 

and agents’ assertion.

During a meeting at the start of our review, officials from insurance 

companies and national insurance associations asserted that some 

servicemembers were being prevented from purchasing supplemental life 

insurance. Also, a firm that sells supplemental life insurance on and off 

multiple installations supplied us with documents34 on 1,344 

servicemembers who completed insurance applications from October 2002 

through September 2004 but did not subsequently start a policy through the 

firm. During site visits to two of the installations where the majority of the 

1,344 servicemembers were based at the time of completing their 

applications, we attempted to conduct focus groups with subgroups of 

those servicemembers. Our points of contact on the installations indicated 

that many of the servicemembers had rotated to other installations or were 

in training that could not be missed.

34 Approximately 65 percent of the files included an allotment form with a servicemember’s 

signature.
Page 30 GAO-05-696 Servicemember Insurance

Although we could not determine how representative these 1,344 

applications were of all applications completed without a purchase being 

made, this case study of the experiences at one firm provides some insight 

into the viability of cost-related alternative reasons why servicemembers 

might not follow through with the purchase of supplemental life insurance 

coverage. Our analysis of the 1,344 cases showed that 831 applications 

were for E1 through E3 servicemembers, and the per person average 

monthly cost of the products in the applications was $92.35 For those 831 

junior enlisted personnel, 3 percent of the cases contained only an 

application for life insurance, 52 percent contained only an application for 

what an official from the firm characterized as “a life insurance product 

with an accumulation fund,”36 and 45 percent included both types of 

applications.

Military officials, servicemembers, and insurance officials and agents 

identified reasons—in addition to being actively prevented from processing 

a supplemental life insurance allotment form—why servicemembers might 

not start a policy after completing an application. These other reasons 

included:

• The counseling supplied during the 7-day cooling-off period could have 

been misinterpreted as an implicit order from the chain of command not 

to purchase the insurance, rather than as advice about the advantages 

and disadvantages of purchasing supplemental life insurance or a 

particular type of coverage.

• The counseling could have resulted in the servicemember’s following 

through on purchasing a supplemental policy but obtaining it from 

another vendor, and possibly at a lower price.

• Some servicemembers may have developed buyers’ remorse when they 

later considered the competing demands on their compensation.

35 At the time that applications were completed, coverage through the government-offered 

SGLI was $16.25 per month for $250,000 of coverage. During our review, insurance officials 

stated that they too offered similar term-life policies for approximately the same amount.

36 GAO has another review under way that is examining, among other things, the quality of 

the financial products—including supplemental life insurance—offered to servicemembers.
Page 31 GAO-05-696 Servicemember Insurance

• Servicemembers may have completed the application because of high 

pressure sales practices, knowing they would not later file an allotment 

form.

• An allotment may not get started because of a lost or missing allotment 

form.

Although we were not able to determine whether chains of command were 

intentionally preventing servicemembers from purchasing supplemental 

life insurance, information of four types suggests that the inability to 

purchase supplemental life insurance coverage is probably not a 

widespread problem. First, 85 percent of the state insurance regulators in 

our survey indicated that no insurance company had filed a complaint 

regarding the sale of life insurance to servicemembers on installations from 

October 2003 through December 2004, and the other 15 percent said they 

did not know. Second, most of the insurance agents identified by the 

national insurance associations and interviewed during our six installation 

visits indicated that they had not experienced a problem with the allotment 

process. In contrast, agents for two life insurance companies typically 

reported a problem, and the concerns related primarily to the processing of 

allotments on two installations that were served by the firm that supplied 

us with the more than 1,000 cases. Third, when we were able to talk with 

servicemembers identified as having completed insurance applications 

without starting allotments, they indicated that they did not purchase the 

supplemental life insurance for reasons other than prevention by the chain 

of command.37 Finally, if servicemembers wanted life insurance and were 

actively prevented by the chain of command from filing allotment forms to 

make the purchase, they could pay the premiums by check, electronic 

withdrawals from other financial accounts, or some other means, without 

further chain of command intervention.

37 It is impossible to determine whether the installation directed us only to servicemembers 

who chose not to purchase the policies for reasons other than active prevention. We did, 

however, receive written statements from two junior enlisted servicemembers and we 

contacted one on his personal cell phone. He confirmed that he did not want the policy after 

completing the application. In addition, to lessen the likelihood that other servicemembers 

would not answer truthfully when speaking in a focus group, we administered an 

anonymous survey before the focus group sessions to promote honest responses about each 

individual’s experiences in the solicitation and allotment processes.
Page 32 GAO-05-696 Servicemember Insurance

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.38 Numerous changes have been proposed. Some 

interim policy and practices that are currently in place have been 

incorporated into the draft revision. Also, requirements for gathering and 

disseminating information have been proposed, but they do not fully 

address oversight deficiencies. Still other proposed requirements address 

issues such as the type of information that life insurance agents will 

provide to servicemembers to describe the product being offered by the 

agent.

Draft Directive Proposes to 

Incorporate Existing 

Interim Policy and 

Formalized Practices 

Already in Place

One of the larger sets of additions to the draft directive proposes to 

incorporate interim policy that DOD issued in 2002 about on-installation 

financial education presentations.39 Those additions generally prohibit 

representatives of commercial loan, finance, insurance, or investment 

companies from providing such presentations. With certain restrictions, the 

presentations may, however, be provided by representatives of the 

following types of organizations: credit unions and banks located on 

military installations,40 nongovernmental, noncommercial organizations 

expert in the field of personal financial affairs, and those that are either taxexempt (under 26 U.S.C. 501(c)(3) or (c)(23)) or under a contract with the 

government. Among other things, restrictions require that the presenter 

and educational materials use disclaimers to indicate clearly that they do 

not endorse or favor any commercial supplier, product, or service. Also, the 

installation commander shall consider the company’s history of complying 

with on-installation commercial sales instructions if the presenting 

organization is affiliated with a company that sells or markets insurance or 

other financial products.

38 70 Fed. Reg. 20316 (2005).

39 70 Fed. Reg. 20316 (2005), part 50.11 (g).

40 The draft directive also requires banks and credit unions operating on DOD installations 

to provide financial counseling services as an integral part of their financial service 

offerings. Banks and credit unions operating on DOD installations are subject to additional 

requirements specified in other DOD policies (for example, DOD Directive, 1000.11, 

Financial Institutions on DOD Installations (June 9, 2000); DOD, Financial Management 

Regulation 7000.14-R, Vol. 5, Chapter 34 (September 2000).
Page 33 GAO-05-696 Servicemember Insurance

An additional change to the draft solicitation directive incorporates 

procedures pertaining to advertising and commercial sponsorship that 

were already in place at some of the installations we visited.41 For example, 

the draft directive notes that solicitors are allowed to provide commercial 

sponsorship of DOD morale, welfare, and recreation programs or events on 

installations but are not to contact participants without their written 

permission. Interviews with insurance agents and installation personnel 

during our site visits indicated that agents were already generating lists of 

future contacts through the use of forms that program or event participants 

completed, indicating their permission for the future contact.

Proposed Evaluation, 

Reporting, and 

Dissemination 

Requirements Do Not Fully 

Address Oversight 

Deficiencies

DOD has taken some positive steps to improve its oversight of personal 

commercial solicitation on installations by proposing to add four new sets 

of requirements that pertain to gathering and disseminating evaluative 

data. Each of the requirements has associated problems that could limit the 

usefulness of the gathered and disseminated data.

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. Failure to disseminate 

information on all confirmed violations to all parts of DOD and to state 

regulators can allow violators to continue operating on installations.

41 70 Fed. Reg. 20316 (2005), part 50.11 (f).
Page 34 GAO-05-696 Servicemember Insurance

As the result of another proposed addition to the draft directive, 

installation commanders will be required to inquire into any alleged 

violations of the solicitation regulation or questionable solicitation 

practices.42 This step could increase the DOD’s oversight of the number, 

types, and severity of confirmed violations occurring throughout all 

military installations if there were also an additional requirement to report 

all confirmed violations to higher-level commands. Some factors that could 

keep the number of inquiries into potential violations artificially low are the 

lack of knowledge about which solicitation practices are prohibited, the 

steps required to report a violation, and whom to contact when a suspected 

violation occurs. We reported in April 2005 that only the Army is 

monitoring the completion of required personal financial management 

training for junior enlisted personnel, and it estimated that about 18 

percent of that group had not received the required training. Our earlier 

review did not assess the amount or the types of life insurance-related 

training provided, but we noted that each service administered its personal 

financial training differently.43 When we recommended additional DOD 

oversight by requiring the services to develop and implement plans to 

monitor the training, the Under Secretary of Defense for Personnel and 

Readiness partially concurred with our recommendation but noted that the 

DOD instruction governing personal financial management training had 

sufficient procedures to let the military departments accomplish their 

responsibilities.

Another proposed addition to the draft directive would require an 

insurance agent to provide a servicemember with a new DOD-wide 

questionnaire that would contain questions about the servicemember’s 

experiences during the prearranged appointment with the agent for 

solicitation.44 The value of information obtained from this assessment 

instrument may be very limited, and might even create an erroneous 

impression of what has occurred during the typical solicitation 

appointments. The questionnaire will document interactions that were not 

described as problem areas during our visits to six installations—that is, 

life insurance agents who were complying with the requirement to 

prearrange one-on-one solicitation meetings. Also, the voluntary 

completion of the forms will result in a lack of transparency, since some 

42 70 Fed. Reg. 20316 (2005), part 50.11 (c) (3).

43 See GAO-05-348.

44 70 Fed. Reg. 20316 (2005), part 50.11 (a) (iii).
Page 35 GAO-05-696 Servicemember Insurance

forms may not be turned in for a variety of reasons: For example, they were 

never distributed by an agent, or the servicemembers did not want to take 

the time to fill in and drop off the form. In addition, the directive includes 

no requirement to submit the data to higher levels so that service-wide and 

DOD-wide information can be developed.

Other Changes Will Result in 

Better Explanation or 

Clarification of Existing 

Requirements

Another change merits special mention because it could result in 

servicemembers’ having better information for making decisions about 

whether or not to purchase a specific amount or type of supplemental life 

insurance coverage.45 All financial products that contain insurance features 

must clearly explain the insurance features of those products. The draft 

regulation elaborates further about insurance products, stating that if there 

is a savings component to an insurance product, the agent shall provide the 

customer written documentation, which clearly explains how much of the 

premium goes to the savings component per year, broken down over the 

life of the policy. This document must also show the total amount per year 

allocated to insurance premiums. The customer must be provided a copy of 

this document that is signed by the insurance agent. One problem that 

might be encountered in implementing this proposed requirement is the 

absence of any guidance about what types of information must be 

contained in the written description and who (for example, the 

installation’s solicitation coordinator or the National Association of 

Insurance Commissioners) would judge whether the information is 

conveyed clearly.

Three other changes in the draft also merit mention. First, solicitors are 

prohibited from contacting DOD personnel by calling a government 

telephone or by sending an e-mail to a government computer unless the 

parties have a pre-existing relationship. Second, solicitors with military 

identification cards and/or vehicle decals must present documentation 

issued by the installation authorizing solicitation when entering the 

installation for that purpose. Third, commercial sponsors may not use 

sponsorship to advertise products and/or services not specifically agreed to 

in the sponsorship agreement.

45 70 Fed. Reg. 20316 (2005), part 50.11 app. A.
Page 36 GAO-05-696 Servicemember Insurance

A DOD official informed us that DOD plans to review the findings and 

recommendations of our report and then request more public comments 

after our report is issued. He also indicated DOD will not publish a final 

revised directive until at least 90 days after the issuance of our report, 

consistent with the provisions of Section 8133 of the Department of 

Defense Appropriations Act for Fiscal Year 2005.46

Conclusions DOD cannot identify the extent to which life insurance agents are violating 

solicitation policies or procedures, the types, severity, or patterns of 

violations. A proposed new provision in the draft directive would require 

DOD to maintain and disseminate a master file on banned agents, but this 

new provision will still not provide DOD with a full picture of the important 

but missing data outlined in the prior sentence. For example, DOD’s 

current list (1) is not searchable to help solicitation coordinators quickly 

check on agents who want to be approved or re-approved for oninstallation solicitation, (2) does not provide the same information on every 

case as is evidenced by the absence of dates for 6 of the 51 cases, (3) does 

not identify the specific types of violations that occurred—data critical for 

identifying patterns of violations, and (4) probably does not contain 

information on all agents who installation commanders have determined 

violated regulations but have not done something severe enough to be 

banned. The continued absence of these important data will force DOD, the 

services, and installations to take actions based on isolated incidents, 

anecdotes, and other possibly insightful, but non-optimum information. 

DOD has, however, taken a positive step by including a requirement in the 

draft directive to maintain a list of contacts for state insurance regulators, 

but it does not require installation commanders to keep state regulators 

generally informed about all confirmed solicitation violations occurring on 

their installation. This ambiguity could result in some relevant violations 

not getting reported to state regulators. Similarly, ambiguity is present in 

the wording of the requirement for the cooling-off period for junior enlisted 

servicemembers who want to purchase supplemental life insurance. While 

DOD’s draft directive clarified that the period is 7 calendar days, other 

ambiguities were identified earlier in this report. Failure to address these 

issues during the current revision could result in inconsistent enforcement 

of that requirement.

46 Pub. L. No. 108-287, sec. 8133 (Aug. 5, 2004).
Page 37 GAO-05-696 Servicemember Insurance

The quality of the information in the DFAS payroll databases limits the 

ability of other parts of DOD in their efforts to (1) monitor servicemembers’ 

perceived need for supplemental life insurance and (2) detect prohibited 

group presentations as evidenced by large numbers of new allotments for 

supplemental life insurance. Continued reliance on multiple generic 

allotment forms and a generic data entry code that does not distinguish 

different types of insurance products (for example, life versus automobile) 

will perpetuate existing data reliability problems. Furthermore, the 

continued use of generic forms to start a supplemental life insurance 

allotment results in a missed opportunity for DOD to institute steps to 

address solicitation requirements whose enforcement has not been 

assessable. For example, DOD has no current forms or other assessment 

methods for documenting that the required cooling-off period for junior 

enlisted personnel occurred, servicemembers received required documents 

from life insurance agents, and the finance or administrative staff who 

accepted the allotment form for supplemental life insurance also verified 

that the person submitting it was either the purchaser or the 

servicemember’s representative with a special power of attorney. With 

regard to this last enforcement and documentation issue, our review found 

some noncompliance with the requirement that only servicemembers or 

their representatives with special power of attorney could start 

supplemental life insurance allotments. Even though some of the reasons 

for the noncompliance may be well-meaning, some of the instances where 

finance officials have accepted such allotment forms from unauthorized 

persons have resulted in banning agents, diverting valuable resources away 

from the military mission to conduct investigations, and possibly placing 

servicemembers and their families at financial risk when unanticipated 

allotments begin for unwanted products. Adherence to existing regulations 

would go far to eliminating these negative effects.

Recommendations for 

Executive Action

We are making five recommendations. We recommend that the Secretary of 

Defense direct the Under Secretary of Defense for Personnel and 

Readiness to take the following actions in revising DOD’s solicitation 

regulation:

• Develop and implement, with the services, a DOD-wide searchable 

violations database that uses consistent data elements and coding 

across services. Solicitation coordinators or others at the installation 

would then be required to enter the installation name, violating agent’s 

name, insurance company supplying the product, type(s) of violation(s), 

date and type of action taken, and other information important for 
Page 38 GAO-05-696 Servicemember Insurance

identifying patterns of violations and facilitating efficient data collection 

and dissemination of information on confirmed violators to all 

installations and state insurance regulators.

• Specify in the revised directive that the installation commander is 

responsible for notifying state insurance regulators, the service 

secretariat, and DOD, when the commander has determined that agents 

or companies have violated DOD, service, or installation policies. 

Requiring installation commanders to contact appropriate state officials 

regarding all confirmed violations of DOD’s commercial solicitation 

directive increases the likelihood that state insurance officials will be 

provided an opportunity to determine if further action such as 

revocation of a state license is warranted.

• Clarify the portion of the revised directive that pertains to the 

cooling-off period that must elapse before junior enlisted personnel can 

start an allotment to purchase supplemental life insurance. Addressing 

and eliminating the ambiguities that we have identified about what is 

required versus optional could result in better compliance with the 

directive.

We recommend that the Secretary of Defense direct the Defense Finance 

and Accounting Service to take the following actions:

• Determine what current and future modifications should be made to the 

regulations, forms, and procedures used to initiate and electronically 

capture supplemental life insurance allotments so that more useable 

data are available to the DOD, service, and installation offices 

responsible for overseeing supplemental life insurance solicitation. This 

step might include developing and implementing a single code and form 

that would be used for supplemental life insurance allotments and to 

document compliance with requirements that DOD has previously had 

little visibility over.

• Issue a message to all finance offices and the Defense Finance and 

Accounting Service offices that process allotments for supplemental life 

insurance to remind personnel that DOD’s Financial Management 

Regulation indicates that only servicemembers or their designated 

representatives with special power of attorney for the prescribed 

purpose are authorized to start, stop, or modify financial allotments. If 

deviations from the policy are warranted to allow mailed allotment 
Page 39 GAO-05-696 Servicemember Insurance

forms, the Defense Finance and Accounting Service should specify the 

additional verification required in those situations.

Agency Comments and 

Our Evaluation

DOD’s comments are included in this report as appendix IV. DOD partially 

concurred with our first two recommendations and fully concurred with 

the three remaining recommendations. 

In commenting for DOD, the Principal Deputy for Personnel and Readiness 

raised three issues concerning the thoroughness and accuracy of our 

review.

First, DOD incorrectly stated that our review was only to look at the 

complaints of the insurance industry and that after we did not substantiate 

these complaints, we instead looked at DOD’s oversight of commercial 

insurance solicitation on DOD installations. While we were aware of the 

industry’s complaints, we focused our review on broader systemic issues, 

like the implementation of DOD and service poliies, procedures, and 

regulations governing the marketing and sale of supplemental life 

insurance on domestic military installations. Focusing on these systemic 

issues, however, allowed us to determine whether the complaints had 

merit. At every stage during our review, we emphasized that we were asked 

to review compliance with DOD’s regulations and policies on both the 

marketing and sale of life insurance on installations and the processing of 

financial allotments for such products. For example, in the letter notifying 

the Secretary of Defense that we were beginning our review and at our first 

meeting with DOD and service representatives, we listed the following 

three researchable questions:

1. What are DOD’s and the services’ policies and procedures for the 

marketing and sale of life insurance policies to military personnel and 

the processing of financial allotments for military personnel?

2. How do DOD and service regulations affect the marketing and sale of 

life insurance policies and the processing of financial allotments to 

military personnel?

3. How are the processes and procedures for the marketing and sale of 

life insurance policies and the handling of financial allotments, 

especially for commercial products like life insurance policies, 

implemented at Fort Bragg, Fort Lewis, and other military installations?
Page 40 GAO-05-696 Servicemember Insurance

Our report fully addressed solicitation and allotment issues in addition to 

providing our congressional requesters with an update on the revision of 

DOD’s personal commercial solicitation directive, as they also requested. 

Further, DOD stated that our report makes only minor mention of the fact 

that we did not substantiate the insurance industry’s assertions that 

servicemembers were being prevented from using allotments to obtain life 

insurance. To the contrary, we devoted a section of our report to the issue, 

but that issue was only one of many allotment-related concerns that we 

addressed in that portion of the report.

Second, DOD expressed concern about our use of survey data in examining 

the extent to which insurance solicitation violations were occurring on 

installations. The most significant reason for using the survey was the 

incompleteness and other problems associated with the data that DOD 

maintains on violations. The problems with those data are addressed more 

fully in our later response to DOD’s partial concurrence with our first 

recommendation. Because we were aware that survey data are 

unsubstantiated, we supplemented that information with data gathered 

from other sources such as DOD’s list of banned agents and information 

gathered from a wide variety of individuals during our six visits to military 

installations. DOD similarly conduits surveys to monitor other personnel 

issues. For example, the Office of the Under Secretary of Defense for 

Personnel and Readiness conducted a survey of over 75,000 

servicemembers asking for unsubstantiated perceptions about racial/ethnic 

discrimination and harassment47 and these data could be combined with 

compliance-related information from DOD’s investigations of alleged 

violations to give the department a more complete view of the issue. DOD 

also stated that we should have disclosed the wording used in the survey. 

The information that DOD reviewed in our figure 1 is the exact wording of 

our survey items. Although the wording for the overall question, “During 

the past 12 months, how often have the following practices concerning 

supplemental life insurance taken place on the installation?” was changed 

to a declarative sentence to increase readability, our paraphrasing is a true 

representation of what we asked. Finally, the response rate of 75 percent 

for our survey of all personal financial management program managers on 

U.S. installations is higher than the rate obtained on recent DOD-wide 

surveys such as the August 2004 survey which had a response rate of 

40 percent. Given these facts, we believe that our discussion about the 

47 See Defense Manpower Data Center, Armed Forces Equal Opportunity Survey, DMDC 

Report No. 97-027 (Arlington, Va.: August 1999) p. 40.
Page 41 GAO-05-696 Servicemember Insurance

extent of solicitation policy violations was appropriate, especially since 

DOD had information on only the subset of violations serious enough to 

merit banning an agent from an installation.

Lastly, DOD maintained that we made a false statement about the 

department not knowing the extent of personal solicitation policy 

violations. DOD’s point is incorrect on several grounds. First, early in our 

review in May 2004, we asked DOD officials whether a DOD-wide database 

existed that the services could use to report to DOD insurance agents or 

companies that have had their solicitation privileges withdrawn. DOD 

officials told us that while there was such a system, it was up to the 

services to provide updated information. DOD officials said at the time 

there was no comprehensive information available to document such 

actions. In October 2004—approximately 5 months after we asked for a list 

of all banned agents—DOD provided us with information similar to that 

provided on its Commanders Page Web site as of April 2005. At the time we 

received this information, the Director of the program that oversees 

personal commercial solicitation told us that the list may not be complete 

and accurate—which we found to be true—but that it provided all of the 

information that the services had reported. Second, DOD’s list of banned 

agents did not include all cases where insurance agents or companies were 

banned. As we reported, personnel at Fort Bliss, Texas, indicated that the 

installation commander had banned an agent who was not included on 

DOD’s Commanders Page Web site as of April 2005. Third, unless DOD bans 

every agent who violates in any way the solicitation policy regardless of the 

severity of the violation, its data on banned agents are not equivalent to 

knowing the extent of all confirmed violations.

Regarding DOD’s comments about our recommendations, DOD partially 

concurred with our first recommendation to develop and implement a 

searchable violations database, but DOD’s explanation of its partial 

concurrence does not identify any additional steps to address the 

deficiencies that we identified with their current procedures. As we noted 

in our report, the monitoring system should focus on all confirmed 

violations of solicitation policies and not just on those severe enough to 

result in agents being banned. By establishing a database on all confirmed 

violations, DOD would have a more complete picture of solicitation 

violation activities to better identify patterns, types, and severity of 

confirmed violations. If patterns are found, they could serve as the basis for 

identifying actions to eliminate the recurring or systemic problems. Our 

proposed database would also provide installation solicitation officers with 

a resource to check whether agents requesting solicitation approval or 
Page 42 GAO-05-696 Servicemember Insurance

re-approval at their installations were involved in prior violations at other 

locations.

DOD partially concurred with our second recommendation that installation 

commanders notify state insurance regulators of confirmed violations of 

solicitation policies. DOD’s position is that such reporting by installation 

commanders should only be required when the violations involve the 

eligibility of the agent to hold a state license and to meet other regulatory 

requirements. We believe that DOD should report all confirmed violations 

to state regulators. Installation commanders and their legal advisers may 

not have the expertise needed to determine whether a solicitation violation 

involved license-eligibility or regulatory requirements. Having installation 

commanders report all confirmed violations to state regulators would 

allow the regulators to decide whether further action is appropriate. As we 

pointed out in our report, state insurance officials from North Carolina 

were concerned that DOD’s lack of reporting violations prevented them 

from determining whether further actions, such as revocation of licenses, 

are warranted.

DOD concurred with our third recommendation and stated that it had 

identified an additional ambiguity in the current revised directive regarding 

who is responsible for monitoring and enforcing the cooling-off period for 

supplemental life insurance purchases. DOD’s proposed revision addresses 

the concerns that we raised.

DOD concurred with our fourth recommendation and stated that they will 

consider our proposed changes for a future enhancement of their pay 

system. In addition, DOD said that it will review its regulations and forms 

to determine what current and future modifications should be made.

DOD concurred with our fifth recommendation and stated that it will issue 

a message identifying who can start, stop, or modify allotments to all 

finance offices and Defense Finance and Accounting Service offices that 

process allotments.

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days after its 

issue date. At that time, we will provide copies of this report to interested 

congressional committees and the Secretary of Defense. We will also make 

copies available to others upon request. This report will be available at no 

charge on GAO’s Web site at http://www.gao.gov.
Page 43 GAO-05-696 Servicemember Insurance

If you or your staff have any questions regarding this report, please contact 

me at (202) 512-5559 or stewartd@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff members who made major contributions to 

this report are listed in appendix V.

Derek B. Stewart

Director, Defense Capabilities and Management
Page 44 GAO-05-696 Servicemember Insurance

List of Congressional Requesters

The Honorable Tom M. Davis

Chairman

Committee on Government Reform

House of Representatives

The Honorable Duncan L. Hunter

Chairman

Committee on Armed Services

House of Representatives

The Honorable Christopher Shays

Chairman

Subcommittee on National Security, Emerging Threats 

 and International Relations

Committee on Government Reform

House of Representatives

The Honorable Jim Cooper

The Honorable Martin T. Meehan

The Honorable Ellen O. Tauscher

House of Representatives
Page 45 GAO-05-696 Servicemember Insurance

Appendix I

Scope and Methodology ApApenednxidexiIs

In addressing the objectives of our engagement, we reviewed reports that 

had been issued by GAO, DOD, and others, including the life insurance 

industry. We interviewed officials from DOD, life insurance companies and 

associations, and other organizations, such as the Consumer Federation of 

America, to identify the many perspectives on the issues being studied. In 

connection with another report, we constructed, pre-tested, and 

administered insurance- and allotment-related survey questions to all 175 

installation-level managers of DOD’s personal financial management 

programs located in the United States.1

 We received completed surveys 

from 131 installations, yielding an overall response rate of 75 percent, 

which ranged from a low of 62 percent for the Air Force to 93 percent for 

the Marine Corps. We also constructed, pre-tested, and administered an 

e-mail survey to the insurance commissioners for the 50 states, the District 

of Columbia, and four territories: American Samoa, Guam, Puerto Rico, 

and the Virgin Islands. We received completed surveys from 46 states, the 

District of Columbia, and one U.S. Territory, yielding an overall response 

rate of 87 percent. We did not receive surveys from four states (California, 

Delaware, Florida, and Idaho) and three territories (American Samoa, 

Guam, and the Virgin Islands). We later contacted the four non-responding 

states to verify if they had any investigations on insurance sales practices 

on military installations, and only California responded to our inquiries. In 

addition, we interviewed personnel from the state insurance 

commissioner’s office for four of the six states where we conducted site 

visits to military installations, as well as personnel for the commissioner’s 

office in Georgia. We also asked insurance companies and two national 

insurance associations to identify agents and company representatives who 

could be interviewed about solicitation and allotment practices at the six 

installations. During site visits, we requested materials related to the 

marketing and sale of supplemental life insurance and the establishment of 

allotments for that purpose. Those materials included a list of life 

insurance agents approved for on-installation solicitation, handouts 

distributed to assist servicemembers in determining their need for 

supplemental life insurance, documentation for violations of personal 

commercial solicitation and insurance-related policies, and complaints 

related to insurance solicitation and allotments. While on the site visit, we 

conducted individual interviews or focus groups with the following types of 

individuals: installation leaders; the coordinator for the installation’s 

commercial solicitation program; servicemembers; legal assistance 

attorneys from the Judge Advocate General corps; finance department 

1

 See GAO-05-348.
Appendix I

Scope and Methodology

Page 46 GAO-05-696 Servicemember Insurance

personnel who managed and processed allotments; family support center 

staff responsible for personal financial management training and 

counseling activities; staff from morale, welfare, and recreation; and 

representatives of on-installation banks and credit unions.

We limited our scope to the sale—marketing, solicitation, and purchase—

of life insurance to active duty servicemembers on installations in the 

United States. Emphasis was given to findings pertaining to junior enlisted 

servicemembers since DOD and insurance officials have indicated that this 

subgroup is more likely to encounter problems with the marketing and sale 

of supplemental life insurance and establishment of an allotment for such a 

purchase. During the course of our work, we visited six installations (see 

table 3). We selected the installations based on inputs from DOD and 

insurance officials, and with due consideration for the large number of 

Army personnel deployed to Iraq and Afghanistan. We did obtain additional 

information on completed and ongoing large-scale investigations of 

violations that occurred on other installations: Fort Benning, Georgia, and 

Fort Stewart, Georgia, although we did not conduct site visits to these 

installations.

Table 3: Installations in the United States where GAO Conducted Site Visits from 

July to December 2004

Source: GAO.

Service Installation

Army Fort Bragg, North Carolina

Fort Campbell, Kentucky

Fort Lewis, Washington

Navy Naval Station Great Lakes, Illinois

Marine Corps Camp Pendleton, California

Air Force Lackland Air Force Base, Texas
Appendix I

Scope and Methodology

Page 47 GAO-05-696 Servicemember Insurance

To address the extent to which agents were violating DOD’s policies 

governing the solicitation of supplemental life insurance to active duty 

servicemembers on domestic installations, we reviewed and analyzed 

DOD, service, and selected installations’ policies and directives governing 

personal commercial solicitation, primary among these was the DOD 

directive on personal commercial solicitation on DOD installations. We 

also reviewed DOD reports on commercial life insurance sales;2

 materials 

provided by insurance association and company officials, as well as 

insurance agents; and state government announcements such as those 

from the office of the Georgia state insurance commissioner about 

investigations of and enforcement actions against some companies and 

agents who sold supplemental life insurance to servicemembers. We 

contacted the Federal Trade Commission to ascertain whether its Military 

Sentinel system contained any information on complaints or investigations 

on supplemental life insurance sales to servicemembers. We obtained a 

wide range of perspectives about the sale of supplemental life insurance to 

servicemembers during meetings with DOD and service headquarters 

officials, officials from companies and two life insurance associations (the 

American Council of Life Insurers and the National Association of 

Insurance and Financial Advisors), and a representative of the Consumer 

Federation of America. In addition to interviewing staff from the insurance 

commissioners’ offices in four of the six states where we visited 

installations and in the state of Georgia, we constructed, pre-tested, and 

administered an e-mail survey to the insurance commissioners for the 50 

states, the District of Columbia, and four territories. We also used 

responses about supplemental life insurance-related issues from a survey 

of all DOD personal financial management program managers, professional 

staff employed on most installations who were responsible for 

coordinating the financial management training, counseling, and other 

assistance provided to servicemembers. During our site visits, we asked 

that the command point of contact provide us with the following types of 

materials: a list of life insurance agents approved for on-installation 

solicitation, handouts distributed to assist servicemembers in determining 

the need for supplemental life insurance, documentation for violations of 

personal commercial solicitation and insurance-related policies, and 

complaints related to insurance solicitation. While on the installation, we 

conducted individual or focus group interviews with the following types of 

installation personnel or offices: installation leadership, the coordinator for 

2 Final Report: Insurance Solicitation Practices on Department of Defense Installations, 

and DODIG, Report No. 99-106.
Appendix I

Scope and Methodology

Page 48 GAO-05-696 Servicemember Insurance

the installation’s commercial solicitation program, legal assistance 

attorneys from the Judge Advocate General corps, and family support 

center staff responsible for financial training and counseling activities. We 

also asked the life insurance associations and company officials for the 

names of agents that we could interview while on our site visits. As part of 

our site visits, we conducted interviews with on-installation bank and 

credit union officials, asking about current and planned efforts to offer 

supplemental life insurance through their financial institution.

To address how effectively DOD personnel are adhering to DOD’s 

regulations that govern how active duty servicemembers establish payroll 

allotments to purchase supplemental life insurance, we interviewed 

officials from DFAS at their headquarters and field offices associated with 

each service. We also reviewed and analyzed guidance documents 

governing servicemembers’ use of allotments that DFAS, the services, and 

selected installations provided to us. We interviewed finance officials at the 

installations we visited and observed the data entry process used to 

electronically transmit data from the installation to the payroll accounting 

system maintained by DFAS. At several installations, we also interviewed 

officials at administrative units that serve as intermediaries in the 

processing of servicemembers’ allotments and asked questions as 

personnel demonstrated the procedures used in submitting, processing, 

and confirming allotment transactions.

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 20053

 to determine the restrictions on when the draft 

directive could be issued. We conducted interviews with DOD program 

officials to discuss proposed changes, the reasons for the proposed 

changes, and other issues related to the draft directive. Also, DOD provided 

us with a copy of the draft directive as of January 2005 so that we could 

compare and contrast it to the current version of the directive. We 

compared that version to the one printed in the April 19, 2005, Federal 

Register announcement.4

 We subsequently contacted DOD policy officials 

to determine whether DOD intended to again request comments after our 

report was issued.

3

 Pub. L. No. 108-287 (Aug. 5, 2004).

4

 70 Fed. Reg. 20316 (2005).
Appendix I

Scope and Methodology

Page 49 GAO-05-696 Servicemember Insurance

We performed our work from May 2004 through May 2005 in accordance 

with generally accepted government auditing standards.
Page 50 GAO-05-696 Servicemember Insurance

Appendix II

Details on Selected Recent In-Depth Apendxies

Investigations ApendxiI

We are providing synopses of the reports that investigators prepared after 

they completed gathering data on alleged violations. We did not 

independently attempt to verify the allegations or the weight of the 

evidence supporting decisions reached by installation commanders. 

Instead, we merely summarize the information provided in the investigative 

reports.

Installation: Camp Pendleton, California

Period when the violations occurred: October through November 2003

Description of the violations: An insurance agent approached an officer 

requesting authorization to teach a class on veterans’ affairs benefits and 

financial planning to squadron Marines. The officer believed the class 

would benefit Marines and included the agent on the training schedule. 

During the class, the agent spoke little about veterans’ benefits, focusing 

more on investments. The agent distributed cards to obtain contact 

information and later met with Marines while they were on duty or in their 

homes to sell them policies. The agent described the policy as an 

investment plan, rather than an insurance policy, guaranteed, as stated by 

the agent, to provide Marines “$500,000 to $1,000,000 by the time they 

reached their sixties.” The agent also tried to sell the investment plan to 

Marines without appointments. During the meetings, Marines were given 

the impression that the agent was a representative of the Department of 

Veterans’ Affairs and was able to assist them in obtaining their benefits. On 

one occasion, the agent tried to obtain a MyPay personal identification 

number from a Marine.

Investigators determined that these actions violated prohibited solicitation 

practices including providing financial planning and insurance classes 

without prior approval; attempting to solicit or sell insurance without an 

appointment; attempting to sell insurance in an unauthorized area; using 

unfair, deceptive, misleading, or fraudulent schemes to encourage sales; 

and soliciting to trainees.

Documentation to assess the scope of the problem: The investigation 

report included sworn statements from 12 Marines who met with the agent 

as well as two other Marines approached by the agent.

Estimated number of affected servicemembers: The initial class 

included 15 to 25 Marines, and the agent conducted the class at least one 

other time.
Appendix II

Details on Selected Recent In-Depth 

Investigations

Page 51 GAO-05-696 Servicemember Insurance

Actions taken:

• By the installation: Solicitation privileges for the agent were 

suspended for two years for all Western area Marine Corps installations.

• By the insurance company: The insurance company returned the 

agent’s solicitation pass and ceased all operations on the installation 

with no plans of reopening.

Installation’s interaction with state insurance commissioner’s 

office: The installation recently provided copies of the investigation to the 

state insurance commissioner.
Appendix II

Details on Selected Recent In-Depth 

Investigations

Page 52 GAO-05-696 Servicemember Insurance

Installation: Camp Pendleton, California

Period when the violations occurred: May through September 2003

Description of the violations: Under the guise of presenting information 

on veterans’ affairs benefits, two insurance agents obtained permission 

from a commanding officer to provide the classes to Marines arriving from 

boot camp, at which attendance was required. Four people conducted the 

classes, including three insurance agents and the wife of one agent. 

According to participants, the classes started with normal veterans’ benefit 

discussions, but shifted into an investment and life insurance sales pitch 

after non-commissioned officers left the room. The product was identified 

as a “can’t lose proposition” and participants were told that participation 

would earn them about $500,000 in just over 21 years. During the sales 

pitch, agents distributed paperwork, including applications, allotment 

forms, and statements of understanding, to the Marines. Participants were 

encouraged not to read the forms and sign them quickly, leave the amounts 

on the allotment forms blank, provide the insurance company 

representatives access to MyPay personal identification numbers, and 

provide signed photocopies of their identification cards. The agents 

brought portable printers to the meetings to obtain the necessary 

information. The Marines were not allowed to take paperwork with them, 

being told that copies would be sent to their home of record.

Investigators determined that these actions violated prohibited solicitation 

practices including soliciting military personnel who are in an on-duty 

status; soliciting without appointment in areas utilized for the housing and 

processing of transient personnel and in unit areas; using manipulative, 

deceptive, or fraudulent devices, including misleading advertising and sales 

literature; soliciting recruits, trainees, and other personnel while in a 

“mass” or “captive” audience; and violating the requirement that at least 

seven days elapse between the signing of a life insurance application and 

the certification of an allotment for personnel in pay grades E1 through E3.

Documentation to assess the scope of the problem: The investigation 

report included interviews from 26 Marines in the five classes. Additional 

information, such as direct deposit forms and statements of understanding, 

was also included.

Estimated number of affected servicemembers: 345
Appendix II

Details on Selected Recent In-Depth 

Investigations

Page 53 GAO-05-696 Servicemember Insurance

Actions taken:

• By the installation: Solicitation privileges for the agents were revoked 

for Camp Pendleton and all Western region Navy and Marine Corps 

installations.

• By the insurance company: The insurance company shut down its 

operations at Camp Pendleton and has no plans to reopen. The company 

terminated the three agents involved, at least one of whom was a retired 

Marine. Refunds were provided to 110 Marines before the June 8, 2004 

cutoff date.

Installation’s interaction with state insurance commissioner’s 

office: The investigation report recommended the California Department 

of Insurance be notified of the report results. The installation recently 

provided copies of the report to the state insurance commissioner.
Appendix II

Details on Selected Recent In-Depth 

Investigations

Page 54 GAO-05-696 Servicemember Insurance

Installation: Fort Benning, Georgia

Period when the violations occurred: December 2003 through July 2004

Description of the violations: Four agents, two who were on Fort 

Benning’s list of authorized insurance and investment agents, gained access 

to soldiers in the Basic Combat Training Brigade through unit noncommissioned officers under the pretext of providing financial planning or 

financial management classes. The agents conducted their briefings in unit 

classrooms, discussing the value of investing and providing examples of 

wealth accumulation. At the end of these presentations, soldiers wanting 

additional information were asked to complete an informational form. 

Following up on leads generated from the forms, the agents returned to the 

unit area a few weeks later and met individually or in a small group with 

soldiers. These follow-on meetings, involving the use of laptop computers 

and direct deposit forms, took place in unit classrooms or unit dayrooms. 

Fort Benning officials found that officers and non-commissioned officers 

contributed to the solicitations and a number of drill sergeants knew of the 

insurance presentations in the unit area.

Investigators determined that these actions violated prohibited solicitation 

practices including soliciting during enlistment or induction processing or 

during basic combat training; soliciting to mass, group, or captive 

audiences; and misusing the allotment of pay system.

Documentation used to assess the scope of the problem: The 

investigation report included sworn statements from a number of soldiers 

who met with the agents. Additional information, such as direct deposit 

forms, was also obtained.

Estimated number of affected servicemembers: 377

Actions taken:

• By the installation: Installation solicitation privileges for the agents 

were revoked. Three officers and seven enlisted personnel involved 

were reprimanded for failing to adequately safeguard the soldiers for 

whom they had responsibility.

• By the insurance company: The agents involved were fired from the 

insurance companies they represented. The insurance company from 
Appendix II

Details on Selected Recent In-Depth 

Investigations

Page 55 GAO-05-696 Servicemember Insurance

which most of the policies appear to have been sold has agreed to 

provide refunds to soldiers.

Installation’s interaction with state insurance commissioner’s 

office: The investigation report recommended that findings be shared with 

the state licensing agencies. Installation officials have provided 

information to the state of Georgia regarding these incidents.
Appendix II

Details on Selected Recent In-Depth 

Investigations

Page 56 GAO-05-696 Servicemember Insurance

Installation: Fort Benning, Georgia

Period when the violations occurred: July 2002 through October 2002

Description of the violations: Two agents conducted financial 

management briefings to soldiers in the infantry training brigade. The 

agents gained access to soldiers through unit non-commissioned officers 

under the pretext of providing financial management classes. The classes 

were imbedded into the training schedule with other personal and financial 

affairs presentations and were conducted in unit classrooms on the 

installation. The soldiers were escorted to the classrooms by noncommissioned officers, and according to the investigation, some of the 

non-commissioned officers had knowledge of the solicitation actions 

taking place. In addition to the financial management classes, one of the 

agents allegedly made insurance presentations in training areas to noncommissioned officers. During these presentations, some trainees met with 

the agent and subsequently purchased life insurance policies.

Investigators determined that these actions violated prohibited solicitation 

practices including soliciting during enlistment or induction processing or 

during basic combat training; soliciting to mass, group, or captive 

audiences; making appointments with or soliciting military personnel who 

are in an “on duty” status; and using manipulative, deceptive, or fraudulent 

devices or schemes to sell products, including misleading advertising and 

sales literature.

Documentation used to assess the scope of the problem: The 

investigation report included sworn statements from involved noncommissioned officers, soldiers who attended the briefings, and Army 

community affairs officials who received complaints from two of the 

soldiers involved.

Estimated number of affected servicemembers: 906

Actions taken:

• By the installation: Installation solicitation privileges for the two 

agents were revoked.

• By the insurance company: The agents involved were fired from the 

insurance company they represented. The insurance company offered 
Appendix II

Details on Selected Recent In-Depth 

Investigations

Page 57 GAO-05-696 Servicemember Insurance

refunds to affected persons, and as of May 2005, about 20 percent of the 

soldiers received refunds.

Installation’s interaction with state insurance commissioner’s 

office: Installation officials have provided information to the state of 

Georgia regarding these incidents.
Page 58 GAO-05-696 Servicemember Insurance

Appendix III

Allotment Forms ApendxiI
Appendix III

Allotment Forms

Page 59 GAO-05-696 Servicemember Insurance
Page 60 GAO-05-696 Servicemember Insurance

Appendix IV

Comments from the Department of Defense ApendxiIV

Note: Page numbers in 

the draft report may differ 

from those in this report.
Appendix IV

Comments from the Department of Defense

Page 61 GAO-05-696 Servicemember Insurance
Appendix IV

Comments from the Department of Defense

Page 62 GAO-05-696 Servicemember Insurance
Appendix IV

Comments from the Department of Defense

Page 63 GAO-05-696 Servicemember Insurance
Appendix IV

Comments from the Department of Defense

Page 64 GAO-05-696 Servicemember Insurance
Page 65 GAO-05-696 Servicemember Insurance

Appendix V

GAO Contact and Staff Acknowledgments ApendxiV

GAO Contact Derek B. Stewart (202) 512-5559

Acknowledgments In addition to the individual named above, James Cook, Jack Edwards, 

Lynn Johnson, David Mayfield, Terry Richardson, Arnett Sanders, Cheryl 

Weissman, and Kristy Williams made key contributions to this report.
Page 66 GAO-05-696 Servicemember Insurance

Related GAO Products

Military Personnel: DOD Comments on GAO’s Report on More DOD 

Actions Needed to Address Servicemembers’ Personal Financial 

Management Issues. GAO-05-638R. Washington, D.C.: May 11, 2005.

Defense Base Act Insurance: Review Needed of Cost and Implementation 

Issues. GAO-05-280R. Washington, D.C.: April 29, 2005.

Military Personnel: More DOD Actions Needed to Address 

Servicemembers’ Personal Financial Management Issues. GAO-05-348. 

Washington, D.C.: April 26, 2005.

Military Personnel: DOD’s Tools for Curbing the Use and Effects of 

Predatory Lending Not Fully Utilized. GAO-05-349. Washington, D.C.: 

April 26, 2005.

Credit Reporting Literacy: Consumers Understood the Basics but Could 

Benefit from Targeted Educational Efforts. GAO-05-223. Washington, D.C.: 

March 16, 2005.

DOD Systems Modernization: Management of Integrated Military 

Human Capital Program Needs Additional Improvements. GAO-05-189. 

Washington, D.C.: February 11, 2005.

Highlights of a GAO Forum: The Federal Government’s Role in 

Improving Financial Literacy. GAO-05-93SP. Washington, D.C.: 

November 15, 2004.

Military Personnel: Survivor Benefits for Servicemembers and Federal, 

State, and City Government Employees. GAO-04-814. Washington, D.C.: 

July 15, 2004.

Military Personnel: Active Duty Benefits Reflect Changing 

Demographics, but Opportunities Exist to Improve. GAO-02-935. 

Washington, D.C.: September 18, 2002.

Military Banking: Solicitations, Fees, and Revenue Potential.

GAO/NSIAD-99-72. Washington, D.C.: April 15, 1999.

(350536)
GAO’s Mission The Government Accountability Office, the audit, evaluation and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and policies; 

and provides analyses, recommendations, and other assistance to help 

Congress make informed oversight, policy, and funding decisions. GAO’s 

commitment to good government is reflected in its core values of 

accountability, integrity, and reliability.

Obtaining Copies of 

GAO Reports and 

Testimony

The fastest and easiest way to obtain copies of GAO documents at no cost 

is through GAO’s Web site (www.gao.gov). Each weekday, GAO posts 

newly released reports, testimony, and correspondence on its Web site. To 

have GAO e-mail you a list of newly posted products every afternoon, go to 

www.gao.gov and select “Subscribe to Updates.”

Order by Mail or Phone The first copy of each printed report is free. Additional copies are $2 each. 

A check or money order should be made out to the Superintendent of 

Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 

more copies mailed to a single address are discounted 25 percent. Orders 

should be sent to:

U.S. Government Accountability Office

441 G Street NW, Room LM

Washington, D.C. 20548

To order by Phone: Voice: (202) 512-6000 

TDD: (202) 512-2537 

Fax: (202) 512-6061

To Report Fraud, 

Waste, and Abuse in 

Federal Programs

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470

Congressional 

Relations

Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548

Public Affairs Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548