The chairman of one of the nation's largest insurance companies accused the Federal Trade Commission yesterday of a "reckless misrepresentation" of the facts in its study of the insurance industry.
Aetna Life & Casualty Co. Chairman John Filer told the Senate Commerce Committee that he wanted to "set the record straight" because of his "concern for many millions of policyholders" who may he misled by FTC staff allegations that life insurance policies were bad investments.
In a report issued July 10, the FTC staff said the average interest rate paid on savings associated with whole-life insurance policies was about 1.3 percent.
Whole life, also, known as ordinary life or straight life, is the most commonly held policy, remaining in force as long as premiums are paid and offering full benefits upon the policy-holder's death.
In releasing the study at another Senate Commerce Committee hearing, FTC Chairman Michael Pertschuk testified that "it is fair to say that no other product in our economy that is purchased by so many people for so much money is bought with so little understanding of its actual or comparative value."
In yesterday's hearings. Filer, speaking on behalf of the American Council of Life Insurance, said that the FTC staff began its study of li life insurance with "fixed opinions," and then "rejected facts and pursued its foregone conclusion."
Filer contended the actual return on investment for a life insurance policy holder was 5.9 percent rather than the 1.3 percent alleged by the FTC.
"Of course, 5.9 percent would not have rated headlines, "Filer said. "In that vein, by releasing its report to the press -- but not to the industry -- prior to its presentation to this committee, the FTC was successful in orchestrating the news. Its side of the story was the only story the press had to work with."
He claimed the release of the FTC report violated the agency's standards of truthful advertising because it "omitted material facts" and was "false and deceptive."
Contrary to the contention of the FTC, Filer said the insurance industry is in favor of cost disclosure. "We reject the contention of the FTC staff that the whole life policy is a form of investment and a poor investment at that." Filler said. He said insurance cannot be fairly compared to a savings account or other forms of investment, because it offers more in TEST OMITTED FROM SOURCE