A new battle in an old war is being fought in Maine over whether life insurance salesmen play fair with their customers.
The huge life insurance industry is regulated by each state, not by the federal government, and it in large measure escaped the wave of consumerism of the last decade.
In 1973 congressional testimony, Ralph Nader called life insurance the last giant industry to come under legislative examination and labeled it a "smug sacred cow feeding the public a steady line of sacred bull."
Last year Wisconsin became the first state to pass a consumer protection law designed to provide life insurance buyers with information in straightforward language about various types of policies. Shortly after that law was enacted, a number of life insurance companies and agents won an injunction preventing the law from taking effect until an appeals court considers their suit.
"Meaningful cost disclosure is very threatening to some," Harold Wilde, who just completed his term as Wisconsin's insurance commissioner, said in a telephone interview.
The battle in Maine is expected to be no less intense. Today the legislature will hold its first hearing on a bill that would require insurers to give prospective customers a buyer's guide and a simple method of comparing the cost of various policies.
The bill is sponsored by state Rep. Robert S. Howe, who said in an interview; "This is one of the last frontiers of consumerism."
Much of the impetus for a disclosure bill here comes from the controversial activities of two insurance agents, Michael Bates and Michael Doyle, who have angered the insurance establishment by aggressively promoting term insurance over the other major type of life insurance, which is usually called whole life or cash value.
Bates and Doyle fired their first broadside last December with a fullpage newspaper advertisement urging people who own whole life policies to admit they had made a mistake and exchange their policies for term insurance.
The two agents got two kinds of phone calls in response: threatening ones from other life insurance agents, and a trickle of interested ones from potential customers.
Bates and Doyle also began advocating a disclosure law similar to the one Howe has introduced, because they argue that disclosure bolsters their case.
What Bates and Doyle advocate is heresy among the major life insurance companies and agents. The industry has a special vocabulary that makes the heresy clear. To exchange a term policy for a whole life policy, which is generally more expensive, is called "conversion" in the business. To do the opposite, as Bates and Doyle urge, is called "replacement."
Some life insurance agents work under contracts that forbid them ever to "replace" a policy, though they are urged to help customers "convert."
The life insurance industry has been fending off people like Bates and Doyle from time to time over the years. The National Association of Life Underwriters says that different kinds of insurance are appropriate for different people. Its emphasis, however, is on selling whole life.
The issue is broader than the argument between term and whole life. Wilde said that Wisconsin found there are staggering cost differences between similar policies written by different companies.
"Some people are paying Cadillac prices and getting Fords," Wilde said.
Nader and other consumer advocates have pointed out that the largest life insurance companies generally do not sell the cheapest policies, although one might think that their sales volume would enable them to underbid their small rivals.
Wilde believes Wisconsin and Maine are only the beginning of a trend that will spread to many other states. There have been unsuccessful bills calling for greater disclosure of insurance costs introduced in several state legislatures over the last two years.
Doyle and Wilde agree that most insurance salesmen are not deliberately trying to mislead, but simply don't understand the cost differences themselves.
Wisconsin has a life insurance cost disclosure hot line that is funded as a one-year test project by the Federal Trade Commission. The Hot line doesn't tout any policy, but will give a caller any policy's ranking in comparison to similar ones offered by other companies.
Agents who find their company's policies rank high use the hot line as a selling tool, Wilde said. Many of the others, he added, don't get angry at the hot line-they get angry at their company
The buyers' guide that Maine's legislature begins considering this week is designed, its proponents say, to aid the nation's roughly 135,000 insurance agents to fulfill the commitment in their code of ethics "to present accurately, honestly and completely every fact essential to my client's decisions."
The industry in Maine, as it has elsewhere, will oppose the bill, which it sees as a hindrance rather than an aide to customer understanding.