Consumers who purchase and hold whole-life in insurance policies are losing billions of dollars each year because the average interest rate paid on savings associated with those policies is about 1.3 percent, according to a Federal Trade Commission study released yesterday.

The 185-page report criticizes the insurance industry for what the FTC says is a failure to inform customers about what they are buying when they purchase life insurance, a situation the agency claims has led to a complete lack of competition.

Whole life, also known as ordinary life or straight life, is the most commonly held policy. It remains in force as long as premiums are paid and offers full benefits upon the policyholder's death. In addition, savings accrued can be collected by the customer by surrendering the policy before death.

FTC Chairman Michael Pertschuk made the study public yesterday at a Senate Commerce Committee hearing. He 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."

The FTC report, which took 2 1/2 years to prepare, stated that "price competition is so ineffective in the life insurance industry that companies paying 20-year rates of return of 2-percent or less compete successfully against companies that pay 4 percent or 6 percent. This disparity should be contrasted with the banking industry, where differences of a quarter of a percent are considered to be competitively crucial."

Pertschuk said the amount of interest earned on consumer savings held by insurance companies is extremely important, since consumers are saving about as much through life insurance policies as through savings and loan passbook accounts. In 1977, the FTC staff found, consumer savings held by insurance companies totaled more than $140 billion.

Responding, the American Council of Life Insurance attacked the FTC study as "simplistic," and said the 1.3 percent figure "is not a measure of what is currently being credited to policy holders. Typically, companies today are basing their divideneds and premium rates on interest rates of 5 to 6 percent."

The life insurance industry has long argued that it is unfair to separate the savings portion of a life insurance policy from the protection aspect, because the two are intertwined as a unitary contract, and cash benefits are only an incidential byproduct of having a policy.

Pertshuck disagreed, saying, "the indisputable fact of the matter is that regardless of how the savings element is described, it is hardly incidental. The savings element accounts for three or four times as much of the premiy um dollar as does the insurance protection, and this has made the life insurance industry a major repository of consumer savings."

The FTC analysis says that if the insurance industry paid a mere 4 percent interest on policyholders' savings -- which the staff said would be "competitivve" for the tax-free income -- "an additional $3.7 billion would have accrued to consumers" holding wholelife policies in 1977 alone.

In 1977 alone, the report noted, Americans paid $24.2 million in premiums on 140 million whole-life insurance policies. The outlay represented about 1.9 percent of all personal income.

In return, those policy holders received two benefits: death protection and a form of savings.

The FTC report states, for the first time, that 55 cents out of every whole-life premium dollar goes into "what are essentially savings accounts" for the policy holders, while only 15 cents goes to paying claims and 30 cents goes to industry overhead costs and profits.

But ACLI, the industry trade group, has a different breakdown. It says 79 cents of every premium dollar taken in by life insurance companies is paid out in benefits and additions to funds for policy holders and beneficiares, while only 16 cents goes to operating expenses, 4 cents is paid in taxes and only 1 cent is left for profits.

The FTC staff said its information was based on the annual statements that more than 1,700 life insurance companies filed with various state commissions as well as on data supplied by the ACLI trade group itself.

There are also "severe but unannounced penalties for early withdrawal of the savings elements of life insurance policies," the FTC says. These penalties "do not merely reduce the return earned on the principal, but often reduce and sometimes even eliminate the principal itself," the report states.

The FTC staff expressed particular concern about policies sold in the 1960s and earlier. Return on those policies is so low, the staff said, that "a great many policy holders . . . would be well advised to surrender their whole-life policies and purchase new ones."

The states have primary responsibility for regulating the life insurance industry. The FTC urges, among other changes:

Disclosure of cost information before a prospective purchaser signs an application for a policy, rather than with the policy delivery as proposed earlier by the National Association of Insurance Commissioners.

Disclosure of the average annual rate of return for all cash value insurance and annuity policies so that different types of policies can be compared. CAPTION: Graph, RATES OF RETURN ON VARIOUS INVESTMENTS - 1977, The Washington Post