Whole life insurance policies are rip-offs and to sell them insurance agents may tell you lies.
Those statements were made in newspaper advertisements in Portland, Maine -- not by a consumer group or an agency seeking greater regulation of the insurance industry, but by two life insurance salesmen, and they brought a sharp reaction from other insurance agents.
The Federal Trade Commission issued a politely worded report in July, deploring the lack of information given to customers about life insurance. Michael Doyle and Michael Bates, who own an insurance firm in Portland, have been making the same argument considerably less politely in a series of advertisements that have brought them into conflict with the insurance industry mainstream. Doyle was expelled from the Southern Maine Association of Life Underwriters for failing to live up to the Association's bylaws, which require salesmen to work to enhance the reputation of their industry.
"Their statements do not add to the favorable image of a life underwriter," remarked Roland Pannet on the Washington-based National Association of Life Underwriters. Panneton was called in to advise the Maine Association as it took steps to oust Doyle. (Bates never was an association member.)
Panneton said Doyle's expulsion was the second or third he could remember in almost six years he has worked for the 140,000-member trade association.
Doyle and Bates complain that the expulsion is being used to cripple their efforts to sell life insurance.
According to the two agents, a number of customers have backed away from buying policies from Bates and Doyle after competing agents have shown them copies of the letters announcing Doyle's expulsion.
"It's like being told just before an operation that your surgeon has been expelled from the American Medical Association," Doyle said.
Doyle has protested to the Maine attorney general's office and an investigation of possible antitrust violations has begun.
Bates and Doyle have angered the life insurance establishment of Maine because they try to convince customers to exchange whole life policies for term insurance.
Whole life is the most popular form of life insurance in the country, and it is the one sold most aggressively by agents for the largest companies. Americans have put $141 billion into whole life policies according to the FTC.
Whole life provides insurance plus a savings plan. However, the savings plan pays considerably less interest than bank savings accounts.
Bates and Doyle urge their customers to buy term insurance, which has no savings plan and is considerable cheaper than whole life.
In an effort to spread information about various types of insurance, Bates and Doyle were strong backers of a bill introduced in the Maine legislature to provide customers with a buyer's guide to insurance. The life insurance industry countered with a bill of its own providing for somewhat less disclosure. Both bills died, but the state insurance commissioner is considering issuing new disclosure regulations.
"Our only hope is to gather enough public support so we can fight the insurance companies with the facts," Doyle said. "Right now, the insurance industry has got us by the tail."
Bates and Doyle aren't entirely alone, however. Jim Maughn, assistant vice president for marketing and administration of Fireman's Fund, said his company backs them.
"We believe that Mike is on the right track," he said. "We'd like him to be a little more soft-sell to fit with our corporate philosophy. We don't want to alienate the industry; we want to educate the industry."
Fireman's Fund has broken ranks with the larger life insurance companies and agrees with the FTC that whole life policies don't pay the customer an adequate rate of return. Fireman's Fund was by far the fastest growing life insurance company in 1978.