Insurers were accused of misleading recruits about policies they were buying

More than 4,200 Virginia military personnel and other consumers will benefit from a settlement prompted by a multistate and federal investigation of three Texas life-insurance companies.

The case centered on allegations that the companies violated insurance and consumer-protection laws in the marketing of life insurance to military personnel, according to the State Corporation Commission.

The companies are American-Amicable Life Insurance Co. and its affiliates Pioneer American Life Insurance Co. and Pioneer Security Life Insurance Co., all based in Waco, Texas. In agreeing to the settlement, the companies denied violating any state consumer-protection laws.

The settlement calls for the companies to provide cash or other benefits amounting to $70 million to 92,000 consumers in 47 states, the District of Columbia and 13 other countries and U.S. territories.

Regulators say the companies targeted young recruits and misled them into believing they were buying investment products when they actually were buying expensive term life insurance coupled with a side fund called either the Wealth Builder or Horizon Life, according to an SCC statement.

Many of the soldiers already had up to $250,000 in low-cost government-subsidized life insurance.

Under the settlement, the companies agreed to:

Make cash payments to 57,000 service members, including 2,900 in Virginia, who bought a Horizon Life policy from Jan. 1, 2000, to July 28, 2006.

Increase the cash surrender value for all existing Horizon Life and Wealth Builder policies regardless of when the policy was issued or military status. This provision affects 53,000 policyholders, including 2,150 who bought policies in Virginia.

Virginia had the eighth-highest number of policyholders affected by the issues under the investigation led by the Texas and Georgia insurance departments, the U.S. Securities and Exchange Commission and the Justice Department.

Notices and checks will be mailed to eligible policyholders no later than Oct. 28, the SCC said. -- Greg Edwards

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Richmond Times-Dispatch

© 2006, Media General. Part of the GatewayVA Network.