In December 2010, I wrote to Mutual Trust Life regarding their employee’s trade magazine misrepresentation: “In fact, whole life insurance actually can get less expensive the longer the policyholder holds the policy because the increase in guaranteed cash values and non-guaranteed dividends often exceeds the premium after a few years.” (see my prior blog for more details.)

This, of course, is just one of the many typical misrepresentations that pervades the life insurance marketplace, and one that Professor Belth has written about in academic journal articles and his own newsletter for over 40 years. Like all of the industry’s misrepresentations, this distortion of a policy’s annual expense is directly facilitated by the industry’s inadequate policy disclosure practices. MTL’s Compliance Officer, Mr. John P. Seneczko replied to my December letter. Below is my response to Mr. Seneczko, addressing both his lame defense and his senseless counterattack, and offering that if he’ll act as some dishonored Japanese executives do, then I’ll buy him the sword. As always, your own thoughts on my blogs are welcomed and appreciated.

Dear Mr. Seneczko:
The promptness of your reply was admirable. I am sorry, though, to inform you that I see several serious problems with your reply. [MTL’s reply is presented in excerpts in my response, and in its entirety at the end of this blog.]

For instance, when you write, “While we disagree with your opinion of this article, it does not promote MTL products nor is [it] directed toward MTL customers and thus, is not an MTL Insurance Company endorsed solicitation. As a result, we do not believe it would be appropriate for us to comment further at this time,” I disagree. Given industry compliance practices, I do not think MTL can endeavor to distance itself from the nationally published work of its employee. Indeed, to assert that the article is not problematic because it is not directed to MTL customers and does not directly promote MTL products is to make a mockery of compliance rules. To follow your argument, Insurer X could write all sorts of misrepresentations in a published article, others in the industry could use such published material – either directly or indirectly by just verbally quoting the misrepresentation, and there would be no problem. Certainly, MTL’s own agents could not be held solely responsible for the misinformation that they might have learned from this article by their company’s Senior Marketing Communications Specialist. Mr. Seneczko, misrepresentations are pollution, as much as toxic waste is. MTL is responsible for the toxic waste that its employees put into the marketplace.

What is even more surprising than your letter’s plea of innocence is its second sentence which reads, “We have since reviewed the article written by Ms. Cicchetti,” suggesting that you might not have previously read her article – a suggestion that is incredulous on multiple counts. If MTL had not reviewed Ms. Cicchetti’s article prior to her submission of it to the National Underwriter then that indicates a compliance procedures problem. If you had read it before her submission then that of course indicates a different, and more serious, compliance problem. Not having read it in the 11 days after it had been published and before receipt of my prior letter, could well indicate yet another type of compliance problem. In all of these cases, for MTL to employ a Senior Marketing Communications Specialist who is not aware of the cited misrepresentation is for your company to have failed to properly train and supervise its employees. Such failure does not speak well of MTL, not merely regarding the article’s misrepresentations, but regarding the company’s actual other marketing materials that such an uninformed employee authored or approved. After all, for an MTL employee to not understand the mistake in the article’s blatant misrepresentation raises the compliance nightmare: How extensive are her and other MTL employees’ and agents’ misrepresentations?

So, which of the above compliance problems do you prefer: Inadequately trained employee(s), deficient supervision, and/or faulty compliance procedures? In the end, there can be doubt about a serious compliance problem at MTL when it has allowed an employee to attach credibility to her assertions by showing her role as Senior Marketing Communications Specialist with MTL when writing a trade publication article containing a blatant misrepresentation.

In spite of such, your letter merely asserts, without explanation, that you disagree with my opinion of Ms. Cicchitti’s article and that it would not be appropriate for you to comment further. Here again, you are incorrect. MTL does need to comment further. MTL needs to apologize for its employee’s misrepresentation, and it needs to conduct an internal audit to examine the possible pervasiveness of this misrepresentation in its materials and also possible other misrepresentations, given, again, that a Senior Marketing Communications Specialist who doesn’t recognize this age-old misrepresentation probably doesn’t recognize other age-old misrepresentations. Offering to apologize when you or your employees make a mistake is part of the necessary appropriate response. I will look forward to MTL publicly doing so with the same prominence and distribution that its original misrepresentation had. If MTL is not prepared to apologize, perhaps the Illinois regulators should impose a large fine upon MTL that directly impacts the company’s executive bonus pool by clawing back previously paid bonuses.

Let me also be clear about another matter. Punishment for Ms. Cicchetti’s article ought to, it would seem, fall on you or other MTL executives, not on Ms. Cicchetti. While I have not researched her employment history, qualifications, details regarding the writing of the article, etc., I suspect that she is young, does not have extensive financial knowledge, and merely wrote what she has heard others at MTL say. If my intuition is correct, then the responsibility for MTL’s misrepresentation rests exclusively with you or other MTL executives. Misrepresentation in the financial world will not be effectively curtailed until responsibility for such is taken by, or forced to be taken by, senior executives. Heretofore, many life insurance executives have been either ignorant or willfully blind regarding the pervasive misrepresentations in the marketplace. It is time for that to change. If you will take responsibility in the fashion that some dishonored Japanese executives do, I would be glad to purchase the sword for you.

Finally, I also must inform you that I vigorously object to your final paragraph. You certainly imply that there are misleading references made about MTL on my web site when you ask that I “immediately remove any and all misleading references about MTL.” There, however, are not any misleading references regarding MTL on my web site. It is of course true that in another blog, “Should Penn Mutual’s Old Policyholders in Good Health Replace Their Long-Held Policies?” I asked, “What about such policyholders at Mutual Trust Life? (Having nicknamed itself ‘The Whole Life Company,’ makes one wonder, how good must its policies really be?), and later in the blog stated, “Mutual Trust Life, MTL, a little Illinois insurer, touts itself as ‘The Whole Life Company,’ and proclaims MTL’s company vision is ‘to place in the top five of all companies for ten-year historical performance.’ To my knowledge, MTL has never even come near its happy-talk goal, and it may have about as much chance of ever achieving such as I have of being a top five contender to Mr. America….” But again, there is nothing misleading in my words.

On the other hand, MTL’s quoted company vision “to place in the top five of all companies” could, however, well be considered misleading. While it is wonderful to aspire, and self-laudatory words can be accepted as puffery, regulators, I think, might now have to determine (since you so adroitly reminded me of my having referenced MTL a year ago on my web site): Does MTL’s vision statement constitutes puffery or unacceptable marketing? Insurance laws require any information provided to consumers “shall be sufficiently complete and clear so that it is neither misleading nor deceptive, nor has the capacity or tendency to mislead or deceive.” Does MTL have any current and relevant documentation regarding its policies’ 10 year performance relative to the industry that justifies its presentation of its company goal as anything other than a pipe dream and Ra-Ra sales talk dreamed up by its executives to promote MTL’s sales? I contend that without such documentation MTL’s public expression of its goal is entirely disingenuous and misleading.

Specifically, has MTL ever finished in even the top 10 on 10 year historical performance? And furthermore, how significant is 10 year policy performance when its cash-value policies have been sold to be lifelong assets? My recollection from old Best’s Review reports on the subject is that MTL in 20 year historical performance reports would typically finish in the bottom 20% of the relatively few insurers that Best’s actually reported upon. Moreover, does MTL possess the investment management capabilities, underwriting expertise, operational scale and efficiencies to have any realistic chance of ever finishing in even the top 20 of all life insurance companies in 10 year policy performance in 2021? While I am glad to have discovered that MTL has recently removed its “silly–talk” goal from its web site, I am still able to reference its previously posted words. In fact, I now contend that MTL’s removal of such constitutes an implicit admission of such words capacity to mislead and deceive consumers. (So, thanks again for reminding me of my prior mention of MTL. And, oh, by the way, who were your IMSA auditors? While I’m not surprised that your employee’s and your web-site’s misrepresentations made it past such fraudsters, perhaps some authorities who hadn’t previously realized the sham that IMSA has been [some apparently have not yet read my August 2010 letter to IMSA’s President posted in the articles above] will now be interested in speaking with such cracker-jack “compliance” auditors. Perhaps some claw-backs can be obtained from them as well. Wouldn’t that be sweet?)

In closing, I am sorry to have to inform you that I think executives like you actually maintain the life insurance industry’s age-old problems. You and your compliance officer peers throughout the industry not only fail to provide the necessary information that consumers need, but you also promote the illusion that your companies are law abiding and ethical. Any business maintained for generations upon inadequate product disclosure is fundamentally a business that facilitates misrepresentations. And knowingly facilitating such constitutes a patently-defective practice that is by definition inherently non-compliant; otherwise, compliance is meaningless. It is that simple. It is that obvious. It is you, Mr. Seneczko, you and the other duplicitous and/or ignorant compliance officers who do not function to truly promote compliance with genuine ethical practices and laws, but who fundamentally serve just to safeguard your employers from actually getting convicted of all the white collar crimes in which they and their associates engage that have prevented life insurers from becoming widely regarded as a reputable industry. Shakespeare said it very well, didn’t he, “Kill all the lawyers”? Admittedly, he exaggerated, dramatic speech permits such, and he used the professional title of his era. But the sentiment of Shakespeare’s sagacious observation is correct: many of those who are entrusted to uphold the law, compliance officers like you, are actually accomplices to crime. And so, again, I repeat my offer, if you’ll act as a Japanese executive, I’ll buy the sword.

Please know, of course, Mr. Seneczko, that while there is the need on vital issues to speak explicitly and unequivocally, I mean you no personal harm (specifically, despite the above reference to Hara-Kiri, no physical harm – added in the days after the horror in Arizona so that there can be no misunderstanding); the sword I would buy for you would be plastic. Possibly hard plastic! But plastic just the same. Life insurance executives, though, must finally begin in 2011 to take responsibility for their organization’s pervasive age-old misrepresentations. In fact, in doing so, you could actually be the first and become a genuine leader, and I would salute your ‘About Face.’ Wouldn’t that be something, a life insurance industry executive demonstrating the real leadership American consumers have always needed and deserved on the vital issues of product disclosure and ethical sales practices? Who knows, (since there certainly aren’t many mutual life insurers left in America, and none that have shown any real commitment to putting policyholders’ interests ahead of their commission-driven agents’.) if you and MTL effectively reform your operations to provide excellent value to consumers, there could be a good future for Mutual Trust Life.

Please do not hesitate to call me to discuss your thoughts; I will look forward to hearing from you and to MTL’s reply.

Sincerely,
Brian Fechtel, CFA, Agent & Founder of Breadwinners’ Ins.

PS Attention Consumers: Life Insurance Buyers Beware, Be Very Aware. To date, Product Marketing Materials Have Only Been Approved by Financial Regulatory Attorneys and Compliance Officers Who Have Repeatedly Demonstrated Their Ignorance or Willful Blindness.

Copies:
Dirk Kempthorne, President, The American Council of Life Insurers (ACLI),
Susan Voss, President, NAIC,
The executors of the recently euthanized Insurance Marketplace Standards Association (IMSA) – the foremost financial regulatory fraud in American history, founded and operated by a corporate attorney and a former insurance commissioner
and various regulators at the IL Division of Insurance, FINRA, and the SEC

Again, below is Mr. Seneczko’s letter of December 21, 2010 on behalf of MTL insurance Company, a member of the Mutual Trust Financial Group, NAIC member 66427.

Dear Mr. Fechtel:

We are writing to you in response to your email of December 17, 2010, at which time, you notified us of your concerns over an article written by Elizabeth Cicchetti in the National Underwriter.

We have since reviewed the article written by Ms. Cicchetti. While we disagree with your opinion of this article, it does not promote MTL products nor is directed toward MTL customers and thus, is not an MTL Insurance Company endorsed solicitation. As a result, we do not believe it would be appropriate for us to comment further at this time.

However, since this is not an MTL Insurance Company article, we hereby demand that you immediately remove any and all misleading references made about MTL Insurance Company from your website.

Sincerely,
John P. Seneczko, Compliance Officer