Turning to the political scene in Washington Bobo said, "Without question, the most disturbing event occurring in 1979 was the release, on July 10, of the long expected report by the FTC staff regarding their study of life insurance." Not expected, however, had been the FTC's press release highlighting their views on industry rates of return. The report, based on totally misleading figures, put the industry in a very bad light with an apparent bias favoring term life insurance. Describing the NALU's efforts to counteract the unfortunate publicity, Bobo explained:

On the day of the release we began working on a document that will rebut this report at the point of sale. The result is the brochure "A Response to the FTC." To the extent possible, we have tried to use the FTC's own studies and words to counteract the misleading information contained in their press release and report. This is an effective piece, and will be available in quantity….

Within three hours of receiving the voluminous report, our own press release went out to the media and the state and local associations. Within a few days, a statement was filed with the Senate Committee challenging the integrity of the report, and this, too, was reported to the press, state and local associations. Sample letters-to-the-editor and copies of my letter to The Washington Post and the New York Times were also forwarded to our associations.

Many excellent articles, wherein the FTC report was taken to task appeared all over the country. All or these articles were the direct result of diligent local public relations initiatives by your members. Some of these articles were produced locally, but many were produced from materials supplied by NALU.[vii]

The FTC report generated considerable adverse publicity for the industry. Its views were clearly reflected in a broadcast of the popular Phil Donahue Show. The thrust of the presentation was to denigrate whole life insurance by advising people to buy only term insurance and invest the money that they would have spent on permanent insurance. Norman Dacey, an author critical of the insurance industry, was the principal guest. "Dacey is a vast reservoir of misinformation," Bobo commented, "and he emptied much of it on Donahue's audience. We have protested this one-sided presentation and the false statements made. We have asked for an opportunity to respond."

Still, there was much to be thankful for. As Bobo pointed out, the report did not recommend federal regulation of life insurance nor did it recommend fiduciary status for agents and the liability and commission disclosure information that would have been required by such a recommendation. Also, there was no suggestion for modifying agents' contracts to limit their earning capacity. "In our outrage over the manufactured surprise, we should not lose sight of the fact that these issues represented the main battle," he told the agents.

On September 11, the day following Bobo's speech before the National Council, more than 600 people crowded into the ballroom of the Detroit Plaza Hotel to hear David C. Fix, FTC's program director of the life insurance task force, discuss the report and the task force's two-and-one-half-year investigation into life insurance. "While few in the room agreed with Fix, all listened attentively and courteously to what he said," Life Association News reported. "We believe that the central cause of the extraordinary loss suffered by a great many consumers of our society is a lack of adequate and meaningful information concerning the true cost of life insurance products," Fix said. He maintained that the wide variation of the actual cost of essentially identical coverage was in large part attributable to the fact that a consumer cannot easily compare the cost of similar life insurance policies. He said the second problem that prompted the FTC's involvement was "the fact that a great many consumers who purchase cash value life insurance products are unaware of what rate of return they will earn on the savings deposited with companies."

Summarizing the salient points of his remarks, the editor noted:

Fix maintained that neither he nor the FTC favors term insurance rather than whole life. He said, "I think that either product is a legitimate purchase depending upon an individual's needs, an individual's particular situation, his tax bracket and a great many other factors." He emphasized, "I think the one factor that should be disclosed, that a consumer should consider, is the rate of return he will get through the savings component of a whole life policy."

He added, "I don't think you can overestimate the importance of the services of a first quality agent."[viii]

Thomas J. Wolff, agent for State Mutual at Vernon, Connecticut, was elected president for the 1979-80 term. A prominent member of the Million Dollar Round Table, Wolff had established himself firmly in the company of the industry's top achievers during his twenty-five-year career, and was a popular speaker at sales conferences and other industry meetings. As a young man, after service in the Korean conflict, he entered the University of Connecticut as an economics major and graduated in 1956, cum laude. Later in his career as a salesman and a publisher he originated and promulgated the concept of Capital Need Analysis—an estate-planning sales approach based on the human-life-value principle.

Almost immediately, Wolff was able to show what an effective spokesman for the business he could be when the industry found two excellent opportunities to respond to the FTC report. On September 28, Wolff and Prudential's chief executive officer, Robert A. Beck, appeared on the Phil Donahue Show to present the industry's viewpoint. Not only did they succeed in discrediting both Dacey's views and the FTC's misleading statements, but they also ably presented the life insurance business as one conducted by people who are responsible, concerned and keenly sensitive to people's needs for financial security. Offering specific examples and presenting their ideas in very human terms, they emphasized the uses of insurance to solve family financial problems. They were particularly careful to underline the fact that term insurance is an excellent choice for a young person, when it is highly affordable, but not such an advantage later, when it is very expensive. "The point I'm really making," Beck told the television audience, "is that most people die not when they are young but when they are older. And most people who died last year may well have had term insurance that expired and wasn't in force when they died."

On October 17, Wolff and Federal Law and Legislation Committee Chairman Rice E. Brown represented the agents at the Senate Commerce Committee hearings to refute errors in the FTC report. Four insurance company presidents represented the American Council of Life Insurance. All sharply criticized the FTC report. According to Life Association News, "The six spokesmen questioned the FTC staff's objectivity and motives, refuted the actuarial assumptions which led the staff to claim a 1.36 percent return on investment for whole life policies, and provided significant arguments to refute the FTC staff's viewpoint against the purchase of whole life policies."

Brown told the Committee:

When the FTC staff report was made public we said that one of the major problems with it is that the FTC persists in making comparisons between whole life and other thrift media that are invalid. Because of the additional contractual rights in a whole life policy, which are not present in these other media, direct comparisons are inappropriate and invidious, if not misleading. Moreover, we are particularly concerned with the seeming preoccupation for the FTC staff with the concept that term insurance is superior to and more suitable for most people than whole life insurance, and the contentions that consumers are generally uninformed about life insurance and unable to evaluate its cost.[ix]

The industry's representatives had little trouble gaining the Committee members' full attention. Senator Nancy L. Kassebaum, in introducing fellow Kansan Rice Brown to the committee, emphasized Brown's expertise and urged her colleagues to credit his testimony. At the conclusion of the days' hearings, Senator Howard W. Cannon of Nevada, chairman of the committee, told Wolff, "If the analysis of the Federal Trade Commission report that you have presented here today is correct then the conclusions of the FTC staff report certainly cannot stand."

On November 26, Life Association News interviewed Senator Cannon in his offices in the Russell Senate Office Building. Cannon told the reporter that many members of his committee felt that the FTC had been overstepping its bounds, going beyond the authority Congress intended to have. "In other words," he said they have been substituting their perception of the way things ought to be for the powers that Congress really intended them to have." Suggesting that Congress exercise tighter oversight of the FTC, Cannon noted that much of the information from the report was misleading. "Suggesting that Congress ought to exercise tighter oversight of the FTC, Cannon noted that much of the information from the report was misleading. "If the FTC is suggesting that this is a rip-off because insurance policies are paying less than 2 percent of return, the FTC is wrong," he said.

Elaborating further, the Senator observed, "The important point is as I see it, that an insurance policy is an insurance policy. It isn't a saving account and it isn't sold as such, and people are not encouraged to buy it as such. They are encouraged to buy it because it provides death protection. An insurance policy many have some savings recovery features which are all well and good. But to sell an insurance policy solely as a savings account investment would be misleading itself….I think some of the people on the FTC staff may have been prejudiced or may have had preconceived ideas when they went into the study."[x]

In a Life Association News interview during December, FTC Chairman Michael Pertschuk defended the report explaining that 1.3 percent "is our staff's best estimate of the one-year rate of return paid to all ordinary life policy holders in the year 1977. It is not a measure of any individual policy's rate of return. The rate of return for nany particular policy depends largely on the quality of the policy and how long it is held," he admitted.

In January 1980 President Carter wrote a personal letter to the governors of all the states endorsing the FTC's staff recommendations on life insurance cost disclosure. "The commission concluded that whole life value insurance policies not held to maturity pay a relatively low rate of return on their cash values, and that consumers are not getting the information they need to understand the true costs of their policies," Carter wrote the governors. "Copies of the FTC's model state regulation on life insurance cost disclosure were enclosed. "I urge you and your insurance officials to give the model regulation the most careful consideration," the President concluded.

The White House drew attention to the letters with the added fanfare of a press release. In response, Wesley J. Kinder, president of the National Association of Insurance Commissioners, and the NALU's executive vice president Bobo wrote to the President expressing the industry's surprise that he would choose to involve himself in a matter within the province of state insurance regulation. Noting the NALU favored the commissioners' cost disclosure plan (already adopted by 29 states), rather than the one developed by the FTC, Bobo told the President, "There has emerged a clear consensus among the state regulatory officials and the best minds in the life insurance business that the NAIC Model Regulation has distinctive merit among all other proposed alternatives and is definitely in the consumers interest. Further, there is paralleling agreement that life insurance cost disclosure lies within the province of the several states to regulate." Pointing to the FTC staff's repeated efforts to promote their views, Bobo observed:

It is painful, indeed, that the FTC staff's contentions about "low rate of return" on whole life insurance policies is given credence in your letter in view of the effective rebuttal to this precious charge made by our business before the Senate Commerce Committee on October 17.

But even more, we are most concerned that you would identify yourself with an unsubstantiated FTC staff allegation that consumers are paying billions of dollars a year in unnecessary life insurance costs.

In all candor, we thought you had a better opinion of the life insurance industry and its demonstrated performance in bringing security and peace of mind to millions of Americans and, in so doing, providing a steady infusion of venture capital so sorely needed to keep our economic system productive and growing.[xi]

Writing for the insurance commissioners Kinder said, "We are concerned because, as experienced regulators, we know that statements in the letter and press release can be used improperly to replace currently held policies. Replacement may benefit or harm a policyholder, depending upon his circumstances. We deplore any statement that can be used to encourage replacements recklessly on an indiscriminate basis."

In February, President Carter wrote to John Filer, chairman of the American Council of Life Insurance, assuring Filer that he was appreciative of the industry's efforts at self-regulation, fully aware that regulation of insurance was the business of the states, and realized the merits of the commissioners' model disclosure plan. He insisted, however, that the operations of so vast an industry had national implications and naturally commanded the attention of the President of the United States. "The critical role played by the insurance industry in the areas of capital formation, private-sector investment, and individual financial security is a subject that industry leaders and I have often discussed in our meetings,' the President said. "I have sought to reinforce that role in my energy, health and urban policies, among others. I am proud of the insurance industry's response and I look forward to a continued close working relationship with you and other insurance leaders."[xii] Three days after the President's letter was written the Senate, by vote of 77 to 13, approved the NALU-endorsed amendment to the FTC Act which made it clear that, in light of the intent of Congress as expressed in the McCarran Act, the FTC has no power to spend tax money to investigate insurance. (There had never been a question of the FTC's right to regulate insurance. It has not the power.)

The FTC incident was just one more reminder of the importance of maintaining a high profile in Washington's political scene. In 1980 still only 15 percent of the local association members were contributing to the Life Underwriters Political Action Committee. The organization's national chairman, John H. Ward, III, reminded the agent, "The volume of contributions to candidates depends solely on the support life underwriters give to LUPAC by their donations. The goal established for the 1980 elections for the House and Senate is $1 million." Reflecting on the LUPAC's accomplishment over the years Ward said, "The parties and the candidates know who we are. They recognize us as an important interest group representing a major industry, which serves tens of millions of Americans. With the recent rapid growth of the political action committee movement, resulting in more than 2,000 PACs now on the scene, it is reassuring to reflect that LUPAC is one of the oldest and the largest committees and that we have established our credentials. We intend to make our voice heard, in a responsible way, in the important 1980 elections."[xiii]

So that everyone would understand how the LUPAC decided who to help with campaign funds, in October 1980, Life Association News published a tabulated summary of the voting records of the members of both the Senate and House of Representatives on insurance-related bills.

By 1980 the United States still found itself struggling to contain an inflationary economy. Statistics showed that in some areas prices on goods, services and property had almost doubled between 1970 and 1980. To help the public become more aware of the problem and how to solve it, the life insurance industry launched a huge advertising campaign at the beginning of 1980. Two-page spreads appeared in Time, Newsweek, U.S. News and World Report and other major publications, with the injunction, "Inflation. Let's Self-control It." Sponsored by the American Council of Life Insurance, the $3 million campaign won the full support of the agents' group as well. "NALU's commitment to do its fair share of the work in the anti-inflation crusade," Life Association News informed its readers, "started in November, when NALU president Thomas J. Wolff, CLU, appointed a special anti-inflation task force. It is headed by Donald H. Mehlig, CLU, who is with Bankers Life of Des Moines in Torrance, Calif. He is a former president of the Association for Advanced Life Underwriting."

Lending further support to the program, Wolff sent out a letter to the state and local associations urging them to call on their most influential members to help give direction and impetus to the agents' involvement. He suggested that association past presidents "who have the experience, stature, organizational ability, and perhaps more time to give to the various assignments" could become involved. Through the NALU's Public Relations Department, pamphlets and reprints of ads and articles on the subject were made available to the agents for distribution as well as an eleven minute audio-visual called "Everybody's Talking," which dramatized some of the difficult problems in controlling inflation.

Foreword by Alan Press, 1988-1989 NALU President

Preface by Jack E. Bobo, 1989 NALU Executive Vice President

Introduction

Acknowledgements

Chapter 1

Laying the Foundation—A Meeting at the Parker House

Leading Figures—Ransom, Carpenter, Blodgett and Plummer

Conditions Leading to the Foundation of the NALU

Rise of Modern Life Insurance and the General Agency System

Issues and Accomplishments of the First 15 Years

Chapter 2

In the Wake of the Armstrong Investigation

A Royal Commission Investigates Life Insurance Operations in Canada

A Period of Growth and Visibility for the NALU Under Strong Leadership

The NALU Plays a Leading Role in Insurance Education

The NALU During World War I

Chapter 3

The Post-War Decade

The NALU's Extension of Activity

The Agents Move for Recognition

Chapter 4

The Depression and Aftermath

Annual Conventions and Midyear Meetings

The NALU Celebrates Its 50th Anniversary

Chapter 5

The Agents Earn Their Wings

World War II

The NALU Joins the Industry in Legislative Battles

The NALU Establishes the National Quality Award

Chapter 6

Controversies and Schisms (1946-1956)

The Foundation of LUTC

The Nola Patterson Affair

GAMC Formally Organized

Chapter 7

The NALU Goes to Washington

Dispute Over Minimum Deposit Insurance Plans

GAMC Stages First LAMP Meeting

The NALU Celebrates Its Diamond Jubilee Year

The NALU Increases Political Activity

U.S. Senate Antitrust and Monopoly Subcommittee Investigate Life Insurance

The NALU Responds to Consumerist Activism

Chapter 8

The NALU Reaches the Century Mark

FTC Releases a Study Critical of the Insurance Industry

Formation of the Women Life Underwriters Conference

Drop in Local Membership

The NALU Issues Statements on AIDS

The NALU Combats a New Wave of Attacks

The NALU Celebrates a Century of Service

Open Book

Book Marks

[vii] LAN, October 1979, p. 43
[viii] LAN, November 1979, p. 44
[ix] LAN, December 1979 p. 44
[x] LAN, January 1980, pp. 31-33
[xi] LAN March 1980 p. 59
[xii] LAN April 1980 p. 59
[xiii] Ibid., p. 51

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