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The Consumer Federation of America's Terribly Flawed Advice about Life Insurance

Prepared by James H. Hunt and Stephen Brobeck, July 1995*

Be sure to read Breadwinners' February 2011 Letter to The Consumer Federation's Board


Jim Hunt and Steve Brobeck writing purportedly on behalf of America’s consumers – given their respective roles at the Consumer Federation of America as life insurance actuary/consumer adviser and Executive Director - propose actually increasing agent compensation for sales of cash value policies and demonstrate their profound failure to comprehend, and/or properly express basic financial principles. Jim wrote, “First, there needs to be effective consumer disclosure of the costs of early termination of cash-value policies…Thus, most buyers who terminated their policies during this time period [its early years] not only received no yield on their cash value investment, but actually lost some or most of this investment.” From such, Jim concluded that “buyers of cash value life insurance lose $6 billion annually by terminating their policies prematurely.” Jim’s conclusion, I am sorry to say, is pure economic poppycock. The costs or losses Jim attributes to “terminating” a policy do not arise from the act of termination, nor are they avoided by continuing the policy, they are sunk costs which actually arose because of the misrepresentations, misconceptions, and inadequate product disclosure which have plagued the life insurance industry and marketplace for more than a century.

Read the Consumer Federation’s incredibly flawed analysis and advocacy, which fortunately it has withdrawn from its website, but which Breadwinners’ believes needs to be memorialized as evidence of the lost and wayward consumer movement since the 1960s and ‘70s. Unfortunately for America’s life insurance consumers, this consumer group still relies on Jim Hunt, who has never been an effective advocate, and in fact was the company actuary involved in the fraudulent demutualization of Justice Brandeis’ greatest accomplishment. For more on these subjects, read the 2011 Letter to the Consumer Federation’s Board of Trustees and/or contact Breadwinners’ Insurance Founder, Brian Fechtel, for more information. Finally, please note that while Jim is a friend of mine, and for years regularly referred consumers to me, his actions to thwart my disclosure/reform initiatives have strained our friendship, and necessitate my exposure of his problematic conduct that has actually widely harmed America’s life insurance consumers for decades. Anyone who believes in holding accountable business and government leaders, ought to also believe in holding consumer advocates accountable....


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