VA Life Insurance

The Servicemen's Group Life Insurance Program (SGLI) is the largest of eight insurance programs run by the Department of Veterans Affairs (VA); SGLI is administered by Prudential Insurance Company of America, under contract with the VA. SGLI's operating reserves totaled $165 million as of June 1991, and, according to GAO, needed to be increased by about $85 million as a result of recent legislation that doubled maximum coverage from $50,000 to $100,000 for each insured. At the same time, GAO believed that the program's $76 million in contingency reserves were about $51 million more than needed. GAO also thought that reserves in the $191-million revolving fund were too high. GAO found that military personnel covered by SGLI were overcharged premiums throughout the 1980s, and adjustments are needed. GAO made recommendations to the Secretary of Veterans Affairs to achieve the adjustments GAO feels would improve the financial position of the SGLI. The Secretary did not concur with GAO's recommendations.

GAO found that: (1) the Program's operating reserves are inadequate, but the Program's contingency reserve is excessive; (2) between 1982 and 1991, VA overcharged military personnel for insurance, resulting in an excess in the revolving fund; (3) VA has not appropriately set insurance premiums under the Program; (4) the Program contract does not state whether VA or the contractor pays claims in certain peacetime situations; and (5) VA and the contractor reached an agreement on claims liability, but VA has not amended the contract.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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