compliancecompliance compliance solutions session 3: february 27, 2006 session producer: karen...
TRANSCRIPT
COMPLIANCE
Compliance Solutions
Session 3: February 27, 2006
Session Producer:
Karen Smyth, Product Director
Long Term Care
Prudential
COMPLIANCE
Panelists
• Maryann Glotzer, LIMRA International
• Brian Atchinson, IMSA
• Elizabeth Lovaas, New York Life
What is LIMRA International?What is LIMRA International?
A member-owned organization, dedicated to meeting the information needs of companies involved in marketing insurance and investment products. Through the application of cooperative and custom research, we strive to deliver insights that help bring the complex world of financial services into focus.
We know your company, your products, your business, and most importantly, compliance issues.
Why a Customer Assurance Program (CAP)?
Why a Customer Assurance Program (CAP)?
Reaction to class action suits and market conduct concerns of the industry
If customers misunderstand the provisions of their products -- sales practices are misleading
The only way to know customers understand -- ask
Why CAP?Why CAP?
CAP is the industry standard for benchmarking customer satisfaction at time of sale.― Endorsed by IMSA― Over 100 companies using CAP for:
• Life • Annuities • Long Term Care
What is CAP?What is CAP?
Survey of recent buyers
Dear Valued Customer:
I appreciate your recent purchase and
would like to take this opportunity to assure
you of our commitment to serving the needs
of customers such as yourself. You can help
us do a better job of service by telling us
why and how you recently decided to
purchase a Real Life product.
Won't you please take a moment to complete
this brief questionnaire, place it in the
enclosed business reply envelope and drop
it in the mail — no stamp is required. We
have asked LIMRA, an independent
research organization, to conduct this
survey for us.
If you have any questions about your
purchase or if we can provide any other
assistance, please contact your agent or our
customer service department at (XXX) XXX-
XXXX.
Cordially,
[name]
[title]
1. Based on your recent experience, how helpful was:
Extremely Very Somewhat Not Very Not At All
a. The service provided by the producer? 1
2 3
4 5
b. Our product descriptions and sales materials? 1
2 3
4 5
2. What product(s) h
ave you recently purchased from our company? (Mark all that apply)
Life insurance
Annuities Investment products (sto
cks, bonds, mutual funds and the like)
Some other type of insurance
None
(If you did not buy life insurance, please skip to question 7.)
3. For what purpose or purposes did you buy life insurance from our company? (Mark all that apply)
To help cover burial and other final expenses
For business purposes (e.g., key person, split
To help provide for your family's needs after your death dollar, partnership, stock redemption, etc.)
As a way of saving money for retirement
For estate liquidity (e.g., to offset estate taxes,
As a way of saving money for your children's
to cover probate expenses, etc.)
educational expenses
As an investment
To help pay off the mortgage after your death
For tax-sheltered savings
As a charitable contribution
4. What sources of money are you using to pay the premium for the life insurance you recently purchased?
(Mark all that apply)
Current income
Money that has built up in another life
Savings
insurance policy I still have
Money from a canceled life insurance policy
Other
5. Have you received your policy?
1 Yes, my agent delivered it to me in person.
3 No, I have not yet received my policy.
2 Yes, my agent mailed it to me.
6. Did your agent analyze your life insurance holdings, your social security, and your other financial assets in order
to suggest a definite life insurance program to fit your needs?
1 Yes
2 No
7. Do you have any suggestions about how we could improve service to you or any additional comments?
YOUR LOGO
HERE
What is CAP?What is CAP?
Questionnaire
Cover letter
Analysis & Imaging
Drawing
► LIMRA prints questionnaires and envelopes
with the company’s logo and colors
► LIMRA mails questionnaires along with
postage paid return envelopes
► LIMRA pays all mail out and return postage
costs
► LIMRA sponsors a drawing to enhance
response rates
► LIMRA analyzes results and provides reports
0
12
3
4
56
7
All Regio
ns
Agenc
y 1
Agenc
y 2
Agenc
y 3
Agenc
y 4
Agenc
y 5
Agenc
y 6
Agenc
y 7
Agenc
y 8
Agenc
y 9
Report
Percent of Life Customers Unaware They Bought Life Insurance
QuestionnaireQuestionnaire
QuestionnaireQuestionnaire
Reports from CAPReports from CAP
Company summary with industry norms Reports by Distribution Channel Regional, marketing, and producer-level reports Identification of any units or producers who differ
significantly from overall company results Name, address, and policy numbers of every
policyholder who indicates a significant misunderstanding
Additional Information from CAP
Additional Information from CAP
Electronic images of returned surveys in client’s own handwriting
I just wanted to say I love my agent
Mike @ your office in Claremore,
OK. He’s the best!! Heather K.
Most Comments are Positive!Most Comments are Positive!
Benefits of Using CAPBenefits of Using CAP
Monitors sales practices without disrupting sales process― post-sale so does not diminish producer productivity
Prompt reinforcement with policyholders― reinforcing the reasons for buying immediately after sale can
improve persistency ― elicit complaints before they fester into grievances
Communicates expectations― survey content shows producers what company expects its
customers to understand about their purchase
Benefits of Using CAP (Continued)Benefits of Using CAP (Continued)
Independent administration― provides an arm’s length unbiased analysis and plaintiff
lawyers cannot contend company is auditing itself Industry benchmark
― provides standard against which to judge performance ― strength in numbers― CAP User’s Group and CAP Connection
Using CAPUsing CAP
CAP tells you:
Which customers are confused
What they’re confused about
Who or what confused them
Using CAPUsing CAP
Analyze the exceptions― Do you need to contact the client?― Do you need to contact producer?― Do you need to contact a supervisor?― Do you need to contact marketing?
Using CAPUsing CAP
Establish procedures Document all actionsDocument all actions Document responses to those actionsDocument responses to those actions Forward information to anyone who might be Forward information to anyone who might be
interestedinterested
Using CAPUsing CAP
Publish procedures Copy producers on communications with their
clients Copy supervisors on communications with their
producers
Using CAPUsing CAP
Track activity by regions, production units, and by producers
Communicate the results to the regions, production units and producers
Encourage interest
Using CAPUsing CAP
Defend producers from frivolous complaints Defend against insurance department actions Defend against law suits Publish your successes
Questions?Questions?
Compliance Solutions:IMSA Assessments
Brian K. AtchinsonFebruary 27, 2006
Anaheim, California
“The secret of life
is honesty and fair
dealing . . .
if you can fake that,
you've got it made.”
Groucho Marx
What Is IMSA?
• Independent, nonprofit
standards-setting organization.
• Promotes high ethical standards in the marketing, sales and service of individual life insurance, long-term care insurance and annuities.
Why IMSA?
• Organized in early 1990s; a response to crisis of consumer confidence in the insurance industry.
• Provides rigorous, measurable, national standards.
• Identifies problems early before they become widespread.
Principles of Ethical Market Conduct
1. To conduct business according to high standards of honesty and fairness and to render that service to its customers which, in the same circumstances, it would apply to or demand for itself.
2. To provide competent and customer-focused sales and service.
3. To engage in active and fair competition.
4. To provide advertising and sales materials that are clear as to purpose and honest and fair as to content.
5. To provide for fair and expeditious handling of customer complaints and disputes.
6. To maintain a system of supervision and review that is reasonably designed to achieve compliance with these Principles of Ethical Market Conduct.
Principles of Ethical Market Conduct
IMSA Qualification
To qualify, a company:
• Develops and implements policies and procedures in support IMSA’s Principles.
• Conducts an extensive self-assessment.
• Undergoes an independent review conducted by an IMSA-qualified assessor.
• Documents compliance with the six key principles, a minimum of 144 separate criteria.
SuitabilityNeeds-based Selling
IMSA: Compliance Solution
Needs-based selling.
• Evaluate a customer’s insurable needs and financial objectives.
• Use of fact-finding tools.
• “Suitability” determined through needs-based selling.
IMSA: Compliance Solution
Producer supervision.
• Adequate screening and background checks.
• Adequate training and supervision.
• Data collection and ongoing monitoring and review.
IMSA: Compliance Solutions
Clear and fair advertising, marketing, and sales materials.
• Maintain consistent advertising review procedure.
• Materials are easy to understand. Proper disclosure.
• Compliance with laws and regulations on advertising, unfair trade practices, sales illustrations, etc.
IMSA: Compliance Solution
Fair and expeditious complaint handling.
• Written and verbal complaints.
• Track underlying problems to address systemic issues.
Ethics = Commitment to Continuous Improvement
2006 IMSA Standards Update
Value of IMSA
IMSA-qualified companies have:
• Fewer complaints.
• Lower lapse and surrender rates.
• Higher financial ratings.Georgia State University Study, 2005/2006
www.imsaETHICS.org
COMPLIANCE
IMSA in Practice
Beth Lovaas, AIRC, MBA
New York Life Insurance Company
February 27, 2006
COMPLIANCE
Agenda• IMSA topics• Membership• Company approach• Self-assessment process• Independent assessment process• Sample certification timeline• Examples of improvement• LIMRA CAP• Conclusion
COMPLIANCE
IMSA Topics: Suitability
• Efforts to determine product suitable for customer
• Evidence of suitability guidelines• Communicate to agents and
encourage use in sales process• Submission of suitability review
with application
COMPLIANCE
IMSA Topics: Distributor and Employee Training
• Company products and operations• Company policies and procedures
• Replacement, suitability, fair competition, advertising and sales materials, complaints, illustrations
• Compliance with laws and regulations• Marketing and sale of products• IMSA Principles of Ethical Market Conduct
COMPLIANCE
IMSA Topics: Licensing • Appropriately qualified• Licensed and appointed• Meet applicable continuing education
requirements• Assure that distributors do not place
business or receive commission if not properly licensed and appointed
COMPLIANCE
IMSA Topics: Advertising and Sales Materials
• Process for review, approval, and use of materials
• Communicate requirements to distributors• Make materials available to distributors• Maintain compliance with laws and
regulations related to advertising• Track and dispose obsolete materials
COMPLIANCE
IMSA Topics: Replacements
• Provide customers with information to make decisions, including state disclosures
• Communicate company’s policy and guidelines to distributors, including commissions
• Identify and process replacements• Detect undisclosed internal replacements• Monitor agent activity
COMPLIANCE
IMSA Topics: Laws and Regulations
• Process for tracking and implementing laws and regulations by effective date
• Communicate to employees and distributors
• Update policies and procedures to reflect changes in laws and regulations
COMPLIANCE
IMSA Topics: Complaints
• Communicate complaint handling procedures
• Inform customers of how to communicate complaints
• Handle complaints from state departments of insurance
• Monitor complaint trends
COMPLIANCE
IMSA Topics: Oversight and Monitoring
• Enhanced systems and procedures to supervise and monitor compliance with laws and regulations, IMSA, and company codes of conduct and take corrective action
• Monitor customer satisfaction with products and sales practices
• Monitor and analyze replacement activity and take appropriate action
• Enhanced training for distributors and employees on covered products, Principles and Code, and laws and regulations
• Use LIMRA Customer Assurance Program surveys
COMPLIANCE
Continuous Improvement
1. Policiesand Procedures
Continuous Improvement
2. Responsibilities
3. Communication
6. Act Upon
5. Monitor
4. Used
COMPLIANCE
Membership• NYL founding member• NYL certified since 1998 and LTC initially
certified in 2001• Membership renewed every three years• Continued compliance with Principles and
Code• Certification process is vigorous assessment
of company practices in light of Principles and Code
COMPLIANCE
Strategy
• Corporate Compliance Department– Overall recertification– Provide support and guidance
• Life, Annuity, and LTC Business Areas– Complete self-assessment document– Respond to independent assessor
requests and coordinate on-site visit
COMPLIANCE
Self-Assessment Process• Performed in-house by NYL team• Evaluate existing policies and procedures to
– Extent revised in last three years; and– Confirm data provided in prior assessment is
accurate
• Review best practices recommendations from prior assessment and document where and how incorporated into procedures
• Provide report to assessor
COMPLIANCE
Self-Assessment Tools
• Organizational chart
• Interview guide
• Responsibilities matrix
• Training matrix
• Supporting documentation
COMPLIANCE
Independent Assessment Process
• Qualified assessor
• Review self-assessment report
• Perform evaluation to determine if reasonable basis for NYL’s conclusions
• Test and sample data and information
• Submit report and recommendation
COMPLIANCE
Sample Certification Timeline• Self-Assessment: December 2003 – January 2004
• Update 2001 information (responsibilities matrix, interview guide, documentation)
• Corporate Compliance visit 12/10 – 12/11• For each topic, show that have P&Ps, someone is
responsible, how P&Ps are communicated, evidence of use of P&Ps, monitor and measure use, and actions to keep P&Ps current
• Identify and eliminate any reportable gaps
• Independent Assessment: February 2004• NYL provide self-assessment report to assessor• Review materials and develop interview questions• Provide NYL progress report including actions needed
COMPLIANCE
Sample Certification Timeline• Independent Assessment: Mid-March 2004
• Request sample files on New Business, Licensing, Replacements, Advertising and Sales/Illustrations, and Complaints
• Provide checklists of information seeking for each topic• Provide progress report on findings and actions needed
• Independent Assessment: April 2004• Conduct on-site visits for 3 - 4 days• Conduct interviews, walk-throughs, testing, and review of
sample files• Analyze findings and report recommendations for
improvement to management• Submit reports to IMSA
COMPLIANCE
Examples of Improvement• Educate management of good practices• Enhance employee knowledge
– Regulatory requirements– Complaint handling
• Improve regulatory tracking and implementation
• Improve new business process– Suitability– Replacement– Agent licensing, appointment and CE
COMPLIANCE
LIMRA LTC CAP Survey• LTC send monthly data file to LIMRA• LIMRA send survey to all customers that retain
policy after 30-day free look has expired• Surveys sent of about 500 – 700• Response rate about 28%• LTC receive policy flags, management report,
and agent activity report• Flagged policies of 20 - 60• LTC review and analyze policy flags and
forward to others
COMPLIANCE
LIMRA LTC CAP Survey• Corporate Compliance notify
Managing Partner of flagged policies• Managing Partner contact agent to
follow-up with client• Result of contact documented and
forwarded to Corporate Compliance• If no response after period,
information forwarded to Agency Standards for handling
COMPLIANCE
Questions