Call us today @ (518) 692-2494
LIFE • HEALTH • ANNUITY
Compliance you can trust. Service you can rely on.
schedule call with Cailie

Training and Education: 4 Key Ways Your Business Benefits

1) Affordability

Investing in training and education is one of the best ways to make the most of your resources and budget. New employees are better able to hit the ground running when there is a focused training program in place. Looking to maximize your current resources and improve the existing capabilities of your department? Training and education is the answer!

2) Competitive edge

Stay on top of current regulatory requirements, issues, and risk mitigation techniques to give your company the competitive edge. By overlooking this area, you might unknowingly end up behind the 8-ball.

3) Protection

Demonstrating a commitment to compliance is one way to protect your company. Having a training program allows you to document your commitment, as well as create records showing what’s been offered, to whom, and when. If there’s ever a question about who was told what, a formal training program can provide you with the documentation you need.

4) Doing the right thing

Frankly, spending the time to educate your employees and/or distribution partners is one way to do the right thing! “Right” and “wrong” are subjective, but “do to others as you would have them do to you” is one of the universal principles that many support. Ensuring that your team and distributors are educated means you’re making sure that clear limits about acceptability are established and followed.


Are you interested in learning more about our training and educational services?

We're happy to help! The Currin Insurance Compliance Education Program (CICEd) is a comprehensive training platform. Webinars, online courses, customized training, presentations, and research all crafted to support your compliance needs.

You can view this free course that breaks down the different educational services we offer. From there, feel free take a closer look at the other courses we offer online. We are diligently working to add more online courses as soon as possible. In the meantime, please don't hesitate to contact Glenda Bean, Director of CICEd, if you have any questions about what's available now, what might be coming soon, and/or personalized training (in person or video). Enroll in CICEd today...there's no charge to start exploring!

 

Rebate, Gift, or Inducement – What Does It Matter?

Everyone likes to get something extra, something for free, a little treat, right? Buy one pair of shoes, get another one half off. Buy a $100 gift card, get another $25 gift card for free. No big deal, right?

But if we’re talking about gifts in connection with the sale of insurance or annuity products, it IS a big deal, and one that can land you in hot water with state insurance regulators. Most insurance departments have published regulations that limit what, if anything, an insurance agent or carrier can give to prospective or existing clients as a gift. Some states have what I call a “zero tolerance” for gifts of any kind that are offered as a means to induce a consumer to purchase an insurance product. In these states, their rules generally state that gifts “of any valuable consideration or inducement not specified in the policy” are prohibited.

Other states have similar wording in their regulations, but they still allow gifts up to a certain limit to be provided, with amounts generally in the $5-50 range per consumer, per year. There are outliers, though. For example, the state of Idaho includes this same wording in their regulations, yet has the highest limit of $200 per person, per year. It’s also important to note that some of the states that do allow certain gifts not only have a monetary limit, but only allow the gifts to be given if they are unrelated to and not dependent on the purchase of insurance.

Whether you call it a rebate, a gift, or an inducement, the basic premise of the rule is the same – state insurance regulators want clients on even footing when it comes to the policies they purchase. To pass the rebate test in most states, any benefit must be expressly stated in the insurance or annuity policy, and provided to everyone who purchases the product. This also helps to ensure that consumers are not influenced to purchase a product primarily because of the gift, and that they have a real need for the product itself.

According to the NAIC Unfair Trade Practices model regulations (Model Reg 880-4(H)(1)), “Paying, allowing, giving or offering any of the following, if not specified in the contract, is an unfair method of competition and an unfair or deceptive act:

Rebates of premiums payable on the policy; special favors or advantages in the dividends or other benefits; any valuable consideration or inducement not specified in the policy; giving, selling, purchasing or offering, as an inducement, any stocks, bonds or other securities, any dividends or profits accrued, or anything of value not specified in the policy.”

So, what does this mean, especially for insurance agents? What exactly is a rebate? In some states, a rebate means a gift of value, such as cash, a gift card, a fruit basket, or some other tangible gift or object. Other states, however, may consider it a rebate if an agent holds an insurance seminar and serves a nice meal. The cost of that meal, per person, may need to comply with the states’ rebating limits, or the agent runs the risk of a state enforcement action for violating state laws. The same issue may apply with a client appreciation event, such as wine tasting party, golf outing, or other similar events. To determine if the event is in line with their rules, many states will calculate the cost of the event, including all possible variables, such as food, drink, cost of entertainment, etc., and divide it by the number of attendees.

Insurance companies and agents often conduct business in multiple states, so being familiar with and staying current with each states’ position on rebates is important. Take a look at what we have to offer and let us do the work for you. Enroll today!

NY Circular Letter Raises Some Questions and Concerns

NY State Circular Letter

I totally get that insurance companies shouldn’t be denying death claims only because they occurred within two years of policy date. But is there an issue here that deserves some positive attention, and not just rebuke?

The NYS Department of Financial Services issued its first Circular Letter of 2017 in January, warning insurers not to rescind policies when beneficiaries fail to provide medical records of the deceased. We understand that New York will not be allowing companies to require beneficiaries to provide someone else’s medical records. This makes sense.

But what’s a company to do these days when it suspects that the deceased misrepresented a material fact on a life insurance application?

Times have changed with respect to medical privacy since HIPPA went into effect 20 years ago. And the headlines about identity theft and the collecting of electronic information about individuals have put personal privacy on everyone’s radar. Justifiably, medical providers are more than a little wary of releasing records. I’ve had some trouble getting my own records, and my doctor actually knows me!

Insureds generally sign a release of medical records on a life insurance application. But we believe that it’s not clear to anyone that the release remains effective upon death. And in New York, the release only lasts for two years, so the release could expire during an investigation. When in doubt, medical providers will err on the side of “don’t release.” So it appears that the insurer does not have any clear way to view a deceased insured’s medical records.

In this circular letter, which directly addresses death claims and their investigation within the 2-year contestable period, we would have liked to see the Department offer some advice on what actions it recommends insurers can take to determine material misrepresentation. The letter somewhat felt like it was shining light on a situation where a very sick person can lie on an insurance application, and the insurer’s hands are tied to do much about it. Claims must be paid promptly and fairly, the letter reminded us, even when misrepresentation is suspected.

One tack could be that companies investigate every application and take every case to court when an insured dies within the contestable period; but that solution does not feel like it’s best for everyone involved.

So the question remains; what’s an insurer to do? Can you give us a hand, New York?

Social Media & Advertising Compliance

Social Media and Advertising Compliance

Ah, social media – a topic that continues to grow and draw interest year after year for marketing professionals, compliance professionals, and the insurance industry as a whole. The NAIC published their Social Media Whitepaper in 2012, and while it’s certainly a great starting place for contemplating advertising compliance issues, there are a lot of questions left unanswered. There’s also the fact that, between 2012 and 2017, how we consume social media and what tools are offered has changed tremendously – and continued change, at faster rates, should be expected.

Let’s look at videos, for example. YouTube was around back in 2012, but Vine (a short-form video hosting service, acquired by Twitter) was just getting started. Vine’s popularity soared and was considered to be the most-downloaded free iOS app from the App Store in April of 2013. I will note that Twitter has now made it so that Vine users (via the app, now called “Vine Camera”) can only share their videos on Twitter, or save them to their camera. But the point isn’t how long these services last – it’s about their monumental impact on how people are consuming information today.

The thing to take away here is that the whole purpose of this service is to create very short (six seconds) videos. These videos are then played on a loop for the world’s viewing pleasure. The attention span of the social media consuming audience is not 30 minutes, it’s not even 30 seconds. That alone can translate into a huge advertising compliance issue.

This hyper-shortened viewing style is also a huge part of another apps’ success – Snapchat. With Snapchat, you take a picture (of yourself, your dog, your food, your crazy neighbor howling at the moon) add some comment to it (preferably witty) and send it to your buddies. The thing is, the image only displays for a matter of seconds, and it can only be viewed by the recipient twice, then it’s gone. Can you say record retention issue?

Or how about the live streaming of videos – content broadcast to the world, in real-time. Live streaming options can be found on Facebook, YouTube, Instagram, Periscope (owned by Twitter), and many, many other apps and services. Consumers want authenticity. They want to “talk” to people in ways that are comfortable (i.e., not on the phone). They want to see the real people behind brands and companies. Get their questions answered in real-time. But putting yourself, your company, and/or your products out there unscripted, and more importantly, with such ease (we’re literally talking press a button and go – no recording studios, no TV sets or radio stations – click button and you’re on air) can lead to a host of advertising compliance issues.

And there are other compliance issues for social media to keep in mind as well – privacy and data security, for example.

There are lots of things that insurers and agents can do to stay on top of advertising compliance on social media. First, have a written policy in place even if the policy is that your company and/or agents cannot engage in social media on behalf of your company – put it in writing.  Some things to consider include the scope of the policy, the purpose, definition of social media, best practices, restrictions, monitoring, and failure to comply.

As a general rule, do not use social media to sell products. Remember, you only get seconds of someone’s time. It’s just not enough to ensure full and complete information is being presented. And finally, do not underestimate the need to have exceptional record-keeping. You must be able to easily demonstrate that ads are in compliance with state insurance advertising laws. If you have agents, or you are an agent that is also a securities licensed individual, there are additional rules outside of state insurance laws that must be followed. 

Want to talk more about social media? Leave your thoughts and questions in the comments below or send them directly to education@currincompliance.com. Be sure to check out our upcoming symposium in May!

Compliance under Trump, Part II

Compliance under Trump

A few weeks after the election I wrote a post about a Wall Street Journal piece that asked whether compliance was dead under President Trump. At that time the question was forward looking as the new administration had not yet come into power. Now, with just a few weeks of experience with this administration, the answer to that question is starting to take shape.

On January 30, President Trump issued an Executive Order on Reducing Regulation and Controlling Regulatory Costs. In the Purpose of this section the order states: “[i]t is important that for every one new regulation issued, at least two prior regulations be identified for elimination, and that the cost of planned regulations be prudently managed and controlled through a budgeting process.”  That one-for-two concept is reiterated in Section 2. Regulatory Cap for Fiscal Year 2017, Subsection (a) states “Unless prohibited by law, whenever an executive department or agency (agency) publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed.” 

As someone who has made her career in regulatory compliance, this makes my head spin! There are outdated regulations that no longer serve an important or current regulatory purpose. There are regulations that were poorly conceived and therefore do not advance the regulatory purpose they were designed to address. There are overly complicated regulations that result in unnecessary compliance challenges. These, and other similar, regulatory issues should be addressed. However, a one-in to two-out concept for reducing regulations, which does not even look at the regulatory purpose (the benefit) of the regulations being added or removed reflects the notion that a smaller number of regulations is better regardless of the need or purpose for the rules. In my decades-long history in regulatory compliance, that is simply not the case. In fact, in my experience, there is nothing simple about effective regulation or regulatory reform.

One reason it is not a simple matter to reform a regulatory framework in any industry, but especially in financial services, is that typically a cost-benefit analysis is the approach used. Bloomberg Businessweek’s February 13-19 issue discusses some measurement challenges in Brendan Greeley’s article Trump’s New Math on Regulations. Both sides are hard, but there appears to be little doubt that measuring the benefit of a regulation is more difficult than measuring its cost. In Trump’s Executive Order, though, we don’t have to worry about measuring benefits. He makes clear that only one side of the equation matters: cost. He states in Section 2.(c) “any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” Section 2.(d) of the Executive Order goes on to state: “The Director [of the Office of Management and Budget] shall provide the heads of agencies with guidance [that shall] address, among other things, processes for standardizing the measurement and estimation of regulatory costs; standards for determining the costs of existing regulations that are considered for elimination; processes for accounting for costs in different fiscal years; methods to oversee the issuance of rules with costs offset by savings at different times or different agencies; and emergencies and other circumstances that might justify individual waivers of the requirements of this section. The Director shall consider phasing in and updating these requirements.” 

In my experience, regulatory agencies are not populated with people who like regulations for regulations’ sake. Instead people who work in regulatory agencies are committed to serve the purpose for which the agency exists and they see regulations, compliance with regulations and enforcement of compliance as an effective way to change individual and corporate behavior to accomplish the goals of the agency. That is not to say that we all agree on what the goals should be of any agency – certainly that is not the case. But to remove benefits from the equation makes the analysis simplistic in a way that, in my opinion, denigrates the importance of regulatory compliance in serving the public good. Even if one believes in limited regulation, presumably that limited regulation has to be effective, not just cheap.

I am not opposed to any discussion about whether a particular regulation or a group of regulations is actually beneficial or even to arguments about how much any benefit may be worth to us as a society. But I am totally opposed to the concept that any regulation is a bad regulation and that any regulation has merely a cost element and no offsetting benefit.

The suggestion that the only thing that matters is the cost of a regulation is just a way of saying that all regulations are bad. Some may be “more bad” than others – but it is not those that are less effective or those that do not have a clearly identified purpose – no, those that are “more bad” are those that are more costly, however that is calculated and regardless of their benefit.

This simplistic approach to regulatory reform may have another consequence, one that a Thomson Reuters article dated February 14, 2017 calls “Slow-rolling” by agencies. Richard Satran, writing for Thomson Reuters’ Regulatory Intelligence notes that “Reversing regulations that strike at the heart of an agency’s prior work may be even more difficult than passing new ones…The president cannot simply issue an executive order rescinding regulations he does not like. [said Rachel Augustine Potter, assistant professor of politics at University of Virginia] The process requires research, stakeholder meetings, publishing of proposals, comment periods and final publication. Delays can occur at any of these stages.” 

Andrew Kent, a law professor and constitutional expert at Fordham University is also quoted in the Regulatory Intelligence piece. His analysis is another justification for considering the benefits of existing regulation: “In a bureaucracy there are a lot of different ways people can slow down presidential initiatives they don’t agree with… And given the things this administration has been saying about agencies’ work, it is pretty likely that will happen.” 

DOL Fiduciary Rule

DOL Fiduciary Rule

If you are like me, you are very interested in what our new president will decide to do with the DOL Fiduciary Rule with its first implementation date of April 10, 2017 looming. Given the implications, there are a good number of folks holding their breath in hopes that it will be repealed. For these folks, Trump’s repeal of the DOL Fiduciary Rule will likely turn into a big sigh of relief, but what about everyone else? The work to prepare for and implement the rule’s requirements has been nothing short of daunting. Many agents, agencies, IMOs and carriers started the long and arduous process to be ready many months ago, and this puts them in a good position should the rule survive, but what if it doesn’t? What, if any, benefits result from the progress they have made? 

Registered Investment Advisors and Investment Advisor Representatives (“advisors”) have always been subject to fiduciary standards. Some would be happy to go back to arguing they are “better” and should have a competitive advantage with consumers over insurance-only agents who are not now, and if the rule is repealed, would not become subject to those standards. (http://www.marketwatch.com/story/what-if-trump-kills-the-fiduciary-rule-2017-01-23). Advisors argue that the fiduciary standard is much different from the suitability standards that apply to the sale of insurance products no matter who sells them. 

The DOL rule hasn’t become dinner conversation beyond our industry. Nonetheless, if it is repealed, the issues and perceptions that led to its adoption and to including insurance products will not go away. There is a clear perception that those who sell insurance products and are not now subject to fiduciary standards act in their own interest rather than the interests of their clients. So it seems quite possible that the DOL rule, repealed or not, will become the catalyst for change within our industry. 

So, what happens next? We are not convinced that our industry can stop preparing for the DOL. We think it is likely that even if it does not become effective as it currently exists, changes will come that will change the standard of care owed to consumers, perhaps at the federal level and perhaps at the state level. 

We recommend continuing to prepare for compliance and our clients are choosing that path – at least for now. Regardless of what will flow from the president’s executive actions, we continue to help our clients navigate reviewing their advertising materials, agent agreements, and incentive offerings. In addition, on-site, online, or remote training is recommended for your home office and field personnel. We have found in-person training to be the most effective as it can be developed with your specific organizational needs in mind. Policies and procedures reflecting impartial conduct standards of care are in place for many companies, but not across the board. We would be happy to help you look at what you have done, what might still need to be done, and what a repeal might look like for your organization. 

This is a time of great change and it can be overwhelming, but one thing we can do is focus on strong relationships with consumers and making sure that no matter what happens with the specifics of this DOL rule, our products are sold in a way that is respectful and takes into consideration the best interests of consumers.

Interesting Question

I was reviewing a life insurance application recently, and came across a yes-or-no question about whether the applicant’s driver’s license was suspended.

Hmmm. Interesting question.

I was reviewing the application for compliance in New York. The Life Insurance Application Outline says no question may be asked about past arrest or imprisonment; questions are allowed only about past convictions or a pending legal matter. A suspension certainly means something happened in the past, and maybe it was a conviction, but maybe it wasn’t.

A license can be suspended for obvious reasons, such as driving without liability insurance, DWI, and failing to pay a traffic ticket fine.

But the state can also suspend a driver’s license for failure to pay child support, and for owing more than $10,000 in taxes without a plan in place to pay it back.

I could not guess how the Life Bureau might react to the question (Is your driver’s license suspended or revoked?) given the possible connection to dubious financial matters.

So I called the Department.

The answer was not obvious to the attorney I asked. Unwaveringly polite, she said she’d get back to me. Which she did, after conferring with others at NYSDFS. And it turns out that the question is allowed.

I was surprised. I had put the odds in favor of the Department not allowing it. But the surprise was pleasant. 

How to be Successful with Online Learning

I don’t know about you, but the idea of online learning is hugely appealing to me. The flexibility to do it from anywhere and at my own pace makes online learning sound like the holy grail of the educational experience. I’ve often envisioned myself learning all kinds of new skills and information right from the comfort of my home office (aka: couch) all done in my spare time.

Then, reality sinks in – there’s no such thing as “free time” and if I’m really being honest, my couch office is a one-way street to dreamland, not a place where I’m learning new information. Unless it’s about How It’s Made

And we haven’t even talked about subject matter yet. If the topic I want to learn about is something complex and detailed, like one of my favorite topics, Insurance Compliance, most surely is – it adds another element to the equation. Engagement. I will say, I’ve done some online learning programs on the topic, and while there was no shortage of valuable content right at my fingertips just waiting for me to master it all, the subject matter can be dry. 

That said, online learning really can be a valuable tool in gaining new skills and expertise. Here are my top three tips on how to set yourself up for a successful online learning experience:

1.     Be Realistic – like I said above, online learning isn’t necessarily any easier than any other type of learning. You still have to “show up” and do the work. But, online learning can make it more convenient to access the information you need. Be honest with yourself about what you need to do to make the experience a successful one. Schedule your study time, commit to the schedule, and set up a space that is conducive to learning. Or, in other words, don’t lay on the couch and expect to learn much or feel engaged in the content.

2.     Know Your Goal – Understand exactly what it is you’re looking to learn, and find content that delivers. Look for a syllabus, course description, or course outline. If you have questions, ask! The more focused you get on your goal – what you need, and why you need it – the easier it will be to figure out if the course meets your needs. Another benefit here is that knowing your goal helps keep you motivated. Online learning requires some self-discipline, and if you’re anything like me, it doesn’t take much to convince yourself to do something else with your time (#YOLO #TreatYoSelf). I know at least for me, the more meaningful the goal is to my life – whether it’s for work or my own personal goals – the more likely I’ll stay motivated to see it through.

3.     Ask Questions – Don’t be afraid to reach out and ask questions. Something doesn’t make sense? Ask. Can’t figure out how to get the lesson started? Ask. Wish you could know more about XYZ? ASK. Online learning can be isolating. You might think of something, but never circle back to it because, well, life. But this is about you and moving yourself toward your goals, so make sure you ask the questions.

Online courses can be a powerful tool that allows busy professionals an avenue to continue learning. Don’t shy away from it! Take the time to develop a strategy and set yourself up for success. Happy learning!

We mourn the loss of Cailie's father, Hunter Currin.

Hunter Currin

Hunter Currin

It is with overwhelming sadness that we share with you the passing of Cailie’s father, Hunter Currin. As Cailie said, “A light has gone out.” Hunter lost his battle with Acute Lymphoblastic Leukemia (ALL) early this morning (1/4/17) surrounded by his beloved family. He was steadfast in his fight since first being diagnosed in 2011, never wavering from his determination to beat ALL, with Cailie always by his side.

All of us at CCS, especially Cailie, would like to extend our sincere gratitude for your continued support during this most difficult time. If you wish, please feel free to send Cailie a message at ccurrin@currincompliance.com.

Hunter Currin's obituary.

'Twas the night before Christmas, and Chanukah too

We wish you all a very happy holiday season and a peaceful and prosperous new year! We hope you enjoy this twist on a holiday classic, penned by our very own and quite talented Suzanne Seay!

'Twas the night before Christmas, and Chanukah too
We had a response for New York that was due.
We’d had 15 days to address every objection
We did all we could to avoid their rejection.
Every ‘t’ had been crossed, every ‘i’ had been dotted,
All the coffee was drunk, every stomach was knotted.
PDF’s were all ready, uploading begun,
We at Currin Compliance were up for some fun.
But wait, just a minute, something’s not right.
Some brackets are missing, my God, not tonight!
It’s that damn interest rate, with which we’d been fussing.
The percentage is good, but the bracket’s gone missing!
We jumped into action, typing like mad.
We Adobed that thing, putting back what we had.
We quickly revised that bad SOV.
And made it compliant, Cailie and me.
And then we were ready to put it to rest.
Submit to New York, and hope for the best.
But wait, oh my goodness, could it be so?
The dates on the thing are from long ago.
Well, not so long ago, just several weeks
But New York thinks of these as outmoded antiques.
So more last-minute changes and PDF-making
The deadline approached with each breath we were taking.
After typing, amending, revising, uploading,
We submit via SERFF, with no ounce of foreboding.
We’ve filed on deadline, we put it to rest.
It’s Pending State Action. We gave it our best.
We hope when returning the next working day,
The approval we seek, will be heading our way.
Our wishes for you this holiday season,
Are that comments from states are all based on reason.
We hope that the New Year brings few thunderstorms
But many (so many!) approved policy forms.

Want to outperform your peers? Compliance may be the way!

In a recent Deloitte report, “Compliance to Power Performance: 2016 Ethics and Compliance Survey,” a correlation between compliance and performance is drawn in a way that those of us in compliance have often been unable to draw: “Thus, a great compliance function should be considered an asset to insurers, where investment in the function is associated with increased top and bottom lines, as well as lower threats of reputational and other risks.” p. 18. 

This seems to be the result of more mature compliance programs, especially on the life and health side of the industry, offering more ways to study and look at the effectiveness of compliance. This led Warren Hersch in a commentary in Life Health Pro to speculate that compliance with the DOL regulation might be good for company performance. Because the rule does address market issues that have led to fines and reputational damage, the argument does make sense.

In my opinion, those real issues could have been addressed in a more effective way, but to the extent they are real and compliance with the DOL does reduce exposure to sales practice-related fines and reputational harm, Mr. Hersch may be correct when he concludes, based on the Deloitte study: “Industry estimates peg the cash outlay needed to align company operations with the [DOL] rule to be in the billions — $11 billion for brokerages alone, if a recent estimate by consulting firm A.T. Kearney proves accurate.

But there’s a flipside to the mountain of money. And that’s this: Companies that outperform with their compliance initiatives are more successful than competitors. Best-of-breed insurers do better financially [sic] their peers on key business metrics such as premium revenue, return on equity and the bottom line.”

New York’s Paid Family Leave Program

I was lucky enough to be able to attend the New England Chapter of the AICP’s winter meeting last week, along with my colleague Mandy Bain. The meeting was held at the beautiful Cranwell Spa and Golf Resort in Lenox, MA. It was an intimate gathering, which provided great opportunity to get to know all attendees via a fun networking game called “Yes, I have done that!” There were people there who have ran a marathon, played college sports, lived through a hurricane, been to Disney World, and many more exciting things!

In addition to the networking game, the meeting included the official AICP Chapter Business Meeting, a delicious lunch (I finished every bite!), a Yankee Swap, and a very informative session with speaker Eileen Hayes of Greenberg Touring.  Ms. Hayes provided an update on various New York related issues, one of which was the New York Paid Family Leave (PFL).

As an expectant mother and resident of New York, I have a personal interest in the details of the PFL program. I have recently been navigating the various options available to my partner and me as we try to make decisions on what is best for us to spend time with our son during the first months of his life. Of course, my baby will be born in 2017 and the PFL program isn’t effective until 2018 so it will not directly affect me, but I still feel a personal connection and vested interest in how this program will affect people just like me in the coming years.

Additionally, I have always enjoyed the work I have done with New York’s Disability Benefits Law (DBL) and understanding the process for a carrier to move into that market. Since the PFL policy requires all carriers in the DBL market to offer PFL coverage, it has an impact on many of our clients and we have all been waiting with great anticipation for more guidance from both the Workers Compensation Board and NYSDFS. The Workers Comp Board is in the process of drafting a regulation on requirements related to eligibility, and DFS is drafting a regulation on the rates for the PFL coverage.

When first learning about PFL, it became apparent quickly that developing rates for the coverage is a major hurdle. The law calls for a community rate, which means that DFS will be setting a rate that will apply to everyone in the state. While there are other similar paid family leave programs in other states that can be used for comparison (most notably California and New Jersey), Governor Cuomo is proud to call New York’s PFL program the strongest in the nation. As such, it is not an easy apples to apples comparison. Understandably, there is a great concern that the rate set by the state will not be adequate. While there will be an adjustment at the end of the first year based on reported claims and the actual loss ratio experienced, there is much anticipation for the DFS regulation in order to give companies time to consider all of their options. Those options might include pulling from the DBL market altogether or drafting PFL policy forms and submitting for approval and moving forward with the many administrative and system enhancements needed to provide the coverage. Per Ms. Hayes, regulations should be finalized by “late winter.”

My baby is due March 2017, so I am hoping that means I will get the chance to review the regulations prior to the time I am out for my own maternity leave. I am also looking forward to working with companies to develop and file these PFL policy forms upon my return.

NY Proposed Regulation 210: Life Insurance and Annuity Non-Guaranteed Elements-Part III

On November 30, 2016, the New York State Department of Financial Services (Department or DFS) published Regulation 210 in the New York State Register. This is our third posting in a series on this proposed regulation. Be sure to check back for additional analysis or email Cailie Currin directly.

In Part I of our discussion of this regulation, we looked at the new policy form content requirements established with this proposal. Part II, examined the non-policy form filing requirements. This Part III gets at the title content: how this proposal regulates non-guaranteed elements in life insurance and annuity products.

If you do business in NY, you have probably bumped into §4232- hopefully on your own terms. Some have become acquainted with this section in less than positive ways. Annuities subject to the individual non-forfeiture law (§4223) are covered by §4232(a): “No such additional amounts shall be guaranteed or credited except upon: (i) reasonable assumptions as to investment income, mortality and expenses; (ii) a basis equitable to all contract holders of a given class; and (iii) written criteria approved by the board of directors or a committee thereof.”

Life insurance policies subject to the individual non-forfeiture law (§4221) are covered by §4232(b)(2): “No such additional amounts shall be guaranteed or credited except upon reasonable assumptions as to investment income, mortality, persistency, and expenses.” There are some additional requirements including (b)(4) that “Any such additional amounts shall be credited on a basis equitable to all policyholders of a given class and shall be based on written criteria approved by the board of directors of the company or a committee thereof.”

It is from here that Regulation 210 picks up the ball and runs – all out!

There are a few important definitions from §48.1 of the regulation, and I will highlight a couple here:

(a)  Adverse change in the current scale of non-guaranteed elements. This is defined to mean “any change in the current scale of non-guaranteed elements that increases or may increase a charge or reduces or may reduce a benefit to the policy owner, other than a change in a credited rated based entirely on changes in the insurer’s expected investment income.” (Emphasis added) Anytime I see an absolute term, like “entirely” it makes me nervous and this is no exception.

Perhaps this is meant to provide comfort that when credited rates change based on changes in the expected investment income, they are not subject to these rules, but if they have to be entirely based on those changes, it isn’t clear that it provides much actual relief. Anything absolute often ends up being of little value.

(b)  Board-approved criteria. This definition, in §48.1(d), is important because the insurance law has been silent as to what the mandated criteria should contain and the law has allowed significant latitude to boards to decide for themselves the appropriateness of the criteria. This new definition brings regulation into the boardroom in a new way and states that the criteria must include “reasonableness standards, financial objectives, equity objectives, marketing objectives, good faith standards and fair dealing standards.”

(c)   Class of policies. Section 48.1(e) states that this means “all policies with similar expectations as to anticipated experience factors that are grouped together for the purpose of determining non-guaranteed elements.” and

(d)  Pricing cell, which means “a collection of policies for which the same anticipated experience factors are used to determine the same current scale of non-guaranteed elements.” Section 48.1(m).

There will be more on Class of policies and Pricing Cell in Part IV of this series on Reg 210, but they are important to understand as we go deeper into the written criteria here. Section 48.2(a)(1) states that “[a]n insurer shall establish board-approved criteria for determining non-guaranteed charges or benefits” and then the rest of that section sets forth the process for doing so, beginning by assigning policies into classes for the determination of non-guaranteed elements.

Section 48.2(b) then focuses on changes or “readjustments” to non-guaranteed elements on existing policies. Paragraphs (b)(1), (b)(2) and (b)(3) all address specific types of products and for the most part, with respect to the experience factors that can be considered, but provides more prescription as to timing (“At the time of revision of a scale …the difference from the point in time of revision and application of the revised scale in effect at issue shall be reasonably based”). There is then application of the “reasonableness standards” that must now be described in the written criteria.

Most significantly however, is §48.2(b)(4), which states “An insurer shall not increase profit margins at any policy duration.” This introduces regulation of profit to life insurance and annuities in a brand-new way.

I understand the concern of the DFS on this point. If non-guaranteed elements are re-adjusted in ways that are averse to policyholders in order to make a product more profitable, either across the board or at a particular duration or duration(s), there does seem to be a “fairness” issue – perhaps bait and switch, perhaps something less specific. That concern, however, does not seem to provide justification for inserting the DFS into the regulation of profit margins absent statutory authority to do so. And this regulation, if adopted, would allow the DFS to look at profit in a number of different ways because of the opportunities to look at the written criteria themselves for the first time as well as the readjustment to the non-guaranteed elements.

Section 48.2(f) goes beyond the short, but expansive list of required elements that are in §48.1(d). It states that the “board-approved criteria shall:

(1)  Require anticipated experience factors consistent with any experience that is credible and relevant;

(2)  Require the examination, as needed, of anticipated experience factors at specified times and under specified conditions but no less frequently than required by law to determine of the factors are reasonable;

(3)  Include a statement of the maximum period, not to exceed five years, between reviews of anticipated experience factors and non-guaranteed elements for reasonableness; and

(4)  Require the review of the anticipated experience factors and non-guaranteed elements for existing policies whenever the non-guaranteed elements on new issued policies are changed.”

Section 48.2(g) includes two optional additions to the written criteria and then the section concludes with a final set of mandates in §48.2(h): “Board-approved criteria for non-guaranteed elements related to anticipated experience factors that do not vary directly with the level of existing business, including overhead expenses, shall be reasonable and shall be consistent with the actual insurer allocation of expenses. Board-approved criteria shall place reasonable limits on the policy owner’s exposure to higher unit expense costs from discontinued sales or a volume of sales significantly less than anticipated.”

Remember that this proposed regulation states that its violation is “deemed to be an unfair method of competition or an unfair or deceptive act…” Section 48.2(a)(2)(viii) states that the assignment of policies into classes of policies for the purpose of determining non-guaranteed elements shall, among other things, “be consistent with the language of the policy and the advertising or other material provided by the insurer to the policy owner.” That makes sense. If the concern is that the policy owner knows what s/he is buying, what can change, when it can change, and under what circumstances it can change, then the advertising and other consumer protection regulations should be applied to make sure that the purchase is an educated one. If the concern is one of fairness, that seems a reasonable approach to take. This regulation, by reaching into and micro-managing how boards make very specific decisions and particularly by diving deep into the regulation of company profits, does not seem quite so consistent with “reasonableness standards.”    

Rebate, Gift, or Inducement – What Does It Matter?

Everyone likes to get something extra, something for free, a little treat, right? Buy one pair of shoes, get another one half off. Buy a $100 gift card, get another $25 gift card for free. No big deal, right?

But if we’re talking about gifts in connection with the sale of insurance or annuity products, it IS a big deal, and one that can land you in hot water with state insurance regulators. Most insurance departments have published regulations that limit what, if anything, an insurance agent or carrier can give to prospective or existing clients as a gift. Some states have what I call a “zero tolerance” for gifts of any kind that are offered as a means to induce a consumer to purchase an insurance product. In these states, their rules generally state that gifts “of any valuable consideration or inducement not specified in the policy” are prohibited.

Other states have similar wording in their regulations, but they still allow gifts up to a certain limit to be provided, with amounts generally in the $5-50 range per consumer, per year. There are outliers, though. For example, the state of Idaho includes this same wording in their regulations, yet has the highest limit of $200 per person, per year. It’s also important to note that some of the states that do allow certain gifts not only have a monetary limit, but only allow the gifts to be given if they are unrelated to and not dependent on the purchase of insurance.

Whether you call it a rebate, a gift, or an inducement, the basic premise of the rule is the same – state insurance regulators want clients on even footing when it comes to the policies they purchase. To pass the rebate test in most states, any benefit must be expressly stated in the insurance or annuity policy, and provided to everyone who purchases the product. This also helps to ensure that consumers are not influenced to purchase a product primarily because of the gift, and that they have a real need for the product itself.

According to the NAIC Unfair Trade Practices model regulations (Model Reg 880-4(H)(1)), “Paying, allowing, giving or offering any of the following, if not specified in the contract, is an unfair method of competition and an unfair or deceptive act:

Rebates of premiums payable on the policy; special favors or advantages in the dividends or other benefits; any valuable consideration or inducement not specified in the policy; giving, selling, purchasing or offering, as an inducement, any stocks, bonds or other securities, any dividends or profits accrued, or anything of value not specified in the policy.”

So, what does this mean, especially for insurance agents? What exactly is a rebate? In some states, a rebate means a gift of value, such as cash, a gift card, a fruit basket, or some other tangible gift or object. Other states, however, may consider it a rebate if an agent holds an insurance seminar and serves a nice meal. The cost of that meal, per person, may need to comply with the states’ rebating limits, or the agent runs the risk of a state enforcement action for violating state laws. The same issue may apply with a client appreciation event, such as wine tasting party, golf outing, or other similar events. To determine if the event is in line with their rules, many states will calculate the cost of the event, including all possible variables, such as food, drink, cost of entertainment, etc., and divide it by the number of attendees.

Insurance companies and agents often conduct business in multiple states, so being familiar with and staying current with each states’ position on rebates is important. Let us do the work for you. Enroll today!

Effective Compliance Communication - Quick Tip

Getting compliance buy-in isn’t always easy. Your company could have the highest compliance standards in the world, but if you can’t get the message heard effectively, then it won’t move your company ahead.

So what can you do? A lot, actually! Having a communication plan in place can help your company become raving fans of the compliance department. Here are six steps to help get you started:

  1. Determine Your Goal: Really think through what you’re trying to achieve – make it clear and specific. Defining your goal is the basis of determining your communication strategy.
     
  2. Understand Your Audience: Along with your goal, you need to understand who you’re speaking to. Often those in compliance aren’t “speaking the same language” as their audience and that contributes to the feeling that compliance isn’t in touch with others. Find out what motivates your audience and what their needs are. Connect your compliance message to how it helps them achieve their goals.
     
  3. Evaluate Readiness and Need: Next figure out how ready your audience is for the communication, and what the level of need is for the communication. The higher the readiness, the more easily you’ll get buy in. If readiness is lower, determine what the most important issues are to communicate and start there.
     
  4. Review Current Resources: Are there key individuals you can bring in to help get greater buy-in? Think of those with decision-making abilities or those who influence the decision makers. Leverage these individuals to help spread your message to others. Also, look for what’s already in place and working well – then build off that. Keep this motto in mind: “Grow the seeds, not the weeds!”
     
  5. Select Content: Use materials that speak to your company’s overall tone and culture. Continue to show how your compliance message is in line with your company’s goals. Don’t be afraid to be creative. Breaking down the information into bite-sized pieces, rather than a long, technical presentation, can help with engagement and retention. Think about using things like role-play scenarios, games, and cartoons/animation in the delivery of your message. Whenever possible, get face-to-face with your audience. While shooting off some e-mails may feel like it’s saving you time, or giving you some space from a difficult conversation, talking in person usually ends up being more productive.
     
  6. Develop Schedule: Chances are, your target audience is receiving messages from lots of different areas – both internally, and perhaps even externally. As you develop a communication plan, find out what your target audience is already receiving. Check to make sure there aren’t mixed messages or conflicting information. If possible, you may be able to synch up your communications with other information your target audience is receiving. This will help reduce information-overload, and help you be even more effective in your communication delivery.