Advisor or Adviser?

In our review of insurance advertising, we often see both Advisor and Adviser used, usually following “Financial.” We comment on the use of the term Financial Advisor/er in the context of an insurance-only producer, and on the potential confusion that term can create in the mind of a consumer. But beyond that, I have to confess that I react more positively to Advisor than Adviser. I know that both are acceptable, but I continue to react.

So this morning I gave in to the desire to research and see if there was any basis in grammar or usage that would justify my emotional reaction to one spelling version over the other. My Google search indicated I was not the only one thinking about this. One discussion on Yahoo! Answers resulted from Firefox and other spellcheckers’ preference for Adviser, though the person asking the question, like me, preferred Advisor. The answer to the question discussed the equal treatment given in the standard dictionaries, but said a Google search found that Advisor returned 85,100,000 pages compared to only 21,500,000 for Adviser. Since this was not a particularly recent discussion I decided to try it myself. Today my search results were 801,000,000 for Advisor and 76,300,000 for Adviser. Vindication! I am in the majority with my preference for Advisor.

But I also learned something else. Google has a Google Advisor (note: Advisor) and it is described this way: “Google Advisor makes it easy to find financial offers from multiple providers, compare them side-by-side and apply online.” Who knew? Unclear whether “financial offers” might include insurance, I took a trip over to Google Advisor. There I found easy comparisons in the categories of credit cards, CDs, and checking and savings accounts. I am very curious how long it might be before Google Advisor adds an insurance component as well. It is hard to imagine they haven’t looked at it yet.

MIB Authorization Changes

As some of you may know, the MIB has recently published a requirement to change the MIB Authorization. While the requirement to the Authorization was published previously, I received notice today that a deadline has now been set: By January 1, 2013, all MIB Members must include language in the MIB Authorization “that elicits an applicant’s express written consent to report information to MIB.” The following language or language substantially similar is to be used:

“I authorize XYZ Insurance Company, or its reinsurers, to make a brief report of my personal health information to MIB.”

The guidance issued by MIB indicates that it is also permissible to refer to “Protected Health Information” in the authorization.

The change is intended to be consistent with the Health Insurance Portability and Accountability Act (“HIPAA”), as amended by Health Information Technology for Economic and Clinical Health Act (“HITECH”), and other state and federal laws of the United States as well as Canadian privacy laws. MIB has determined that reliance on implied consent, based on the Pre-Notice, is “no longer tenable for the conduct of the MIB information exchange.” For those who are members, MIB has FAQs and a Whitepaper explaining the rationale in more detail on their Member Compliance microsite.

MIB also included in the announcement of the change to the Authorization requirement that both NY and NJ had created specific filing exemptions for these changes. New York issued filing guidance, stating:

The MIB, Inc. authorization generally appears in a policy form as defined in Section 3201(a) of the Insurance Law. Any policy form revised solely to comply with the exact language in the MIB, Inc. request, as set forth above, is not required to be submitted to the Department for review and approval provided that the member companies making the requested change to a policy form send a letter to the Department identifying, by form number, the policy forms that will be revised to make the change, confirmation that this is the only change being made to the policy form and confirmation that upon the next revision of the policy form submitted for approval the authorization language will be incorporated into the policy form.

The contact in the NYDFS Life Bureau is Kathleen Nelligan, Chief Insurance Attorney, and in the NYDFS Health Bureau it is Austin Rinella, Supervising Attorney.

Compliance Programs, Policies, and Procedures

“For heaven’s sake, don’t adopt policies that you’re not going to implement,” she said. “Make sure you know who should do what and that they’re doing it.” So concludes a February 5, 2012 piece written by Mark Schoeff, Jr. in InvestmentNews titled “SEC targets compliance.” The quote is attributed to Rosalind Tyson, director of the SEC’s Los Angeles office.

Ms. Tyson also suggests that firms’ core business activities should be the basis for the compliance programs they design and implement. The same holds true for insurance compliance departments.

As a qualified independent assessor under IMSA, part of what we did was to look at exactly these issues at life insurance companies. Since the demise of IMSA, there isn’t a formal process for life insurers to evaluate these issues independent of a market conduct exam. Based on what we are seeing, some of the processes and procedures that were put into place as a result of IMSA assessments are at risk for triggering the concern raised by Ms. Tyson in the context of broker/dealers.

As we get further and further away from those assessments, who is monitoring what happens to those processes and procedures as there is evolution of the business and changes to the practices? Many of the IMSA assessments pre-date the recession and many companies have cut significant numbers of jobs since then. Do the policies and procedures that are on the books and assigned to specific positions still work with the remaining jobs at these companies. We often find they do not.

The companies we work with have a clear commitment to compliance. However, time can be the enemy of a compliance office. With time comes change, while we also have less and less time these days to do those things that need to be done. As we all try to keep up with fewer and fewer resources, making sure that policies and procedures reflect the current structure and core business activities of our companies can get put off and put off under the increasing demands.

InvestmentNews put out the warning to firms that the SEC is targeting compliance and I think the same can be said of Insurance Departments for insurers and producers. Compliance is not glamorous, but ignore it at your peril. 

Super Bowl & Business: personal goals vs. team goals

Being in upstate NY, our office staff is pretty much split between New York Giants fans and New England Patriots fans. In the weeks leading up to the Super Bowl, there was some trash talk. And this morning there has been acknowledgement that it was a good game, but there has also been some gloating. It is great having an office where there is a lot of camaraderie and an atmosphere of playfulness. That said, we all take our work seriously and we work hard.

No conversation about this year’s Super Bowl will be complete without a discussion of what ended up being the final touchdown of the game by Ahmad Bradshaw. Watching him, you could see the dilemma: score a touchdown or go down on the one-yard line to help his team win? As team players, we are used to the idea that our personal goals and the team’s goals are the same. My success reflects well on the team and the team’s success reflects well on me. But last night’s dilemma for Mr. Bradshaw highlighted the space in which compliance often lives. Compliance can mean not going for that immediate personal triumph in favor of the longer-term and less clearly defined success of the group.

It can be very hard to clearly see the possibility of a personal victory: a touchdown, a sale, a market advantage, and then let it go in favor of something not yet visible. And in compliance, our job is often to help the individual see that more elusive goal – a bigger, longer term and sustainable success rather than the short-term individual achievement. Our goal is to be sure that our clients aren’t tainted by the same stain that Mr. Bradshaw will be. He is likely to always be connected to his choice last night to go for the personal touchdown rather than making the choice that would more certainly have guaranteed his team’s victory.

He was lucky that Tom Brady’s Hail Mary pass did not result in a touchdown. If it had, he would have suffered an even worse fate in the analyses of Super Bowl plays. And sometimes those in business who put their personal success before the team’s success are lucky too – they don’t get caught. But there is always the risk that the quarterback will connect with the receiver. Then, not only is the individual’s reputation seriously tarnished, but the team loses too.

Compliance is all about making sure that there is room for individual glory, but that we don’t forget the team we play with. 

Producer Advertising Session at IAdCA in March

Excerpt from Insurance Compliance Insight, Jan. 30, 2012 posting:

“Materials, Regulatory Impacts on Insurers, Fraud Management

It is one of the most critical areas of insurance advertising, yet one that not every company addresses properly.

We’re talking about the review of producer-generated advertising and marketing materials – an evergreen issue on regulator’s watch lists that can lead to sanctions if an insurance company doesn’t have a good compliance plan to monitor them.

If your company doesn’t have one, or it could be improved, consider attending the annual meeting of the Insurance Advertising Compliance Association. The IAdCA meeting is March 28-20 at the Hyatt at Olive 8 Hotel in Seattle, and will feature a session about producer advertising from industry compliance expert Cailie Currin, president and CEO of Currin Compliance Services.

It is one of three industry meetings in the next few months that should be of interest to compliance professionals. Also coming are the annual meetings of the National School on Market Regulation and the Insurance Fraud Management Conference.

The IAdCA is ideal for those involved in the creation and compliance review of advertising and marketing materials. It’s the best place there is to find out how to meet legal, compliance and marketing requirements and still preserve the sizzle in your company’s marketing materials.

Knowing what producers are saying in the marketplace is one of those compliance requirements that can’t be ignored. “If a company doesn’t know what’s out there, they could have a liability issue,” warns Currin, whose company has a staff dedicated exclusively to advertising and producer compliance. It sees a lot.

“Regulators are looking at invitations to sales seminars, and companies should, too,” she said. Insurers should also watch to see how their producers are referring to their products.

“We look at ads that no one else is reviewing regularly and see producers not calling annuities what they are – annuities. Instead, we see them calling a fixed indexed annuity a ‘safe money account’ or a ‘smart money account,’ rather than what it is.” Currin says she and her team also have seen producers discussing guarantees that could be misleading as they pertain to what’s actually guaranteed in the insurance or annuity contract. One common problem: comparisons of insurance products to certificates of deposit.

Currin will be discussing ways to address such issues, and her presentation will be packed with examples of producer advertising, both good and bad. She said the presentation will be “on an advanced level,” so expect more than Producer Advertising 101.

Also on the IAdCA agenda are several sessions about social media, a regulator panel featuring Leslie Krier of Washington and Jim Mumford of Iowa, who will talk about advertising filing procedures, advertising violations, specific state advertising regulations and what is expected of companies doing business in those states.

The meeting will also feature discussions about:

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  • fixed and variable life insurance and annuities;
  • health insurance;
  • long-term care insurance;
  • property & casualty lines;
  • state market conduct issues and developments;
  • variable product advertising;
  • Internet advertising compliance;
  • threats associated with today’s technologies and how to use them responsibly.

The meeting also features a keynote speech about leadership by Howard, Behar, one of the founders of Starbucks. Register by Feb. 8 and you’ll have a chance to win one of 10 copies of his book, It’s Not About the Coffee: Lessons on Putting People First from a Life at Starbucks.

Registration information and the agenda are on the IAdCA website. Registration is $575 for first-time attendees and $475 when more than one person is attending from the same company (with a $50 discount for those who have attended previous IAdCA meetings).”

The Importance of Expertise

The InvestmentNews column posted on Jan. 22 by Matthew Grove and John Moninger leads with: “Financial advisers who view 2012 as an opportunity to develop an expertise in retirement income planning will reap benefits to their practices and will be well-positioned to lead the industry over the next 20 years as baby boomers move from the accumulation phase of retirement planning to the spending phase.” They state that their conclusion is based on a recent survey by LPL Financial, LLC and New York Life/MainStay Investments. That survey is reported to state, among other things, that “about three in four retirees who use a financial professional indicated that they have consolidated their savings and investments with their primary adviser.”

While this business opportunity seems real and significant, the most important part of the opening of this opinion piece is, in my opinion, the need to “develop an expertise in retirement income planning.” Unfortunately, it is much easier to see the opportunity than it is to develop an expertise in retirement income planning. And there are many compliance issues that arise when there is a focus on retirement income planning without the appropriate expertise.

In addition, for life insurance agents, the consolidation of savings and investments with the primary adviser presents issues that go beyond the expertise. For a life insurance agent, a client that wants to consolidate also presents source of funds issues. It takes tremendous discipline to tell a client that wants to move from a securities investment to a life insurance product that the life agent cannot generally recommend or actually move funds that are currently in securities to insurance products without raising source of funds problems. An agent that succumbs to that enticing prospect could face fines, loss of license and other disciplinary actions!

NAIC Sends Mixed Message on Life Insurance as Investment

In a January 4, 2012 press release, the NAIC released results of a recent survey the organization conducted. The release reports the finding that 63% of the consumers polled had life insurance. The release further quotes North Dakota Insurance Commissioner Adam Hamm, chair of the NAIC Life Insurance and Annuities Committee as saying: “According to our survey, more than two-thirds of consumers don’t know some types of life insurance include a cash value, and nearly half don’t think of life insurance as an investment option.” Hmmm. A major reason why consumers don’t think of insurance as an investment option is that insurers and insurance producers are generally concerned about using the term “investment” to describe insurance – particularly when making comparisons to other possible ways to allocate personal financial resources. Because of concerns over licensing and source of funds, producers are often prohibited from selling most life insurance as an investment option because it raises the possibility that the consumer will confuse “investment” with “security.”

The NAIC Advertisements of Life Insurance and Annuities Model Regulation (Model 570) states in section 4.B that:

No advertisement shall use the terms “investment,” investment plan,” “founder’s plan,” “charter plan,” “deposit,” “expansion plan,” “profit,” “profits,” “profit sharing,” “interest plan,” “savings,” “savings plan,” “private pension plan,” “retirement plan” or similar terms in connection with a policy in a context or under such circumstances or conditions as to have the capacity or tendency to mislead a purchaser or prospective purchaser of such policy to believe that he will receive, or that it is possible that he will receive, something other than a policy or some benefit not available to other persons of the same class and equal expectation of life.

Time and experience have shown that when discussing the “investment” aspects of insurance policies, insurers and producers become vulnerable to disciplinary and legal action. Consumers and consumer advocates often say that when the investment elements of life insurance and annuities are discussed in the sale that consumers don’t understand they are buying insurance. Suitability and Compliance Officers have been saying that the accumulation features of insurance and annuities cannot be described as an investment to be sure that consumers understand they are buying insurance protection.

In addition to consumer understanding that the product is insurance first and foremost, there are problems that arise for producers when discussing insurance as an “investment.” Those relate to licensing. The state of Iowa has addressed the issue most comprehensively in a Bulletin dated June 24, 2011. In the introduction, Commissioner Voss states: “For purposes of this Bulletin, “Insurance-Only Person” means an individual who holds an Iowa insurance license that authorizes the sale of annuities or life insurance products and who is not Iowa-licensed as an investment adviser, securities agent or investment adviser representative under Iowa securities law.” Commissioner Voss says that a “Securities-Only Person” means “an individual who is licensed as an investment adviser, securities agent or investment adviser representative under Iowa securities law, and who is not Iowa-licensed as an insurance producer under Iowa insurance law.” The dichotomy is established between insurance and investment by the license held. To avoid confusion on this issue, producers are taught to avoid calling insurance an investment so as to be clear that they hold the appropriate license.

Insurance-only persons are specifically prohibited from holding themselves out as licensed to provide “investment advice.” If insurance producers are not able to provide investment advice, they are walking a dangerous line to discuss the investment side of insurance products. As a compliance consultant, I regularly tell my clients that they should not use the word investment to describe the accumulation or cash value features of insurance products because, in my opinion, there is a regulatory risk in doing so. My advice is to use the insurance terms or a generic term like “financial product” rather than investment. The Iowa Bulletin concludes: “Persons who solely provide insurance advice as discussed in Section I of this Bulletin, and who disclose that fact to the consumer, should not be concerned with investment adviser or investment adviser representative requirements.”

While the NAIC release discusses whole life and universal life, in addition to variable life and variable universal life, it concludes with the statement that: “Purchasers should consult a licensed investment or tax advisor for guidance on which permanent life policy best fits their risk tolerance and investment objectives.” While that seems to be generally consistent with the Iowa Bulletin’s statements with regard to investment advice and investment advisors, it does seem to leave insurance-only producers out of the equation.

If the NAIC really believes that “permanent life insurance policies that build cash value may be a way to add stability to a financial portfolio and accumulate funds over the long-term,” we need to continue the discussion about what insurance-only producers can say about these features of permanent life insurance policies. If “65% of survey respondents did not know that some types of life insurance include a dollar amount that is guaranteed to increase in value and may provide tax benefits” and there is a public policy benefit to that discussion, then we need to figure out how to balance the interests of making sure that consumers know that the product they are buying is a life insurance policy or an annuity with the need to discuss the investment elements of the insurance products. People can’t know about the investment features of some life insurance policies if those that sell the policies can’t discuss those features as investments without running the risk of disciplinary action against them and the companies they represent.

AICP – NE Chapter Spring 2012 E-day in Sturbridge, MA?

On Friday, December 9, five of us from Currin Compliance Services, LLC attended the New England Chapter of the Association of Insurance Compliance Professionals business meeting in Sturbridge. Kathy Donovan from Wolters Kluwer gave a great presentation on what happened in the world of insurance regulation in 2011 and what 2012 may bring. The networking event was a Yankee Swap, which was lots of fun. In our group, we had a couple of people thrilled with the gifts they ended up with, a couple disappointed with what they had, then lost … and me. I kept the gift I opened and no one took it. My gift was something I would never buy myself, but when dropped in my lap, I was happy to have them! 

This year I am vice president of the NE Chapter. As many of you know, that means I am responsible for planning the Spring 2012 E-day (with LOTS of help from a wonderful committee of volunteers, of course!).  In talking to some folks at this business meeting and looking at the great turnout, we thought Sturbridge might be a perfect location for the New England AICP E-day. It is easy to get to for the majority of those who would drive from within the NE Chapter.  Those of us in ME and upstate NY may have the longest drives, but I am wondering about our friends in Toronto? Would you come for E-day in Sturbridge, MA, or is it too far from an airport for a one-day conference? Anyone else have comments/concerns? Think it’s a great idea? 

Please comment here or let me know by e-mail if you want your voice heard! Planning begins in earnest after the holidays. 

Of course, there are lots of opportunities to volunteer, too. Have an idea for a break-out session? A speaker or panel? Bring it on! Let’s make this another fantastic E-day in New England.