Civil Unions/Domestic Partnership and Same-Sex Marriage are not the same for any purpose, including insurance

At the recent NE Chapter of the AICP e-day there was a discussion of “civil unions” in the “hot topics” session with a panel of regulators and former regulators from several states in the region. One of the interesting things to me was that the regulators on the panel were all from states with same-sex marriage but the industry representative asking the questions and facilitating the discussion kept using the terms “civil union” and “domestic partnership.” It was clear to me that there was confusion about the differences between these statuses in his mind and in the mind of many in the audience.

That is not too surprising. As many commentators have noted, the number of states with same-sex marriage and the percentage of people who support same-sex marriage has risen dramatically with unprecedented speed.

However, so many insurance products have spousal benefits it is essential that we in the industry understand the differences, and be precise when we discuss the issues. This was again brought to my attention in a brief bullet point discussion in the most recent edition of NAFA Annuity Outlook, May/June 2013. On page 9, it states:

On a different topic, many states are allowing civil unions. That means many annuity contracts are being modified or amended to say that you can pass on the annuity, not just to a spouse, but also to a partner. But the issue is the tax law is federal law. And the federal law didn’t change. So with civil unions, there will still be a federal taxable event.

This one brief statement combines civil union, partnership, and spousal language without the clarity I would like to see. Some states do provide for civil unions. Others have domestic partnerships.

And a growing number have same-sex marriage. Same-sex marriage is not the same as civil union. Contracts that provide spousal benefits do not need to be modified to change any language, because a spouse is a spouse in those states. The problem is that federal laws do not recognize all state law marriages as being equal. DOMA prevents the IRS from recognizing legal state recognized spousal relationships. DOMA is what creates the problem for insurance companies in administering their contracts consistently. If it were not for DOMA, spouses in any state would be treated the same. DOMA being struck down would not force any state to pass same-sex marriage, but it would mean that in those states where same-sex marriage is legal, all spouses would be treated the same and contracts in those states would apply equally to all spouses.

Civil Unions and domestic partnerships are different. Some states have said that they should be treated the same as marriages for some purposes, and that language has to be added to insurance contracts to effect that similar treatment. And it is true that “with civil unions, there will still be a taxable event.” But the more challenging problem contractually is that for some spouses, spouse doesn’t really mean spouse, because DOMA prevents it. In that case, federal law extra-contractually modifies the term to take away the rights for some spouses that are granted to other spouses. Until DOMA is repealed or struck down, this will be a major headache for insurers.

It was clear from the regulator panel at AICP that their view is that insurers and producers should not be telling same-sex spouses that certain contracts are not available to them or are, per se, unsuitable because of, for example, spousal continuation. That means that company personnel and producers need to be able to understand the state-specific rules and they have to be clear how those rules impact contractual provisions. It also needs to be clearly explained what same-sex spouses would experience as far as federal tax treatment today and how that might change if – or in my opinion, when – DOMA is no longer federal law. It may be a very reasonable decision for a married same-sex couple to decide that they think DOMA will not be law when a spousal continuation provision would be triggered and that they want to buy the product with that feature, even though it is not currently available.

For a couple with a civil union, the repeal or striking down of DOMA will likely have no effect on spousal continuation, because they are not spouses. Civil unions are not the same. And it is essential that our industry understand the source of the confusion and what could be done to make it so much easier to administer contracts that have spousal rights. It is very simple – repeal DOMA.

“Self-Policing” Producers

The use of online advertising is as hot as ever and the insurance industry wants its piece of the marketing pie. And who could argue with that? With practically everyone and their mom (Hi Mom!) having access today to the World Wide Web, the Internet can be an easy, accessible, worldwide “billboard.” However, whether you use a figurative billboard or a literal one, advertising regulations still apply. As the prevalence of online advertisements increases, so will the watchful eye of regulators, especially if complaints start to increase.

This is exactly what Stan Haithcock prescribes in his recent article “When an online annuity ad goes bad” (2013). Haithcock raises a number of interesting issues, such as the “one size fits all” problem of annuity advertising as well as the “need” for web promoters to mislead the public from the very beginning of the sales process. What stood out the most to me was his “call to arms” – not just to consumers or regulators – but also to other agents to begin “self-policing” the annuity industry. His suggestion? “Every time you see a bad pop-up ad or display ad, take a screen shot of it and send it to your state insurance department and the carriers whose product you think the “promoter” is pushing. Every time you see a video that is pushing the limits on facts, send a link to them as well. Demand that they clean it up. Demand that they do their job…” He doesn’t limit this to online ads – he goes on to say it’s time for ads, regardless of the medium, to be looked at under a “microscope.” That is a bold request and a risky one too.

Can you imagine what that could mean for individual producers, FMOs and carriers? Do you feel confident enough in your own advertising that if it gets sent to a regulator, you could defend what is being put out there? When it comes to sales, reputation is a big part of an agent’s livelihood. Imagine that your business was under the microscope of the state department of insurance. Even if no fine is given (and chances are, there will be a fine), that type of negative exposure can stick to a producer for a long time. We are often asked, “what’s the risk” of certain words and phrases that come up in ad review. This can be a difficult question to answer since regulations are broad and somewhat subjective. However, with others within the field looking for (and frustrated with) bad ads, there can be a much greater risk than what you might expect.

You have to remember, just like Facebook can be a treasure trove of embarrassing and damaging content for people going out and looking for a new job, the use of online advertising is easily accessible to anyone – consumers, regulators and your competitors. Before putting content out there, ask yourself if this passes the desk of your state regulator, are you prepared to defend it (and your business)?

Florida Submissions

As most of our readers know, Florida is the only state that does not permit rate and form filings through the NAIC online System for Electronic Rate and Form Filing (SERFF). Instead, insurance filings must be drafted and filed directly through Industry Portal on the Florida Office of Insurance Regulation (FLOIR) website.

A central part of each Florida filing submission is the Universal Standardized Data Letter, which contains two required certifications; a readability of submitted forms and the overall filing submission’s compliance with applicable Florida statutes and rules. These certifications have always been required to be signed by a company officer, but in a recent telephone conversation with Mr. James W. Walker, Jr., Senior Management Analyst with FLOIR, he informed me that Florida has adopted a new policy of checking to see if this certifying company officer is also listed on the Jurat page of the latest Company’s Annual Statement. This may be an issue for a number of companies who have many more officers than are listed on the statement.  

Mr. Walker asked that we share this information with our clients and colleagues in the industry. He also noted that if company officers change in between annual filings of the Financial Statement, policy form or rate filers should be aware of this requirement and should make sure that another officer listed on the Jurat page is signing the certifications in any Florida submissions.

Ignorance is Bliss?

Certainly we all have had times when we wished we didn’t have the vision to see possible pitfalls ahead, but instead were able to simply move on full speed ahead into the unknown, putting all fears aside. I couldn’t help but think of this phrase a short while ago while on a ski trip with my family.

I’m a fair skier, good on my best day, but I had grown a bit weary after a long day on the slopes. It was snowing quite heavily, and as it was late in the day, there weren’t many people left on the mountain.  In fact, there were only two of us on this particular run: a young snowboarder, probably no older than eight or nine years old and me. I started the run a bit ahead of my young companion, but I missed the turn that would have taken me on my fairly gentle ‘blue’ run back to the lodge. Instead, I found myself at the top of a fork in the trail with only two long double blacks (most difficult) ahead. I stopped and began contemplating my predicament. Even when fully rested and in my best skiing, these slopes would be well beyond my ability. I pondered at the prospects—down a steep mogul run to the left, or on an even steeper, yet less bumpy trail to the right. Fearful thoughts ran through my head. I thought about my family and friends who I would leave behind without telling them how much I cared. Who would take care of the pets? Had I made my life insurance premium? And so on.

I was preparing to remove my skis and start the embarrassing but safer ‘walk of shame’ descent, when suddenly from out of the snow emerged the young snowboarder. Undaunted by the poor visibility or the perils ahead, he flew past me and over the sharp crest, disappearing into the heavily falling snow. Hearing neither a terrifying scream nor a loud thud and even though I could no longer see him, I assumed he escaped without incident.

Emboldened by what I had just seen, I snapped back into my skis and started down. I am happy to say that while I may have stopped once or twice (ok, more like five or six times), I made it down unscathed.

So, what’s the point here? After all, the kid made it down. In fact, he made it with probably minimal effort and far more enjoyment than I. Ignorance (in this case of the possible life threatening slopes) truly was bliss.

I would suggest to the reader that while it may be perfectly acceptable for an obviously skilled snowboarder to put fear and good sense aside, such cavalier actions in business are unwise, especially in the insurance industry.

Other than the nuclear power business, few if any industries are as heavily regulated (and litigated) as ours. Regulators may suggest that they do a lot to keep the participants informed, and to an extent they’re right. But just like the ski resort operator who puts up signs and provides trail maps, agents, marketing organizations, and carriers need trained professionals to help them navigate through potential pitfalls.

I’m not suggesting that insurance agencies play it safe, staying on the easier slopes at all times. Often, risk does bring reward. An occasional ‘double black diamond’ trail may be the right move for your business. Just make sure that when you head over that crest, you know exactly what you’re getting into. Engage an in-house, experienced compliance person, an outsourced resource, or both.

Properly assess the planned new venture before investing in it too heavily. There are plenty of examples of well-intended, poorly planned ideas especially in the advanced sales space that have left casualties strewn on the proverbial trail.

Periodically review your operation. With frequent changes in regulation and in litigation, it is a good idea to test even previously tried and true processes against the current environment. Understand the risks, take the proper steps to mitigate them sufficiently and then push on down the hill. Enjoy the run!

The Icarus Deception and Insurance Compliance

I’ve been reading Seth Godin’s book, The Icarus Deception. Before I started I read some of the reviews on  Goodreads and saw mentions of being in Godin’s tribe:  One had to be a member of the tribe to appreciate the book. That concerned me because this is the first of his books that I have read. That makes it hard to believe I could be one of the tribe.  

But I’ve been reading it - that sounds like its long and tedious, that is not the case at all. In fact it is very easy reading and there is lots of white space on every page. However, I find I enjoy reading small bits at a time.

That said, it seems Mr. Godin’s thinks ‘compliance’ is the opposite of art. And art is what he recommends for those of us who are brave enough.  He writes about the economy of connection and how approaching work as art helps make connections, whereas an approach based on compliance is old-economy and leads to stagnation and dissatisfaction.

My company’s name has the word compliance in the title.  I don’t want to think of it as old economy!  That makes it hard not to have a gut reaction to his terminology. But in reality I see much of what we do at Currin Compliance as the type of art he promotes.

I think it is most clear in the advertising review area. There one of the things we look for is whether a particular product or group or type of product is touted as right for everyone.  By taking those claims out of any given piece  we are encouraging the kinds of real connections that Godin’s book says is the new economy.

Godin also talks about changing safety zones and those safety zones moving away from our personal comfort zones.  That has happened to many of our producer and FMO clients. That is why they seek us out. They know the safety zone has moved and they want our help at bringing their comfort zone back in alignment with the safety zone.  Compliance is the way to do that.  

In both of these examples, compliance is the art that makes success possible. Godin says art is frightening and that is often true about compliance if it means doing things differently. Our compliance  is not the example of old economy thinking that Godin’s book suggests.

But then I don’t think Godin is talking about compliance in the way I use the word. I think he uses it to represent going along with all the rules mindlessly, without thinking. He uses the word to describe an approach to life and career that avoids critical thinking.  In that context I agree with his conclusions.

But that is not how we view compliance. To us, compliance is art and we view it as vibrant, constantly-evolving and all about making the connections.  

On the back cover of the book, the last excerpt is “Art isn’t a result: it’s a journey.  The challenge of our time is to find a journey worthy of your heart and soul.”  I have found mine. I think my brand of compliance is such a journey. I may be a member of the tribe after all!

A great way to start the day . . .

In my early morning reading I came across this March 5 post in the Careerist blog about workaholics. I think most of us who have our own businesses are at least inclined to be workaholics. I have also discovered that many of our clients would also be in that category. E-mails come in from the wee hours of the morning to very late at night. So many of us are working so many hours.

Is that a good thing or a bad thing?

According to The Careerist, it depends. And I think she is right – at least at some points in life. The Careerist quotes Tomas Chamorro-Premuzic from an article in the Harvard Business Review blog:

If you are lucky enough to have a career – as opposed to a job – then you should embrace the work/life imbalance. A career provides a higher sense of purpose; a job provides an income. A job pays for what you do; a career pays for what you love…If you are having fun working, you will almost certainly keep working. Your career success depends on eliminating the division between work and play. Who cares about work/life balance when you can have work/life fusion?

I do feel lucky to have work/life fusion. But even though I loved my work just as much 3 years ago, I was not as “happy” during the extended hours of work. Back then my daughter was home and I wanted to be with her in a way that made the long hours feel like I was missing out on something really important. It was not easy to eliminate the division between work and play. But I loved my work just as much and I experienced success during that time as well. It was harder then, but it made me realize how important both aspects of my life were to me.

As an employer, I think it is important to recognize that work/life issues are different for everyone and that they change over time. With my daughter in college, it is much easier to relax into long hours doing work I find interesting and about which I am passionate. Employees with younger children are able to be passionate and hard-working while they are here because we recognize that they do have other things going on that are also important.

As a small business I can offer flexibility that allows people to work hard when they can without feeling conflicted about it, but yet encourage them to be completely away from work when they are with their family. Work hard while you are here, be here as long as passion for the work trumps outside demands, and then when you leave here or turn off the computer at home, let it go. Completely. Come back refreshed tomorrow. Come back passionate tomorrow.

I have amazing employees. They work hard at their jobs and they do a great job for our clients. Those clients reap the benefit of a great group of people who work really hard. The blog reminded me of my passion for this work. It also reminded me of my deep appreciation for everyone who works with me here; whether they are struggling for work/life balance or feel the same fusion I do with work/play. It is a great way to start the day.

The Role of Emotion in Insurance Advertising

I have been reading Supreme Court Justice Sonia Sotomayor’s memoir, “My Beloved World,” which by the way I highly recommend, for many reasons. In the section where she is working in the NYC District Attorney’s Office and doing some of her first jury trials, I was struck by her discussion of appealing to a jury by touching their emotions. She writes about a discussion with her boss after the loss of two jury trials back-to-back. He tells her “Even the most perfectly logical argument, absent passion, would make the choice [to convict] seem like one of personal discretion rather than solemn duty.” (p. 209) She then discusses the role of emotion in jury trials, and it left me thinking about the role of emotion in insurance advertising.

Not as big of a leap as it might first appear.

Then- Assistant District Attorney Soyomayor was trying to figure out how to get a group of people to do something that is generally painful—send a human being to jail or prison. Insurance producers are trying to get people to do something painful—spend money on something they can’t feel or touch, to spend a lot of money on what often amounts to promise of something that will be good in the future. So, is the role of emotion the same? I think so.

We often tell those who submit ads for our review that they need to tone down the emotional appeals of their ads. But that isn’t because there is a problem with including some emotional appeal, we recognize that there is an important role for emotion in sales generally and insurance in particular. However, there often is a problem with the manner of emotional appeal. Some of the pieces we see are the equivalent of an ADA saying to a jury that convicting the defendant in one case would eliminate crime in the city. It’s not the appeal to emotion; it’s being realistic in that play for an emotional reaction. Getting one criminal off the streets versus eliminating crime.

So what does that mean for life and annuity advertising? For one, “peace of mind” and similar phrases are the equivalent of a crime-free city. No one thing is going to get you there and it may actually be unattainable. Life insurance and annuity products may help by being one of the conditions that could create peace of mind, but it is more like the conviction of one bad guy—a good thing and important, but not the cure-all to suffering.

Getting back to the book, it is also important to note that Justice Sotomayor was being told to add emotion to logic, not make a substitution: “the difference between winning and losing came down to the appeal to the emotion rather than fact alone.” (p. 209). She started with total command of the facts and relentless preparation. (Her story is one of success born from hard work and mastery of the material in front of her.) She needed both to experience success with a jury. And that is what we look for in ads. There can be some emotional appeal, so long as it is reasonable and so long as there is a strong balance between the emotional and the factual.

Jury trials are essentially selling a story. Justice Sotomayor had a very successful jury trial record. She describes the process in a way that seems applicable to insurance advertising and sales, “Devising the case is always a two-step process: build the strategy out of reason and logic; then throw yourself into it, heart and soul. But if you have to revise the plan, suspend feeling and revert to logic until you can think of something you can sell with passion.”

Pete Rock, CLU, FLMI, Joins Currin Compliance Services, LLC

We very pleased to announce the addition of Pete Rock, CLU, FLMI as Senior Compliance Consultant. Prior to joining Currin Compliance, Mr. Rock was Vice President and Chief Compliance Officer for Crump Life Insurance Services.

With Currin Compliance, Mr. Rock will lead our Compliance Audit Unit. Mr. Rock brings his many years in field compliance to his on-site and remote analyses of IMO/FMO/BGA’s risk exposures, including:

• Key operational processes
• Product/vendor/charge-back contract language
• High risk transactions
• Carrier review processes and communication
• Licensing and appointments
• Suitability reviews
• Information and data security
• Anti-money laundering

We regularly receive requests for compliance audits and consultations from IMO/FMO/BGAs and the addition of Mr. Rock to our team allows us to better meet the demand. 

Pete Rock and I will both be at LIMRA/LOMA’s Regulatory Compliance Exchange: Winning Strategies for Managing Risk Today conference in Las Vegas March 20-22, 2013. Stop by our booth, give us a call, or email us to discuss how we can help you identify and manage your compliance risks. Contact: Cailie Currin at ccurrin@currincompliance.com or 518-692-2494.