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One Consent Order, Multiple Sales Practice Issues

I recently noticed a consent order from the Washington State Office of the Insurance Commissioner that contained a number of sales practice issues. The consent order read, in part:

“Investigation revealed that the riders are not suitable given the customer’s financial goals and status. In particular, the customer does not need the income from the riders and the rider’s work against the customer’s primary goal of leaving funds to his children upon death. Further, the Licensee presented the customer with incomplete forms to sign, provided him with inadequate information regarding the products, and stressed aspects of the products that misrepresented their true nature. The Licensee also provided the customer with replacement forms that did not provide the customer with information to address the ten-year vesting period for bonuses, the possible reduction in value of the bonus if the contract is surrendered prior to the expiration of the vesting and surrender period, the limitations of the lifetime guaranteed benefit riders (if not utilized, they create a reduction in values paid), or the fact that the riders had a premium charge.”

The agent in question has apparently been licensed in Washington since 1975, so the sales practice issues noted probably weren’t due to the inexperience of the agent. In my opinion, this underscores the importance of consistently providing compliance education and training to agents. Helping agents understand what is required and, perhaps more importantly, why they need to do certain things helps protect consumers, the agent, and the insurer.

Insurers continue to have risk associated with their distribution partners and should establish controls to identify and address potential sales practice violations. The sooner concerns are identified, the more options that are generally available to the insurer to retain the agent and reduce risk exposure in this area. Stay tuned for upcoming posts where we will explore some top sales practice issues.