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Goodbye underwriting?

by Suzanne Seay

We received a comment on an application from a New York reviewer recently that required us to remove a medical underwriting question entirely, based on the statute that prohibits racial discrimination in insurance under section 2606. The question asked if the applicant had been diagnosed with or treated for sickle cell anemia. We assume the question was disallowed because sickle cell disease disproportionately affects people of African descent.


 The comment got me thinking about race and disease. I’m no expert, but it seems that many diseases affect one race or ethnicity more than another. A recent article in the New York Times (Sickle Cell Disease Still Tends to Be Overlooked) was pointing to the disparities in funding, research, and national focus on sickle cell, compared to cystic fibrosis. Cystic fibrosis mostly affects Caucasian people. There’s more money for, more drugs for, and more articles about cystic fibrosis. Lots more. And a lot fewer Americans are affected by it than by sickle cell disease.

 I support addressing these disparities and focusing more attention on sickle cell. On the other hand, forcing insurers to stop underwriting for sickle cell does not seem like a good idea or the best way to address the clear disparities.

If one race-specific disease is not allowed to be underwritten, wouldn’t it follow that all race-dominant diseases be disallowed? Based on this reasoning, a well-funded cystic fibrosis organization might feel obligated to sue NY to remove cystic fibrosis as a question as well.

 A grass-roots sickle cell group might get inspired to spread the word that anyone with sickle cell disease can buy life insurance in NY, because insurers are not allowed to ask applicants if they have it. This would be good for the families of people with sickle cell, but would probably bring up solvency issues for NY insurers, which is bad for everyone. A plaintiff’s attorney might think this new position taken by NY means that in-force policies should be adjusted to account for this discrimination. And what about death benefits already paid on lives that were based on this discrimination?

 And depending on how many diseases or conditions can be considered to occur much more frequently in one race than another, there might not be enough diseases left to underwrite policies effectively. What is the standard for much more frequently? Does there need to be a genetic element to it? Is that what section 2606 says? What if there is a disproportionate impact on one race or ethnic group, and there is also a lifestyle or behavioral component?

 I fully support anti-discrimination efforts, particularly in these times where racial and ethnic hatred seem to be on the rise. But I don’t believe removing a disease (which has significant mortality impact) from insurance applications is the route to making a difference.

Financial Adviser Title Gets More Complicated

In a article, dated July 1, 2019, Contributor Julie Jason addresses the SEC's new rules on who can be an "adviser" under its Regulation Best Interest. See Is Your Financial Adviser a Financial "Adviser?" Should You Care?

Ms. Jason spends a good deal of her piece talking about the potential for confusion over titles and, specifically, the challenge of brokers who call themselves "financial advisers." Here she is talking about securities-licensed brokers, many of whom work for "large broker-dealers that are dually registered (as broker-dealers and advisers), for example Merrill Lynch and UBS." She asks the question whether those brokers can be called advisers. She answers with, wait for it... Maybe. "If the broker is 'not also a supervised person of an investment adviser 'he or she cannot use 'the term "adviser" or "advisor" as part of a name or title.' (cite omitted) However, he or she can use the firm's name if the firm uses 'adviser' or 'advisor.'"

After some discussion of the new regulation and its best interest requirements, Ms. Jason states: "In today's world, the term 'financial adviser' is simply a marketing term, which may disappear at some point after brokers are prohibited from using it." This is where there is a clear relationship to a provision that also appears in NY's new Regulation 187, which imposes a somewhat different "best interest" standard than the SEC's.

Reg 187 states that an insurance producer "shall not use a title or designation of financial planner, financial advisor or similar title unless the producer is properly licensed or certified and actually provides securities or other non-insurance financial services." Section 224.5(c). This section is important because many insurance agents also call themselves "financial advisors" as a marketing term. They don't like the perception of "agent" and "financial advisor" sounds better. Some actually go so far as to become securities-licensed as an investment adviser representative, but never actually provide securities advise. They merely use the title for its marketing cache. Both NY and the SEC, seem to be getting at this marketing issue and they don't like it.

Under these two regulations, insurers that permit agents to use financial adviser/advisor in their personal marketing and sales of the carrier's products, are likely to be held to a standard of knowing who is using that title and what the basis is for an individual's use of that title. Gone are the days when the marketing of a broker or an agent as a financial adviser was a low risk proposition. Both NY and the SEC have gone out of their way to say they are concerned about consumer confusion on this point.

Now is the time to let all insurance producers know that "financial advisor" is not a title they can legally use as a marketing tool any longer. If they use it they need to have a registration to support it and, in NY, a practice of actually providing non-insurance financial services.

This is not what effective disclosure looks like.

Much of today was spent in preparation for my presentation at the New England Chapter E-day, to be held on Wednesday of this week: June 12, 2019. My topic is the confusing array of disclosures that are now required in NY, especially with the addition of Regulation 187. The confusion is a result of the proliferation of regulations that, no doubt have good intentions, but for my money, are likely to leave consumers more confused than empowered. I only have an hour in my E-day session and I don’t think I can cover all the overlapping disclosure requirements in Section 3209, Reg 60, Reg 74, Reg 187, Reg 194, and Reg 210. If I can't do that -just explain what they are- how is an agent going to be able to explain to a consumer what each of them are and why the numbers and terms are different when they are talking about essentially the same thing? I am all on board that consumers should know what they are buying from whom. I agree that producers should have an in-depth knowledge of the insurance products they sell. Bait and switch is bad, as are commission-driven sales. Misleading consumers into replacing good products with the latest shiny new object is not tolerable.

But working through all the disclosure requirements today, I don’t think this matrix of regulations gets consumers to a better place. Because information is presented in so many different ways, they will have more information for sure. But will it make sense to anyone?

I haven’t yet seen a package of these disclosures prepared for a real sale. I hope to soon. I hope it is more clear than it appears it will be from going through all these regulations. For the consumers of insurance products in NY, I hope I am wrong. I would love your thoughts on this. My presentation will be posted in our Suitability and Standard of Care Center for E-day attendees and Center members after the event. There is a members-only forum to discuss compliance strategies. Take advantage of the opportunity to network on these challenging issues.

At least there was this…

A room with a view

A room with a view

Successful LHCA Meeting in Portland, OR

LHCA Portland OR

I am sitting in the Delta Sky Club in Portland, OR after a great LHCA meeting here.  I have had really positive experiences at LHCA meetings and some that are not so great. The meetings tend to be small, which is a great thing if the people there are excited to both ask questions and share information. This was one of those. The meetings that are not as good are the ones where the people in attendance don’t get up to the mic and share. If there are only a couple of people answering all the questions and many questions with minimal input, it is hard to feel great about the time spent. This meeting was the kind that makes it more than worthwhile to be there. In our office we have some new staff that are really talented and excited about the work and I see that we are not alone- the new attendees at this LHCA meeting shared that excitement and passion for the work we do. I am going home upbeat and invigorated to keep doing the work! 

I presented on NY’s Reg 187 as it relates to life insurance.  There were fabulous questions and comments about how the various company’s implementation efforts are going. I got great feedback on the presentation and that is always nice to hear.  The slides are being made available to LHCA attendees and are posted in our Standard of Care Center for members’ reference.  

My next presentation on Reg 187 will be at AICP’s E-day in Springfield, MA on June 12. That one will focus on the intersections and conflicts between Reg 187, Reg 210 and Reg 60.  I am sure that, too, will be a lively discussion and I am really looking forward to it.  I hope to see you there.  Of course, that deck will also be available for members at in the Standard of Care Center.  

- Cailie