DOL Fiduciary Rule

Technology is The Topic at ACLI Legal and Compliance Meeting

Coeur D’Alene, Idaho

As I traveled back from the beautiful city of Coeur D’Alene, Idaho after the ACLI Legal and Compliance Meeting, I was struck by how the topics have changed recently. At this year’s conference, the DOL rule was certainly present as a topic, but not nearly so much in the foreground as it has been in recent years. Technology, on the other hand, was at least part of every session.

Cybersecurity not only had its own session: it also crept into almost all the others in one way or another. Innovation was equally prominent, as the need to innovate made its way into most conversations. Frustrations with the challenges of regulatory efforts to both allow and restrict innovation were also on many lips.

There were no clear solutions to the challenges posed by these issues, but it was clear that internal legal and compliance efforts, as well as regulatory resources, are being pulled and strained by both. It is an interesting and demanding time. So many more meetings and discussions are to be had as we, collectively as an industry, begin to do more than merely identify the issue, but we continue to dig in and do the work.

IAdCA 2017...A fun time was had by all!

Kasbah Pool, Omni Scottsdale Resort and Spa, Scottsdale AZ

The setting for IAdCA 2017 could not have been more beautiful – the Omni Scottsdale Resort and Spa at Montelucia in Scottsdale, Arizona. The scenery was simply spectacular and we all had rooms that gave us perfect views – if not of Camelback Mountain, of scenery equally magnificent. The conference was definitely fun, but there was also a lot of fantastic content presented by talented speakers.

For me personally, it was an honor to start our time at the Montelucia by being elected as president of the organization – a role in which I will serve for the next two years, finishing my term at the close of the 2019 conference.

As is the IAdCA custom, we opened Wednesday night with a wonderful welcome reception on the Kasbah Patio next to one of the stunning pools throughout the property. Because I was still on crutches due to a weightlifting injury, I happily sat still and enjoyed talking to those who made their way to where I was sitting. The food and drinks were appreciated and it was both a relaxing and pleasant way to start the conference.

We kicked off on Thursday with the opening keynote speaker, Joseph Jordan, who spoke on the topic of Living a Life of Significance. As a former life insurance agent and executive turned motivational speaker, he provided great content, which included an introduction to a concept that was repeated throughout the conference. I think one of the measures of a good motivational speaker is the ability to do what Joseph did: plant a seed that stays with the audience. What he talked about was the importance in our industry to share stories about how our products have touched peoples’ lives. He did so in a way that moved several people to share their personal or family stories about life insurance.

Joseph’s session was followed by two more general sessions before we moved on to the breakouts: one in which Rod Perkins, VP at ACLI was the speaker and the other was David Bolton of the Oregon Division of Financial Regulation and John Reilly of the Florida Office of Insurance Regulation where they shared hands-on information about how to make clean advertising and product submissions to their respective states. Rod had the dubious distinction of being asked to speak in two consecutive years on the DOL Fiduciary Rule – last year it was the sole topic of his general session and this year it was an obvious part of his more general “ACLI Update” session. Last year he spoke just days after the rule was finalized and everyone’s head was spinning. He did a great job last year giving us one of the first overviews and this year he brought us up-to-date on the current confusion about what it actually means to have April 10, 2017 come and go. He did a superb job in a very difficult situation two years in a row with the timing of the conference and the regulatory activity. We are certainly hopeful that he will not let that dissuade him from giving future conferences a chance to prove that the third time’s the charm!

CCS staff was busy during the Thursday afternoon breakout session schedule! Rod and I spoke on Regulatory Shifts in Standards of Care, while Glenda Bean, newly elected IAdCA vice president, spoke with Debby Paris of First Consulting on Effective Communication Tips & Tricks. In the standards of care session, Rod and I decided to broaden our discussion to more than the DOL Fiduciary Rule by including a discussion of the NAIC’s new working group on this topic and getting a bit into the weeds of how a transactional suitability standard may end up moving to a more transactional best interest standard that takes pieces of traditional insurance regulation as a transaction at a moment in time and the DOL’s fiduciary standard that changed the nature of the relationship well beyond any individual transaction. At this early stage of the NAIC effort and the ongoing uncertainty about DOL and SEC action, there are more questions than answers and we had a lively and entertaining discussion about how it could all play out – both the positive and negative outcomes that we could collectively foresee. Glenda and Debby presented on a topic that is one of Glenda’s passions. She has presented it many times and is also in the process of developing a course for our online platform that addresses this soft, but vital skill in compliance – effective communication.

Being the trooper that Glenda is, she rushed right into the second breakout session to substitute for Heidi Gabel of GamePlan Financial who was suffering from a terrible case of laryngitis. Heidi was completely unable to speak on Tuesday so Glenda agreed to take over the moderation of the Mobile Advertising breakout session. It was an easy fit for her since she is hosting a full CCS symposium (CICS) on advertising compliance around social media May 11-12 in Cincinnati, OH. She rounded out the afternoon with a session on Stories from the Trenches that she co-presented with Gary Romo of Allianz. They offered cautionary tales of recent market conduct and disciplinary actions related to sales practices and advertising compliance. While she was spinning scary yarns, our expert researcher, Kaycie Tyll, was presenting with Judith Villareal of CoreCap Investments on gifts and rebates. Kaycie has a 50-state research chart on this topic available on our educational platform (CICEd), so this session was a perfect fit for her expertise!

By the end of Thursday, the CCS team was exhausted, but exhilarated! Glenda and Kaycie went out on the town with local clients, while I hobbled to the resort’s restaurant with a group of eight for a very nice meal with great company. Friday always arrives so quickly at IAdCA and this year we all had to leave on the early side to make connections to Albany. At the last minute, Margaret Jones was added to our list of travelers because my injury made things much more difficult, both at our booth and in transit. Sadly for her that meant cross-country travel in middle seats! I must admit to feeling guilty as I upgraded to first class so that I could prop my bad leg up and move around more easily. The doctor had warned me that deep vein thrombosis is correlated to crush injuries of the type I suffered, so I felt compelled to take his warning seriously, wear compression socks, and sit in upgraded seats.

Fortunately, no adverse consequences happened and we all arrived home very late and exhausted, but feeling great about another fabulous IAdCA conference! Just like the Macy’s Thanksgiving Day Parade, the IAdCA officers are already working on making next year’s event – in Austin, Texas – even better! If you have never been to IAdCA, think about coming to Austin in 2018! If you have been once or all 16 times, make sure to put it on your schedule for April 2018 and check the website regularly for updates.

Will carriers agree to supervise independent agents?

The topic of supervision of independent insurance agents has long been a challenge for insurance carriers.  There are differing views among carriers on whether any supervision should take place and if so, how it should take place, given the “independent” nature of the distribution. But “independent” or not, they are still agents of the carrier.  

Now the Department of Labor’s Fiduciary rule is raising that conversation to a new level for insurers who offer fixed index annuities (FIAs) through the independent agent channel. The added requirements of the Best Interest Contract Exemption (BICE) create a significant litigation exposure for carriers, some of whom may not be willing to take on that liability.

John Matovina, President and CEO of American Equity Investment Life Holding Company, was quoted last week in this on-line article from with his thoughts on the matter. He suggested that this potential liability may cause insurers to move away from the independent channel and focus on sales through banks and broker/dealers to take advantage of their existing supervisory structure.

Key to this discussion is the issue of agent supervision. A major question is if insurers can effectively supervise a producer who may be selling FIAs for multiple insurance carriers. Aside from the tremendous compliance resources this supervision may require of carriers, and potential resistance from a sales force that embraces its independent nature, there are numerous practical considerations that make this task challenging. Mr. Motovina alludes to one of these, which is how to exercise effective oversight over a producer who, in any given sale, may end up selling another carrier’s product? Would every carrier with whom an agent is appointed have to oversee every sale because there is a possibility that their product would be sold?

As the article mentions, Mr. Matovina is among the first executives from the top FIA carriers to comment on the impact of the DOL rule. In a May 2nd follow up communication to producers from Ron Grensteiner, President of American Equity Investment Life Insurance, the company clarified that their earlier comments were not an indication that they are exiting the FIA market place. Rather, they will continue to follow their current processes for the sale of non-qualified annuities, while continuing to explore their options for making qualified FIAs available to their independent distribution channel.

So this raises a key question - will other FIA carriers consider the more conservative position, turning to banks and broker/dealers in an attempt to limit liability? Or will they seek to implement a supervisory structure for their independent agents, perhaps through intermediaries such as IMOs? Would IMOs be willing to step into this space and supervise? Many questions about the rule itself are still undergoing interpretation, and this is sure to be a critical part of an insurer’s analysis for their future FIA distribution models. 

Insurance Regulation – Past and Present

The AICP Heartland Chapter had its E-Day in Kansas City on Monday, April 25th and it was well done (as usual). There was a keynote address by Commissioner Ken Selzer of the Kansas Insurance Department (KID), and sessions on the DOL Fiduciary Rule, IMO’s and their carriers, and market conduct exams. For those who may not be members of AICP, I recommend joining – not only for the content of the conferences and meetings, but also for the opportunity to network and share best practices with your colleagues.

The keynote was particularly enlightening as Commissioner Selzer described how insurance regulation began in America. He described how life insurers would, for example, sell a life insurance policy with a face value of $1,000 to a consumer. When the insured passed away, the insurer would assess the beneficiary’s assets, lifestyle, and other factors, and then negotiate a settlement of perhaps $100. The insurer would do this hoping that the beneficiary would lack the sophistication or motivation to sue the insurer for the face amount of the policy. In response to these types of abuses, states formed insurance departments to protect insurance consumers.

Fast forward to today. The KID is determined to meet the evolving demands of the marketplace. There is now a chat feature on its website and Commissioner Selzer asked the audience members to take out our cell phones and “Like” the KID Facebook page. Times change and the KID is staying current with the times – not only in the use of technology, but also in the area of insurance regulation. Many of you may remember that Kansas is also a regulatory leader, and they issued bulletins 2012-1 and 2014-1 pertaining to third party advertising – especially involving IMOs. Many of us in the insurance industry are continuing to discuss this topic as evidenced by the AICP session on IMOs and their carriers.

What’s next on the horizon when it comes to insurance regulation? Certainly the impact of the DOL Fiduciary Rule will be enormous, but what else may be next? One thing is certain – the regulatory environment continues to rapidly move forward – and compliance professionals need to continually sharpen and expand their skills to keep pace.

Join us in June at the Desmond!

June 22-24, 2016 • Desmond Hotel • Albany, NY

The Currin Insurance Compliance Symposium (CICS) is coming up fast and we hope you will join us! This symposium will include discussions on important issues in our field, as well as general updates and trends that inform our daily work. We will talk about products and processes, management and communication of compliance information, and the use of metrics to evaluate compliance. There will be opportunities for small groups to engage in problem solving and to focus on improving ways to manage our jobs. We will look at some long-standing issues in new ways and also discuss how recent issues impact insurance compliance.

We are very excited to have Ann Johnston, PhD, PCC as our Keynote Speaker. She is a Global Learning Leader with 20+ years of experience and subject matter expertise in leadership, organizational design and development, and organizational change. Having heard Ms. Johnston as a keynote speaker first-hand, we are confident that you will not only benefit from her experience and expertise, but also enjoy her humor and personality!

CICS sessions will include:

  • Indexed Product Advertising:  Requirements and Risks
  • Suitability: What should we be doing now?
  • Carrier/Distribution Risk Assessments:  Why and how?
  • DOL Fiduciary Rule: Updates & Implementation  
  • Compliance Training: Why you need it & how to do it!
  • Effective Compliance Officer Tips & Tricks
  • Hot Compliance Issues in NY
  • Accelerated Death Benefits: Filing challenges in CA, NY, and beyond!
  • Variable Material:  Is it me, or are the rules always changing?
  • Hands-On Advertising Review

(sessions are subject to change)

We look forward to seeing you in June!