C
O
M
P
L
I
A
N
C
E
Compliance Solutions
Session 3: February 27, 2006
Session Producer:
Karen Smyth, Product Director
Long Term Care
Prudential
C
O
M
P
L
I
A
N
C
E
Panelists
• Maryann Glotzer, LIMRA International
• Brian Atchinson, IMSA
• Elizabeth Lovaas, New York Life
What is LIMRA International?
 A member-owned organization, dedicated to
meeting the information needs of companies
involved in marketing insurance and investment
products. Through the application of cooperative
and custom research, we strive to deliver insights
that help bring the complex world of financial
services into focus.
 We know your company, your products, your
business, and most importantly, compliance
issues.
Why a Customer Assurance
Program (CAP)?
 Reaction to class action suits and market
conduct concerns of the industry
 If customers misunderstand the provisions
of their products -- sales practices are
misleading
 The only way to know customers
understand -- ask
Why CAP?
 CAP is the industry standard for
benchmarking customer satisfaction at
time of sale.
― Endorsed by IMSA
― Over 100 companies using CAP for:
• Life
• Annuities
• Long Term Care
What is CAP?
 Survey of recent buyers
What is CAP?
Very
2
2
what
Some
3
3
ry
Not Ve
4
4
All
Not At
5
5
mely
Extre
1
was:
lpful
1
like)
w he
e, ho oducer? ials?
d the
apply)
rienc
nds an
l that
expe by the pr les mater
ark al
tual fu
ed
recent
d sa
s, mu
y? (M
your ice provid tions an
bond
mpan
on
d
co
rip
rv
r
se
sc
ocks,
se
m ou
ts (st
1. Ba a. The oduct de
d fro
oduc
pr
se
pr
r
t
ha
rc
en
b. Ou
vestm
ntly pu
 In ne
u rece
ve yo
es
 No
ply)
t(s) ha
nuiti
oduc
split
that ap
 Ane
n 7.)
hat pr
k all
rson, etc.)
estio
GO
ranc
2. W
(Mar
to qu
key pe
n,
rance e of insu
R LO
any?
skip
(e.g., demptio e taxes,
YOU ERE
fe insu
typ
r comp
re
oses
please
e,
 Li me other
H
m ou
nc
s purp hip, stock offset estat
sines
insura
nce fro
to
 So
y life
For bu r, partnersity (e.g., es, etc.)
insura
bu
e
t

lif
no
ns
dolla e liquid
er:
u buy
u did
expe
(If yo
did yo
ustom
r estat probate
ath
nses
ed C
rposes
 Fo to cover
ent
expe er your de
d
Valu
e or pu
vestm d savings on
final
aft
se an
re
Dear
purpos
an in
ere
uti
other 's needs
purcha ity to assu s
t
l and
r what
 As r tax-shelt le contrib
ily
d?
cent
ed
r buriar your fam r retiremen ren's
3. Fo
rchase
 Fo a charitab
ur re opportun g the ne lp
cove
help ovide fo money fo your child
ntly pu
te yo
As
in
is
he
ce
ia
th
To
rv
n
re

r
pr
ec
g
se
ca
ke

help
e you
ney fo
savin
ath
I appr like to ta itment to self. You
e
us
ur de
suranc
 To a way of saving mo
er lif
m
es
ter yo
life in
your
telling
anoth
would our com
 As a way of al expens rtgage af
r the
up in ve
ch as rvice by d to
m fo
of
ilt
As
su
on
mo
iu
u
bu
s
e
ha
ati
s

yo
ll
er
prem
educ pay off th
decide
b of se
that ha licy I sti
stom
y the
oney
to pa
of cu a better jo u recently uct.
help
e po
 M insuranc
using
 To
e you
us do d how yo Life prod
ar
y
r
ne
he
an
of mo
ete
why se a Real
 Ot
licy.
urces apply)
compl
my po
hat so
at
purcha
ived
ent to
4. W ark all th
t rece
licy
a mom e it in the op
(M
not ye
e
nce po
order
dr
take
have
incom
insura
ts in
ease aire, plac lope and We
No, I
rrent
d life
l asse
3
nn
you pl
.
ve
ncele
ancia
 Cu vings
m a ca
Won't ief questioss reply en required
her fin
Sa
ot
fro

y?
is
oney
n.
d your
polic
this br ed busine no stamp pendent is
y, an
 M
perso
your
rit
in
ed
cu
de
os
th
iv
me
l se
encl e mail — RA, an in conduct
u rece
d it to
socia
ve yo
your
livere to me.
ents?
ngs, needs?
it in th ked LIM zation, to
it
5. Ha
ent de
holdi
as
l comm
my ag ent mailed
rance to fit your
tiona
have ch organi
Yes,
e insu
m
y addi
1
my ag
ur lif e progra
or an
Yes,
resear for us.
ze yo
u
nc
2
ur
to yo
t analy life insura
survey
agen
No
out yo other
service
ite
ur
e
ab
2
fin
yo

ov
d
de
ns
r
y
impr
6. Di suggest a
estio
or ou
ide an
could
to
any qu can prov ur agent XXXw we
)
have
e
out ho
t yo
ns ab
Yes
If you se or if w se contac t at (XXX
estio
1
en
y sugg
purchaance, plea departm
ve an
e
you ha
assist er servic
7. Do
►
LIMRA prints questionnaires and
envelopes with the company’s logo and
colors
►
LIMRA mails questionnaires along with
postage paid return envelopes
►
LIMRA pays all mail out and return
postage costs
►
LIMRA sponsors a drawing to enhance
response rates
►
LIMRA analyzes results and provides
reports
Questionnaire
custom.
XXXX
al
Cordi
ly,
e]
[nam
[title]
Cover letter
Drawing
Analysis & Imaging
Percent of Life Customers
Unaware They Bought Life Insurance
Report
Al
lR
eg
io
ns
Ag
en
cy
1
Ag
en
cy
2
Ag
en
cy
3
Ag
en
cy
4
Ag
en
cy
5
Ag
en
cy
6
Ag
en
cy
7
Ag
en
cy
8
Ag
en
cy
9
7
6
5
4
3
2
1
0
Questionnaire
Questionnaire
Reports from CAP
 Company summary with industry norms
 Reports by Distribution Channel
 Regional, marketing, and producer-level reports
 Identification of any units or producers who differ
significantly from overall company results
 Name, address, and policy numbers of every
policyholder who indicates a significant
misunderstanding
Additional Information from
CAP
 Electronic images of returned surveys in
client’s own handwriting
Most Comments are Positive!
I just wanted to say I love my agent
Mike @ your office in Claremore,
OK. He’s the best!!  Heather K.
Benefits of Using CAP
 Monitors sales practices without disrupting sales process
― post-sale so does not diminish producer productivity
 Prompt reinforcement with policyholders
― reinforcing the reasons for buying immediately after sale can
improve persistency
― elicit complaints before they fester into grievances
 Communicates expectations
― survey content shows producers what company expects its
customers to understand about their purchase
Benefits of Using CAP
(Continued)
 Independent administration
― provides an arm’s length unbiased analysis and
plaintiff lawyers cannot contend company is auditing
itself
 Industry benchmark
― provides standard against which to judge
performance
― strength in numbers
― CAP User’s Group and CAP Connection
Using CAP
CAP tells you:
 Which customers are confused
 What they’re confused about
 Who or what confused them
Using CAP
 Analyze the exceptions
―
―
―
―
Do you need to contact the client?
Do you need to contact producer?
Do you need to contact a supervisor?
Do you need to contact marketing?
Using CAP




Establish procedures
Document all actions
Document responses to those actions
Forward information to anyone who might be
interested
Using CAP
 Publish procedures
 Copy producers on communications with their
clients
 Copy supervisors on communications with their
producers
Using CAP
 Track activity by regions, production units, and by
producers
 Communicate the results to the regions,
production units and producers
 Encourage interest
Using CAP
 Defend producers from frivolous complaints
 Defend against insurance department actions
 Defend against law suits
 Publish your successes
Questions?
Compliance Solutions:
IMSA Assessments
Brian K. Atchinson
February 27, 2006
Anaheim, California
“The secret of life
is honesty and fair
dealing . . .
if you can fake that,
you've got it made.”
Groucho Marx
What Is IMSA?
• Independent, nonprofit
standards-setting organization.
• Promotes high ethical standards in
the marketing, sales and service of
individual life insurance, long-term
care insurance and annuities.
Why IMSA?
• Organized in early 1990s; a response to
crisis of consumer confidence in the
insurance industry.
• Provides rigorous, measurable, national
standards.
• Identifies problems early before they
become widespread.
Principles of Ethical Market Conduct
1. To conduct business according to high
standards of honesty and fairness and to
render that service to its customers which,
in the same circumstances, it would apply
to or demand for itself.
2. To provide competent and customerfocused sales and service.
3. To engage in active and fair competition.
Principles of Ethical Market Conduct
4. To provide advertising and sales materials
that are clear as to purpose and honest and
fair as to content.
5. To provide for fair and expeditious handling
of customer complaints and disputes.
6. To maintain a system of supervision and
review that is reasonably designed to
achieve compliance with these Principles
of Ethical Market Conduct.
IMSA Qualification
To qualify, a company:
• Develops and implements policies and
procedures in support IMSA’s Principles.
• Conducts an extensive self-assessment.
• Undergoes an independent review conducted
by an IMSA-qualified assessor.
• Documents compliance with the six key
principles, a minimum of 144 separate criteria.
Suitability
Needs-based Selling
IMSA: Compliance Solution
Needs-based selling.
• Evaluate a customer’s insurable needs
and financial objectives.
• Use of fact-finding tools.
• “Suitability” determined through
needs-based selling.
IMSA: Compliance Solution
Producer supervision.
• Adequate screening and background
checks.
• Adequate training and supervision.
• Data collection and ongoing monitoring
and review.
IMSA: Compliance Solutions
Clear and fair advertising, marketing,
and sales materials.
• Maintain consistent advertising review
procedure.
• Materials are easy to understand.
Proper disclosure.
• Compliance with laws and regulations
on advertising, unfair trade practices,
sales illustrations, etc.
IMSA: Compliance Solution
Fair and expeditious complaint
handling.
• Written and verbal complaints.
• Track underlying problems to address
systemic issues.
Ethics = Commitment to
Continuous Improvement
2006
IMSA Standards Update
Value of IMSA
IMSA-qualified companies have:
• Fewer complaints.
• Lower lapse and surrender rates.
• Higher financial ratings.
Georgia State University Study, 2005/2006
www.imsaETHICS.org
C
O
M
P
L
I
A
N
C
E
IMSA in Practice
Beth Lovaas, AIRC, MBA
New York Life Insurance Company
February 27, 2006
C
O
M
P
L
I
A
N
C
E
Agenda
•
•
•
•
•
•
•
•
•
IMSA topics
Membership
Company approach
Self-assessment process
Independent assessment process
Sample certification timeline
Examples of improvement
LIMRA CAP
Conclusion
C
O
M
P
L
I
A
N
C
E
IMSA Topics: Suitability
• Efforts to determine product
suitable for customer
• Evidence of suitability guidelines
• Communicate to agents and
encourage use in sales process
• Submission of suitability review
with application
C
O
M
P
L
I
A
N
C
E
IMSA Topics: Distributor
and Employee Training
• Company products and operations
• Company policies and procedures
• Replacement, suitability, fair competition,
advertising and sales materials, complaints,
illustrations
• Compliance with laws and regulations
• Marketing and sale of products
• IMSA Principles of Ethical Market Conduct
C
O
M
P
L
I
A
N
C
E
IMSA Topics: Licensing
• Appropriately qualified
• Licensed and appointed
• Meet applicable continuing education
requirements
• Assure that distributors do not place
business or receive commission if not
properly licensed and appointed
C
O
M
P
L
I
A
N
C
E
IMSA Topics: Advertising
and Sales Materials
• Process for review, approval, and use of
materials
• Communicate requirements to distributors
• Make materials available to distributors
• Maintain compliance with laws and
regulations related to advertising
• Track and dispose obsolete materials
C
O
M
P
L
I
A
N
C
E
IMSA Topics: Replacements
• Provide customers with information to make
decisions, including state disclosures
• Communicate company’s policy and
guidelines to distributors, including
commissions
• Identify and process replacements
• Detect undisclosed internal replacements
• Monitor agent activity
IMSA Topics: Laws and
Regulations
C
O
M • Process for tracking and implementing
P
laws and regulations by effective date
L
•
Communicate
to
employees
and
I
distributors
A
N • Update policies and procedures to
reflect changes in laws and regulations
C
E
C
O
M
P
L
I
A
N
C
E
IMSA Topics: Complaints
• Communicate complaint handling
procedures
• Inform customers of how to
communicate complaints
• Handle complaints from state
departments of insurance
• Monitor complaint trends
C
O
M
P
L
I
A
N
C
E
IMSA Topics: Oversight
and Monitoring
• Enhanced systems and procedures to supervise and
monitor compliance with laws and regulations, IMSA,
and company codes of conduct and take corrective
action
• Monitor customer satisfaction with products and sales
practices
• Monitor and analyze replacement activity and take
appropriate action
• Enhanced training for distributors and employees on
covered products, Principles and Code, and laws and
regulations
• Use LIMRA Customer Assurance Program surveys
C
O
M
P
L
I
A
N
C
E
Continuous Improvement
1. Policies
and Procedures
6. Act Upon
5. Monitor
Continuous Improvement
2. Responsibilities
3. Communication
4. Used
C
O
M
P
L
I
A
N
C
E
Membership
• NYL founding member
• NYL certified since 1998 and LTC initially
certified in 2001
• Membership renewed every three years
• Continued compliance with Principles and
Code
• Certification process is vigorous assessment
of company practices in light of Principles and
Code
Strategy
C
O
M • Corporate Compliance Department
– Overall recertification
P
– Provide support and guidance
L
I • Life, Annuity, and LTC Business Areas
A
– Complete self-assessment document
N
– Respond to independent assessor
C
requests and coordinate on-site visit
E
C
O
M
P
L
I
A
N
C
E
Self-Assessment Process
• Performed in-house by NYL team
• Evaluate existing policies and procedures to
– Extent revised in last three years; and
– Confirm data provided in prior assessment is
accurate
• Review best practices recommendations from
prior assessment and document where and
how incorporated into procedures
• Provide report to assessor
C
O
M
P
L
I
A
N
C
E
Self-Assessment Tools
•
•
•
•
•
Organizational chart
Interview guide
Responsibilities matrix
Training matrix
Supporting documentation
C
O
M
P
L
I
A
N
C
E
Independent Assessment
Process
• Qualified assessor
• Review self-assessment report
• Perform evaluation to determine if
reasonable basis for NYL’s conclusions
• Test and sample data and information
• Submit report and recommendation
C
O
M
P
L
I
A
N
C
E
•
Sample Certification
Timeline
Self-Assessment: December 2003 – January 2004
• Update 2001 information (responsibilities matrix, interview
guide, documentation)
• Corporate Compliance visit 12/10 – 12/11
• For each topic, show that have P&Ps, someone is
responsible, how P&Ps are communicated, evidence of use
of P&Ps, monitor and measure use, and actions to keep
P&Ps current
• Identify and eliminate any reportable gaps
•
Independent Assessment: February 2004
• NYL provide self-assessment report to assessor
• Review materials and develop interview questions
• Provide NYL progress report including actions needed
Sample Certification Timeline
C
O
M
P
L
I
A
N
C
E
• Independent Assessment: Mid-March 2004
• Request sample files on New Business, Licensing,
Replacements, Advertising and Sales/Illustrations, and
Complaints
• Provide checklists of information seeking for each topic
• Provide progress report on findings and actions needed
•
Independent Assessment: April 2004
• Conduct on-site visits for 3 - 4 days
• Conduct interviews, walk-throughs, testing, and review of
sample files
• Analyze findings and report recommendations for
improvement to management
• Submit reports to IMSA
C
O
M
P
L
I
A
N
C
E
Examples of Improvement
• Educate management of good practices
• Enhance employee knowledge
– Regulatory requirements
– Complaint handling
• Improve regulatory tracking and
implementation
• Improve new business process
– Suitability
– Replacement
– Agent licensing, appointment and CE
C
O
M
P
L
I
A
N
C
E
LIMRA LTC CAP Survey
• LTC send monthly data file to LIMRA
• LIMRA send survey to all customers that retain
policy after 30-day free look has expired
• Surveys sent of about 500 – 700
• Response rate about 28%
• LTC receive policy flags, management report,
and agent activity report
• Flagged policies of 20 - 60
• LTC review and analyze policy flags and
forward to others
C
O
M
P
L
I
A
N
C
E
LIMRA LTC CAP Survey
• Corporate Compliance notify
Managing Partner of flagged policies
• Managing Partner contact agent to
follow-up with client
• Result of contact documented and
forwarded to Corporate Compliance
• If no response after period,
information forwarded to Agency
Standards for handling
C
O
M
P
L
I
A
N
C
E
Questions