ETHICS
ETHICS IN SELLING
An ethical insurance agent that goes bankrupt because he or she could not bring in the earnings necessary to pay the bills is not likely to do the consumer much good. Therefore, for the good of the consumer, it is not enough to merely be ethical. The agent must be both ethical and skilled in his or her trade. In fact, it seems probable that the financially successful agent is more likely to be ethical since there will be less stress involved, less desperation to make the sale. Let us look at the steps involved in getting a sale from an ethical standpoint.
SETTING APPOINTMENTS:
First of all, even the best of agents will not succeed if they have no place to be. That means that the agents must be involved in getting appointments. Although there are many methods used to obtain appointments, we will be considering two:
1. Setting appointments by phone, and
2. Coming to a consumer's door with a mail-in lead card in hand.
Each state tends to have some type of requirements for the consumer's protection. We are not able to address these requirements state by state and are not attempting to do so. It is vital that each agent, if he or she is involved in soliciting business, be aware of their particular state's rules and regulations.
Desmond works for an agency that does mass mailings to senior citizens for the purpose of soliciting reply cards. A senior citizen, who wants additional information on the product offered, fills in their name and address and returns it to the agency or insurance company. This is a fairly common practice and most states have addressed the issue by restricting what can and cannot be said in the mail piece.
Some of the agents where Desmond works call before going to the home, but Desmond prefers to drop by unannounced. This method has been especially successful for him. Desmond tells other agents that he gets fewer rejections in person than he would get on the phone.
When Desmond approaches the door, he has several options. Which option would you select?
1. When his knock is answered: "Good morning Mrs. Green. My name is Desmond Drake. I represent XYZ Company and I am here in response to the card you directed to us. Is this your writing or your husbands'?"
2. When his knock is answered: "Good morning Mrs. Green. My name is Desmond Drake. I am here due to the changes that have occurred with your Medicare benefits. Are you aware of those changes?"
3. When his knock is answered: "Good morning Mrs. Green. I am here in response to the card you sent to us for information on your Medicare. As you probably know, some of your benefits may be cut next year. Are you properly prepared for those cuts?"
4. When his knock is answered: "Good morning Mrs. Green. My name is Desmond Drake and I am with your insurance company. They have asked me to stop by and review your benefits with you and answer any questions that you may have. May I come in?"
You may have thought of other opening statements that might be made to gain entrance into the consumer's home. Which of these statements that we have offered would you feel is most ethical? If you choose the first one, you are right. Desmond identified both himself and the company that he represented. He also noted how he happened to come to Mrs. Green's home (in response to the card mailed in).
It is not unusual to hear numerous techniques that, while effective, are not exactly honest. What many agents fail to realize is that the consumer's have not lost sight of the fact that less than honest methods were used. Even if the consumer does not openly say: "You made it sound like you were from the Medicare office" that fact does not escape them. On the other hand, when you represent yourself fairly and openly, the clients are more likely to send referral business your way with a statement of your honesty.
Melony works for herself and it is her responsibility to find her own places to be. She purchases lists from list companies. The type of list purchased will depend upon what market she plans to work that month. Melony likes to do a variety of things. Some months she will work in the senior market. Some months she will work with the younger ages.
Her approaches are basically the same as those used by Desmond. Some states require that a phone solicitor state who they are and which company they represent within the first minute or even 30 seconds of the phone call. Even if your state does not have this requirement, it is only prudent to do so. If Medicare is mentioned, it is important that the consumer realize that the agent is not from the office of Medicare, but that he or she represents products that deal with it.
Consumers may complain that they never really set an appointment, but someone still shows up. Many large agencies employ people who do nothing but set appointments for the agents of their company. While this is convenient for the agents, it may also lead to problems. This is especially true if the phone staff is paid on a "per appointment" basis. There is financial incentive to list appointments that were not actually set. Even if the agent is not at fault, the consumer will view the agent as some type of "con". Certainly, the ethical agent will not wish such situations to develop since it is the agent's reputation that suffers (not the phone person's). Additionally, the agent has no control over what is said on the phone when the appointment is set. In order to protect yourself, you may not wish to allow anyone else to set appointments for you.
Agents can set their own appointments and eliminate the potential problems associated with hiring others. However, setting appointments is not easy and it is time consuming. Those who are good at it are worth the money they earn. Those who write down non-existing appointments for agents are not worth the money no matter how little it is. Since it is the agents that go to the doors, and meet the potential clients, it is their credibility that is on the line.
GETTING IN THE DOOR:
Desmond has used the first example when Mrs. Green answered her door. Desmond identified himself and his agency. He also has the card in hand so that Mrs. Green can see that either she or her husband did send in a reply card. In addition, Desmond has made a point of being professionally attired and presentable. This does not necessarily lessen Mrs. Green's skepticism. She is well aware that he is there to sell her something.
If you have been in sales for any length of time, you are aware of the numerous sales techniques that are promoted. It has been our experience that simply being a good listener, and honest works best. Ethics really are simplistic. Ethics tell you to do that which you know is right. With this in mind, let's consider some of the things that Desmond might encounter at the door.
Mrs. Green: "I know that you're here to sell something and frankly I just don't feel like listening now."
Desmond (noting the vacuum cleaner in her living room behind Mrs. Green): "I can see that you are busy and I don't mean to intrude. Was it your husband that mailed the card in?"
Mrs. Green: "Yes, he's always doing that sort of thing, but we have insurance and I am simply not interested in more."
Desmond: "It is not even prudent, Mrs. Green, to stack your insurance, so I realize that simply putting more in place would not be fair to you. I don't simply work for a living; I work because I know my trade and I know what works and what does not. If there is a time that is convenient for both you and your husband, I really do feel that it is to your benefit to at least hear what I have to say. You'll only be out your time and I promise not to take too much of that."
Certainly, Mrs. Green may still turn Desmond down, but if she does listen, Desmond has already begun building a firm foundation of trust. He has not tried the gimmicks designed merely to get to a presentation. Desmond has been honest. He has not used some of the "I'm not selling anything" routines that are so often promoted. One sales manual actually states to handle this type of objection by responding: "I can appreciate you saying that, but as I indicated, I'm here to explain additional tax advantages that you may or may not be entitled to." There is no doubt that this statement is a way of saying "I'm not selling anything" when, in fact, that is exactly the intent.
It has been said that objections are merely the necessary steps of any sale. A common quote is that the salesperson should expect the client to say "no" five times before they finally say "yes." Whether or not this is actually true is likely a matter of opinion. We find that ethical behavior, however, does not tend to work with the type of manipulation that this technique suggests. Rather, it is a matter of listening to needs, goals and concerns. It is likely true that those who get very good at manipulating the sale may initially write more applications than someone who does not employ manipulation. Since such manipulated sales tend to experience a higher cancellation rate, however, we tend to doubt that the extra sales remain on the books for long.
Many agents work with the "I am a friendly next-door-neighbor type of person" routine. This means that the agent attempts to be so friendly that the consumer cannot resist asking them in. Actually, it tends to be fairly successful. Since friendliness is neither ethical nor unethical, who are we to say that it is right or wrong?
Communication skills are always an agent's best route and this is probably true for most lines of work, not just insurance sales. So much time is taken by agency trainers on "techniques" that other skills become minimized. It is a shame that more time is not taken on simple communication skills. Perhaps it would be better to spend less time learning the "tricks of the trade", and simply learn the trade itself!
LAYING OUT POLICY BENEFITS AND LIMITATIONS:
Once the consumer has agreed to hear the agent's presentation (we dislike the word "pitch" since it suggests trickery) the agent enters into many possible pitfalls. Policies can be very difficult to understand. Most presentations involve a few set items, which include premium rates, benefits, agent services and company stability. Of these, the premium amount should be the least important, although our clients do not always allow this to be so. As a result, rates often take up the majority of the presentation, yet an errors-and-omissions claim has never occurred due to the premium quoted. Probably 98 percent of the E&O claims filed relate to the benefits of the program and how those benefits were discussed (or not discussed, as the case may be). Obviously, more time needs to be devoted to that aspect. Then, as an agent, you must hope that the client remembers what was said and understands the concepts discussed.
The insurance contract can be very intimidating. Technical in nature, complex in its subject matter and seldom read in full by either the insurance agent or the policy-owner, it is bound to be misunderstood at some point by somebody. It has been said that insurance contracts are the number one unread best seller.
To our clients, the most important part of the policy is the part that begins, "We promise to pay." In reality, all other parts are, of course, limitations and/or conditions on the policy.
In some ways, life insurance policies are more easily understood. After all, a person is either dead or alive. If the insured dies while the policy is in force, the promise of a payment is kept. In a medical policy, there may be numerous limitations or conditions of payment that the consumer (policyholder) has difficulty understanding. Medical policies contain such things as co-payments, stop-loss provisions, elimination periods, plus a variety of other confusing and easily misunderstood clauses. All of the provisions can create dissatisfaction, which can cause questions regarding an agent's diligence in presenting the policy and providing services. This is not to say that a life policy should not also be clearly explained to a client. Any contract can be confusing to the consumer. Any contract can cause a misunderstanding.
There are steps that an agent can follow to minimize possible misunderstandings:
1. Full disclosure is always necessary in any type of policy being suggested to a client. Where different interpretations are possible between a brochure and the actual policy, the policy is always the final authority. A brochure is simply a selling tool; never the final answer. The statement the agent receives over the telephone from the agency or home office also takes second place to the actual contract. The policy is the final word every time. An agent who has not read the contracts he or she is selling, is an agent waiting for a lawsuit to happen.
2. An agent should always be slow to replace an existing contract of any type. This is not to say that an existing contract should never be replaced. However, to do so without fully examining what is currently in place would be foolish. The agent should first be fully informed of any new or preexisting health conditions, take-over provisions and limitations that may exist in the new plan. Health problems of any dependents that may apply should also be reviewed.
3. Sometimes owners/employers may not be enrolled in and paying premiums for worker's compensation coverage. While this does not typically apply to the senior clients you will encounter, more and more older age people are still working and might need consideration.
4. Whether you are dealing with a health program, a disability program, or a life insurance program, be sure that health questions are clearly understood and correctly answered. A term that has come into wide usage lately is clean sheeting. It means that an agent knowingly fails to correctly list existing or past health conditions of the applicant. The agent is presenting a "clean" application so that the company will accept it and issue a policy. This is obviously illegal and will not be tolerated by any insurance company!
Sometimes an agent simply is not aware of existing health conditions. If the applicant does not fully understand a health question, it may be incorrectly answered through no direct fault of the agent. We say direct fault because it is ultimately the responsibility of the agent to present the questionnaire in a way that is understandable. Even if the agent thought the health portion of the application was correctly completed, it will not alter the insurance company's view of it. A policy may be rescinded (taken back) by the insurance company for incorrect or undisclosed information. This may occur, for example, on a question that asks if the applicant has high blood pressure. Since the person is taking a medication that keeps his or her blood pressure under control, they may answer the question "no" when, in fact, it should have been answered "yes." Since these types of misunderstandings can easily happen, an alert agent will want to closely monitor the questions and answers on applications.
5. Eligibility of applicants is always a concern when replacing an existing coverage. Do not overlook the eligibility of dependents also. An employee's spouse or disabled child may be especially vulnerable.
6. When one coverage is being replaced with another, continuity must be considered. The old plan should never be dropped until the new plan is firmly in place. The policy should actually be in hand and reviewed for accuracy before the old policy is dropped.
The actual way in which a plan is presented can be very important since so many of the consumers will not understand industry terminology. The weight falls on the agent to present the policy in such a way that understanding is possible. Again, this often comes down to good communication skills. We also suggest that you pay close attention to the body language of your clients. It is often possible to tell that your client is lost merely by the expression on their face. Many people feel awkward saying that they are lost. This might especially be true if they feel their agent is in a hurry to get on to another appointment.
There are also those agents who cannot seem to resist being overly technical. The agent may feel that such technical explanations are necessary or he or she may simply be trying to impress the client. These agents may be extremely knowledgeable, but they are unable to present their knowledge in a way that is understandable to the layperson. While this relates more to skills than it does to ethics, an ethical person will put a priority on client understanding. If the agent is, indeed, wanting to impress the client, then we must ask the question, does ethical conduct allow for such self-serving purposes?
POLICY REPLACEMENT:
Most agents are geared to replace other policies, if necessary, to bring in business. Even the most ethical of agents realize that this will often be part of their sales day. In some areas of insurance, replacement became such a problem that state and federal legislation was brought in to protect the consumer.
Most states require that comparisons (for the purpose of replacement) be precise and done in a manner that fairly compares the two policies. Often there are specific forms that must be utilized if replacement of an existing policy takes place.
Agents often complain that it is very difficult to compare policies if the types do not have much in common. It ends up comparing apples to oranges rather than apples to apples. Whatever the situation, an ethical agent WILL fairly compare the two products, not only because he or she is ethical, but also because it is simply smart to do so. We live in a lawsuit prone society and it is not surprising that many consumers are all too willing to sue.
Most consumers are aware that competing agents will be attempting to replace each other's business. Realizing this, consumers do tend to use judgment before replacing their policies. Where replacement practices may not be as obvious to the consumer is where it involves an agent replacing their own policy. Consumers seldom question a replacement when it is the same agent (versus a competitor) doing the replacement.
Why would an agent replace their own business? For several reasons, some of which may not be sound or ethical.
One of the major reasons that some types of policies are replaced by the writing agent is to gain another commission or a higher commission, depending upon the type of product. For example, in states where commissions are not controlled, it has been a standard practice for agents to replace their own Medicare supplemental business. In many areas, the first year commission was high, with the commissions from the second year on being considerably lower. By replacing their business every year or even just every two years, agents were able to keep their commissions high. This is usually a disservice to the client, especially if preexisting conditions played a part in the replacement. The standardization of all Medicare policies was designed to put these replacements in check or at least dramatically reduce them. Many states have put limitations on the commissions paid on Medicare supplemental policies. The controls do make sense as far as replacement business goes, although the reduced commissions also generally mean less claim service for the consumer. Now, instead of receiving a large first year commission and reduced subsequent commissions, the agent receives a level commission from the first year on in more and more states (as more and more states adopt this format).
Another reason, and a common one, that agents might replace their own business has to do with the mobility of the industry. It is not unusual for agents to work for a period of time for one agency and then, for one reason or another, move on to a different agency. If an agent is not meeting production standards, the first agency might terminate the agent or terminate benefits, such as providing leads. When the agent moves on to another agency, he or she often feels that his or her clients belong to them. Legally, this may not be true, depending upon the agent's contract provisions with the agency. Whether or not it is proper legally, the agent often tends to attempt to bring his clients with him to the new agency. Since the agency is benefiting from the additional business, few agencies worry about the ethics of such replacement business. In fact, it is not unusual for agencies to actually encourage the practice.
The industry has seen some ups and downs in the financial stability of some companies. If an agent feels that he has clients in a company that may be suffering some financial problems, the agent may change their client's policy in an effort to protect the consumer. Certainly, it is best to try to use strong companies so that this will not be necessary, but even the most careful agents may, at some point, find their clients with an unsound company.
Replacement of business is sometimes proposed by agencies who have legal rights to the business but, due to contracts with vested agents, are paying part of the commissionable earnings to those terminated agents. The agencies may be able to move the business within their agencies and, therefore, discontinue the commissions paid to those agents who have been terminated. As we have stated, not only individual agents, but agencies as well have a duty to behave in an ethical manner. That does not necessarily mean that they do. Most insurance laws protect the consumers, not the agents.
WHEN THE AGENT ALLOWS MISCONCEPTIONS:
It would probably be surprising how many policies are sold on the basis of assumed facts or misconceptions. We are not saying that the agent outwardly misled consumers, but rather, they allowed the consumer to make assumptions that were incorrect.
An agent relayed this story:
I was sitting in the home of an older client who was interested in investing in an annuity product. I was showing him several plans available. One was paying a higher interest rate than the other two, and the consumer liked the higher rate. I made a point of telling him the ratings of the companies, carefully pointing out that the higher paying company only had a "B" rating.
After a moment's pause, he replied: "Hell, I would have been happy with B's when I was in school."
It is obvious that the consumer did not understand the importance of financial ratings. It would have been easy to simply fill out the application and never address the obvious misconception on the part of the client.
Any agent who has spent time in the field can probably tell their own stories of people who made incorrect assumptions placing a sale directly into the lap of the agent. Some misconceptions may simply be amusing, while others may cause serious legal problems. Sometimes it can be so difficult to clear up a false assumption that the agent simply lets it slide by. This is often not wise. It is always better for the client to correctly understand what they are buying. The next agent in their home may clear up the matter, making the first agent appear either inept or unethical. As one agent relayed, he hates coming into a home where he must spend most of his time correcting the false information left by the agent before him. While this does tend to cement the sale, it is also a waste of lots of time and energy (and you may be the one losing the client due to misinformation given at the time of the sale).
WHEN THE PREMIUM SEEMS TOO HIGH:
Another area of ethical behavior that should never happen still needs to be addressed. It needs to be addressed because it does happen. There was the client who thought he was paying the premium for a full year only to discover that it was a 6-month premium. There was the woman who was told her bank would be drafted one amount only to learn that the draft was for a much higher figure.
Sometimes when an agent fears he or she is losing a sale due to the amount of the premium, figures may be incorrectly stated for the benefit of the sale. We would like to think that such things are misunderstandings, and certainly that may happen. There is never any excuse for purposely misstating premium amounts.
Premium amounts may be misstated simply because the agent is inexperienced in using premium tables. So many types of policies have formulas for figuring rates. For example, many long-term nursing home policies have premium rates that vary according to multiple factors, each of which must be considered. Major medical plans are based upon ages, the plan selected, and sometimes health conditions.
OBTAINING PROPER SIGNATURES FROM THE CLIENT:
Previously, we looked at the practice of forging client signatures, which is not only unethical, but illegal as well. Despite this fact, it is much more common than many people might realize.
There are many reasons why signatures may not be obtained from the client. Often, it is merely an oversight by the agent. Such oversights clearly state disorganization on the part of the agent. New agents might benefit from highlighting signature lines on all their forms before entering the field. Doing so could prevent the omission of needed signatures.
In some cases, signatures might be purposely overlooked as a way of avoiding the explanation of certain forms. Again this is not only unethical, but generally illegal as well since all forms need to be disclosed to the client. In addition, the well-trained, well-organized agent simply does not need to omit signatures, whether by oversight or by intention.
KEEPING IN TOUCH AFTER THE SALE:
The hardest policies to replace are those belonging to the agent that keeps in touch with his or her clients. Aside from the business retention standpoint, what are an agent's ethical duties regarding service after the sale?
This often depends partly upon the arrangements made between the agent and his or her agency or insurance company. Some companies have a separate servicing staff so that the selling agent is not expected to do any further service work. However, most agents are probably expected to do any necessary service work personally.
Ming Lin is fairly new to the insurance industry. She is trying to build up her clientele, so she realizes that service must be given.
Client A: "I'm so glad I found you in your office. I have brought by my doctor bills and my canceled checks. I just cannot get these figures to balance. I thought I would leave these here and when you balance everything you can drop it by my house."
Client B: "Good morning. My doctor's office just called me and they said that they have not received payment from my visit two months ago. The doctor is Dr. Wilson and I was there on the 12th."
Client C: "My premium just went up $10 per month. What can you do about it? You know I'm on a very limited budget. That's why I wanted a company that wouldn't increase its price."
Client D, a Medicare beneficiary: "My doctor will not accept assignment (the amount allowed by Medicare). As you know, I took the lower plan that doesn't pay extra, so what can I do now?"
Even though Ming Lin does know the value of giving service, how much responsibility does she have to her clients? Client A expects her to basically balance her checkbook. Even though some of the client's checks were written to her doctors, does Ming Lin have any responsibility here? Is it possible that Ming Lin might actually take on certain liabilities by balancing her client's checkbook?
There is no doubt that many agents end up doing much more for their clients than they are morally responsible for. In this case, it is doubtful that Ming has any responsibility at all for balancing the checkbook of Client A. Even though the client has written checks to the doctors, Ming's responsibility is only to see that her medical bills have been paid according to the contract (policy) taken. If her client has received payment of claims in a proper manner, Ming's obligations have been met.
On the other hand, Client B is calling Ming Lin regarding a matter that is Ming Lin's responsibility--payment of claims. If the policy calls for the payment of Dr. Wilson, Ming will need to handle the matter with the insurance company. Perhaps payment has merely been delayed, perhaps the check was sent to either the doctor or to Client B and it simply was not recorded. Whatever the situation, it is Ming's responsibility to make the necessary phone calls to find out. The client is not asking for more than he or she deserves. The client is asking for the general type of policy servicing that is expected.
Client C's distress about a premium increase can be a difficult situation. There is often only so much maneuvering that is possible to keep premium levels down. Ming Lin may simply have to restate the terms of the policy in a positive manner and hope that Client C is able to deal with the increase. Although Ming Lin could investigate the possibility of changing the insurance company that often is not the best solution, especially if medical conditions play a role. What ethical responsibilities does an agent have regarding premium increases? Certainly, she should notify her clients if she is aware of a pending increase. This is especially true if the client is just in the process of taking out the coverage. A pending increase might greatly impact a new client and cause problems down the road. Therefore, if an agent knows of a coming increase, he or she should certainly tell the client just signing on that it is forthcoming.
Client D represents many of our older Americans on fixed incomes. They often tend to take the lower premium, which also means lower benefits. In this case, the client has taken Form C of the standardized Medicare plans. That means that she has Part A, which is hospitalization, covered but she only has the 20 percent co-payment covered under her Part B benefits (medical). Form C does also pay the Part B deductible. As long as her doctor will accept the amount of the bill allowed by Medicare, she will not have a balance to pay. If her doctor does not accept the lowered amount, she is then responsible for the balance above the "approved charges".
Many of Ming Lin's ethical responsibility in this situation came at the time of the sale. It was her responsibility to make sure that Client D understood what she was buying. This means also making sure that the client is aware of the limitations of the policy. Although the Medicare policies have been standardized to make understanding them easier, it does not mean that the agent can neglect going over the differences of the forms with their clients. If Client D purchased her policy with full understanding, it is possible that Ming is limited in what she can do to help her client at this point. She can make suggestions (call your doctor and ask him to reduce his fee), but past that, there is little that the agent can do. As we stated, her responsibility here, as in all sales, is to make sure that the client understood the option that was selected.
As we stated, Ming Lin desired to service her clients. Not all agents or agencies feel this desire. Many simply do not wish to take on the burden of service after the sale. Certainly, servicing one's clients is prudent, but is it required from an ethical standpoint? Some states mandate that each client must have an assigned agent. This means that the insurance company must assign an agent to every account if the writing agent is no longer with them. Those states then expect those assigned agents to handle any claim requests that might occur. Many of the states report that the lack of claim service is the number one complaint from consumers.
Earlier in this text we pointed out that it is likely possible to mandate behavior, but not necessarily ethics. Is it possible to force an agent to properly service their clients? Probably not. If the agent is not smart enough to understand that service promotes sales and helps business retention, it is unlikely that he or she will be smart enough to understand service requirements imposed by his or her state. In fact, an agent who is unwilling to service his or her accounts, probably will not even be educated enough to know how to service the accounts. When this happens, one can only hope that the insurance company or agency will step in and handle the matter. If no one handles it, eventually the client will simply change agents and insurance companies.
SELLING THE "FAST BUCK" ITEMS:
Some might consider this an unfair statement. However, we feel the evidence is compelling that many people, not just insurance agents, will quickly step forward if there appears to be a "fast buck" available by selling a particular item. There may be differing opinions on what constitutes a "fast buck" item. In fact, it is often true that the fast buck lies not in the item sold, but in the manner in which it is sold.
In some states, selling Revocable Living Trusts has become big business. While there is no doubt that a living trust can be very beneficial in the proper circumstances, many of these trusts have been sold for inflated prices to people who did not benefit in any way. Sometimes the consumers do not benefit because the trust is not properly executed; sometimes the consumer simply did not need the trust, so their purchase was unnecessary.
Perhaps the most perplexing aspect of the sale of these revocable trusts has to do with the way in which they are sold. An item is definitely a "fast buck" item when the seller says anything necessary to get the sale. Consumers have been told so many incorrect things about trusts that it became clear to many state regulators that the aim of many trust companies was simply to bring in cash. If this was not the case, there would be more control exercised over the sales force. Unfortunately for those who are honest in their promotion of revocable living trusts, many states will be addressing the abuses currently happening. How the situation will be addressed will vary from state to state, but it is likely that some type of legislation will limit who may represent them.
Several states filed lawsuits against companies that were selling living trusts through insurance agents. State Attorney Generals accused these companies of misrepresentation in the sales of living trusts. Most states advise consumers to consult with their attorneys or attorneys who specialize in estate planning, rather than individuals with little or no experience in the estate-planning field. The lawsuits alleged that the named firms were misrepresenting the cost and length of time for probate and also the taxes that would be owed by some estates. In effect, the firms and their associates were attempting to scare consumers into buying their products. Some states have simplified the probate system and does not impose state death taxes. In addition, in some states, attorneys are not allowed to charge fees based upon a percentage of the estate, as was claimed by some of the living trust companies. Laws vary from state to state, of course, but insurance agents must always be wary of selling items that are not insurance products. E&O insurance will not cover claims for living trusts because they are not insurance products.
A "fast buck" item does not intend to imply that particular items are in this category. Actually, it has to do with how the items are sold. Any product that pays a fairly high commission or finder's fee can become a "fast buck" item. "Fast buck" has to do with the attitude of the salesperson. Is the salesperson thinking almost entirely about making some fast money or are they considering where the item fits and whom it best serves?
As we saw with the living trust sales a valuable estate planning tool was misused by salespeople for the sake of making a fast buck. There was often little concern for the consumer and the consumer's needs. Therefore, an item that is a useful vehicle became a "fast buck" item.
COMMINGLING FUNDS:
There is no reason for an agent to express ignorance regarding the hazards of commingling funds. This is something that any agent should be aware of. While state laws do vary, the basic concept remains the same: insurance funds and personal funds should never be mingled. By this, we mean that two separate accounts must be kept. It might even be wise to go a step further and use two separate banks, one for your personal account and one for your insurance account. Most professionals have an operating account and a trust account. The trust account is used for funds that do not belong to the insurance agent or the insurance agency. The operating account is used for commissions that are due and payable to either the agent or the agency. The operating account is used to pay the routine bills that come with running a business. The trust account holds funds "in trust" for either the insurance company or the policyholder.
Any agent that is not clear on this should contact their state's insurance department for that state's specific requirements.
GETTING EDUCATION IN A TIMELY MANNER:
It is impossible to truly be a professional unless education is made a priority. Every educator's dream is to no longer hear "How easy are your courses?" It certainly does separate the serious career agent from the average agent.
Most states do now require that education be obtained. How much education is required varies greatly from state to state. It is the responsibility of each agent to know and understand their state's requirements. Each agency is responsible for promoting education as an important feature necessary for the welfare of both the agent and the consumer. An agency should never resent the time an agent takes out of the selling field to acquire education. In the end, the agency also benefits.
The words, "in a timely manner," seem to be a key phrase. It is very difficult to get all that is available out of a course, whether in a live seminar or in a home-study program, if the agent must rush through it in order to meet a deadline. Not only does the agent miss a great deal, the true value of the course is also lost. Education is the mark of a true professional.
What about getting education that is not required by the state? Some agents complete education, which gives them specific designations, such as Chartered Life Underwriter (CLU) or Registered Health Underwriter (RHU). These designations are the result of additional education specific to certain insurance lines. While such designations do not necessarily mean the agent is wiser or a more skilled salesperson, they do show that the agent is serious about his or her profession. Regardless of the line of work a person is in, additional education is always a sign of a true professional. This is true of a teacher, a doctor, a lawyer, and certainly an insurance agent.
It is true that there are agencies that do not seem to appreciate agents who desire additional education. In fact, there may be situations where an agent might wish to consider changing who they work for if education is not only unappreciated, but even degraded. It is hoped that this is not a normal situation. It is hoped that most agencies do promote additional education.
There is another side to education besides formal, credited courses.
Angie is a fairly new agent having only been in the sales field for about six months. She works for a large agency with a very large field staff. While the agency does hold product meetings, it is not unusual for new items to be added before they have been formally introduced in the product meetings. As a result, Angie is often given brochures and applications for products that she is not familiar with.
Angie's field manager, Reggie: "Angie, here are some brochures for a new cancer policy we just got in. It's fairly simple, but if you have any questions give me a call. Just read the brochure. That should do it."
Angie reads the brochure and does understand the basics of what it is selling. What Angie is not sure about is where such a policy fits in and who might benefit from buying it. She knows that major medical policies are supposed to cover such things as cancer. Since Angie sells mostly life insurance, however, her understanding of medical policies is not great. Angie makes the determination that many plans must not cover cancer. Otherwise, why would there be such specific policies on the market? Angie sells two cancer policies in the first week and is highly praised by Reggie. Being so new, Angie does not often get praise, so now she begins to make a special point of suggesting her clients buy the cancer policy.
We are not trying to suggest that cancer policies are either good or bad. The question here does not necessarily concern the value of the policy itself, but rather how Angie handled a situation concerning education. Since Angie was not sure where this new product best fit in, what should she have done? It was obvious that Reggie felt the brochure should answer her questions, but he did offer his assistance if she wanted it.
What were Angie's options?
1. She could have called Reggie or cornered him at the office to ask questions.
2. She could have asked other agents more experienced than she.
3. Angie could have waited for the product meeting and asked questions.
4. Angie could have called the insurance company marketing the product. Most companies do have a product support department.
Did Angie need to do any of these things? Since she was able to sell the product even though she was not sure where it fit in, did any questions even need to be asked? Remember that Angie did not have a great understanding of medical policies and made the assumption that some plans must not cover cancer. Is it possible that she misrepresented existing medical policies due to her misunderstanding? We know that Angie would not have purposely misrepresented other policies, but does this lessen her liability? If Angie did misrepresent other plans, what will this do to her credibility if her clients discover her error? If Angie did not bother to explore this product completely, is it possible that this is a work pattern that repeats itself with other products also?
Does the agency bear any responsibility here? Although they do have product meetings occasionally, is it their responsibility to have such meetings before releasing a new product to their agents? Since the agents are basically self-employed, does this mean that education is solely the agent's responsibility and that anything the agency does is more of a courtesy than a responsibility?
We are not attempting to answer these questions. Often the answers vary so much depending upon such things as contracts, etc. that each agent must determine their own answers. However, it is certainly true that each agent must take on a degree of responsibility when it comes to education in general. To rely upon another person or agency to fulfill educational needs is foolish, both personally and financially.
End of Chapter 7
United Insurance Educators, Inc.