February, 2000

Good News From IMSA!

By Kenneth J. Kalis, CLU  

Kenneth J. Kalis, CLU, is a Qualified IMSA independent assessor and President of the Kenneth J. Kalis Company of Gainesville, -Florida. After a 21-year career with The Prudential, Ken began his IMSA involvement in 1994, pilot testing the IMSA questionnaire. Nationally recognized as a writer and speaker on IMSA, Ken was on IMSA’s teams that created the IMSA Assessment Handbook and the IMSA Assessors’ Training. The Kalis IMSA team has worked with over 30 companies on their self-assessments and independent assessments and certified 25 companies for IMSA membership. Ken was again asked by IMSA to be part of the teams updating the IMSA Assessment Handbook and developing stronger standards for the 2001 assess­ments. He can be reached at 352-375-4111, e-mailed at kenkalis@gmail.com or through this web site.  

There have been literally hundreds of changes to the IMSA process that are reflected in the draft of the revised Assessment Handbook. And that process is not yet complete. Copies of the Handbook were mailed out to all IMSA companies in December for review and comment by January 14. IMSA is now processing that feedback. At a meeting on February 1 we finalized the key changes so that the Handbook can be presented to IMSA Board in late March, While changes are of an organizational and relatively minor nature, there are three substantial changes:

•  Continuous compliance. Those of you who are IMSA members know that the INDEPENDENT ASSESSOR REPORT is “based on policies and procedures in place as of the Report Date.”

Current IMSA member companies seeking membership renewal can be expected to demonstrate that policies and jrcocedures have been adopted and operational during the previous membership period. The independent assessor should seek reasonable assurance that the

company has exercised efforts consistent with IMSA’s Principles and Code of Ethical Market in the operation of the policy or procedure during the prior membership period to determine that systemic weaknesses do not exist. The independent assessor will be asked to exercise professional judgment to assess whether the operation of policies and procedures during the previous membership period, in conjunction with evidence of newly adopted policies and procedures, will support an application for membership renewal. Page 27 Revised IMSA Assessment Handbook, Draft 12/99

 What this means from an Independent Assessor’s stand­point is that we will have to make sure your company can show that you have been in compliance with the 24 IMSA questions throughout the 3-year period of your membership, not just on the date of the independent assessment (which was the case last time).

 The second challenge is

•  Ongoing monitoring. As you know, there are three aspects that must be satisfied in order to arrive at a “yes” answer to each of the 24 questions (formerly 27).

One of the accomplishments of the Assessment Handbook Committee has been to streamline the process and eliminate some redundancies by combining some questions and reorganizing the indicators. 

My experience has been that most companies do very well in having an APPROACH, not quite as well in demonstrating DEPLOYMENT, and not quite as well again in the MONITORING aspect.

 IMSA has addressed this issue by beefing up Principle 6 —System of supervision and review.

Companies must have a monitoring system as a minimum standard that reasonably assures the compliance complies with Principle 6, Code D. The monitoring system should include elements that will permit the company to review its home office and field sales and marketing practices to determine whether they are consistent with the company’s policies and procedures, the Principles and Code of Ethical Market Conduct, and applicable laws and regulations. Companies and independent assessors may employ a variety of testing methods to provide reasonable assurance that compliance monitoring activities provide meaningful information regarding the company’s sales practices that is used to take corrective action, if warranted, at the home office and field distribution levels. Page 100 Revised IMSA Assessment Handbook, Draft 12/99

 What does this mean in plain English? You have to make sure you have an ongoing monitoring/testing system in place. This adds a dimension of formality to the process, and encourages the company to use standardized business metrics for monitoring rather than anecdotal or ad hoc information, such as complaints.

•  Managing contractual relationships. IMSA is an organization that embraces a wide diversity of company structures and distribution systems. Indeed, IMSA has drafted its standards with sensitivity in this area to make sure the unique needs of each distribution system are recognized. These standards include the recognition that some companies may delegate supervision, training or other responsibilities to third parties. IMSA’s third challenge is in this area:

Similar to the supervision requirements under Principle 6, Code B, responsibility for monitoring sales and marketing activities may be assigned to a variety of individuals within the company or may be delegated to independent intermediaries. Ultimate responsibility to verify whether monitoring has taken place must be borne by the member company. The company should review its monitoring system to reasonably assure it is operating properly and providing relevant, accurate data. Accordingly, in those instances in which the obligations are delegated to independent intermediaries the company must continue to monitor the performance of those obligations.

 In short, companies are going to have to upgrade from the earlier standard and demonstrate to the independent assessor that someone in the company is monitoring the compliance of the independent intermediary with the terms of the contract.

 2 Description of the Standards Raised

 First of all, IMSA has made some significant steps for­ward in becoming a more credible organization. My hope is that some day the IMSA logo will have such an impact that seeing it will cause regulators to say, “We don’t have to do a market conduct exam on that company this year. They’ve just received their IMSA renewal.”

 Of course, that isn’t going to happen over night. But IMSA is working closely with the regulatory community on a day-to-day basis to enhance its reputation and credentials, and they have made some key steps forward with the revised Assessment Handbook.

  •  This is something that regulators are looking for because it is reflective of a more rigorous process. We will get into more specific detail on this later in this article.

•  Monitoring system. The increased emphasis on systematic, on-going monitoring can be seen in a more strongly worded question 6.4:

“Does the company have policies and procedures that require a monitoring system to provide reasonable assurance that the company’s home office and field distribution sales and marketing practices for covered products comply with the Principles and Code of Ethical Market Conduct and applicable laws and regulations?”

vs. the 1997 version

“Does the company have policies and procedures that require internal auditing and monitoring of information related to the sales practices of its distributors and employees involved in the sales process?”

Long-Term Care products. Beginning with the 2001 assessments, long-term care products will also be covered. The same standards, questions and indicators that apply to individual life and annuity products will apply to long-term care products. IMSA is planning to develop and deliver specific training on this later this year (dates are set for April 12 and 13 in Washington, April 25 and 26 in Chicago, and May 2 and 3 in Los Angeles). No company can be recognized by IMSA for its long-term care product before 2001 or before it gets its life and annuity products recognized.

 3New Testing Requirements

 There have been some anecdotal incidents reported to IMSA that gave the impression that Independent Assessor’s weren’t doing enough “testing.” I believe that there was a misunderstanding of the word “testing” in these communications.

 What do we mean by testing? The Handbook lists five key types:

 •  Testing by Companies. The INDEPENDENT ASSESSOR Standards Committee was charged with looking into the testing issue and making recommendations on how to proceed. We didn’t think that hit or miss testing by the Independent Assessor added much value to the process while it would substantially increase the cost of the independent assessment. In view of this, we recommended that the companies be encouraged to conduct rigorous testing for each question so that the Independent Assessor can

 •  Testing by Independent Assessors. IMSA has asked the INDEPENDENT ASSESSORS to take a more rigorous approach to testing and to indicate, for each of the 24 questions, which of the above testing methods has been used to validate the answers. One outcome of this could be an expanded Independent Assessor’s Report in which we will have to indicate which testing method was used for each of the 24 questions. . This could result in added complexity and cost to the independent assessments, but my-hope is that companies will rise to the occasion and install all the testing that is needed.

4 What Companies Can Do to be Proactive

GET STARTED NOW!! Some companies have already gotten started. Some have done this by participating in the IMSA committees, something I urge you strongly to do. This is important not only so that you keep informed as to new developments, but also so that you let IMSA know YOUR concerns and circumstances for your company and your distribution systems.

•  Establish compliance baselines. In order to show improvement, you have to have a starting point. I recommend you use your previous IMSA self-assessment report since it contains all the policies and procedures that support IMSA in your company. I also recommend you put this material into a format that can be easily updating while maintaining your historical record of progress. Doing this electronically saves time in the long run, but will take some extra time to get you up and running. Whichever approach you take, remember, you are going to have to show compliance throughout the membership period, so make sure that you’ve got all three years covered.

 •  Conduct an Interim Assessment. If you haven’t been on top of this, you may want to have your Independent Assessor conduct an Interim Assessment to help you find out where you are, what’s been done since your last assessment, and what action plans should be in place to help you qualify for renewal membership. What should be the key element of an interim assessment? Here are a few:

1.  To review the self-assessment reports for the distribution channels to validate that they are still in compliance with the IMSA standards.

2.  To affirm ownership and responsibility for each of the policies and procedures supporting the answers to the IMSA questions and their relevant indicators.

3.  To verify the ongoing monitoring aspects for each of the IMSA questions and determine if they are operating satisfactorily.

4.  To review the documentation supporting the IMSA self-assessment reports to see if it needs to be updated or supplemented. -

5. To evaluate and verify any progress made towards implementing the recommendations made by the IMSA independent assessor.

6.  To translate the paper self-assessment reports into electronic format and scan into this the relevant supporting documentation.

7.  To prepare an action report for the IMSA Assessment Team summarizing the findings and making recommendations for bringing all policies and procedures into compliance and for implementing any recommendations made by the IMSA independent assessor that have not been put into place yet.

8.  To make recommendations on how to prepare each distribution channel for renewing its IMSA membership in the coming year.

 •  Ongoing compliance reviews. Some companies have been keeping their IMSA self-assessment reports up, to quarterly reviews. This, in my opinion, is the best way to assure yourself that you are right on top of things and are fully prepared for renewal membership. The sooner you get started on this, the better your monitoring results will be. 

Some of the items to cover?

1.    Put together the IMSA 2001 Team, a self-directed work team that will manage the IMSA process on an on-going basis.

2.    Hold the first meeting of the IMSA Management Team to set plans for the year, develop a schedule.

3.      Communicate your continuing commitment to IMSA and ethical market conduct through a company-wide statement from your president.

4.    Set priorities, and assign responsibilities for updating documentation to the appropriate process owners.

5.    Review the recommendations for improvement made by your independent assessor or your own management people and develop action plans for policies and procedures you have in place to answer the 24 IMSA questions.

7.    Identify new people, including those new to their cufrent positions, who need to be trained in IMSA’s Principles and Code for questions 2.3 and 6.3 and schedule training.

8.    Identify those new people to whom communications on policies on fact~finding responsibilities (1.1), company support for the Principles and Code (1.4) and fair competition (3.1) need to be communicated and prepare appropriate acknowledgement mechanism.

9.    Ask your independent assessor for an IMSA update and incorporate relevant developments into schedule for reassessment.

10.  Conduct the necessary training for new people on questions 2.3 and 6.3.

11.  Execute the communications necessary to comply with questions 1.1, 1.4 and 3.1.

12.  Update self-assessment report as necessary, including updated documentation. Also update for any changes in process owners.

13.  Have independent assessor review progress to date and discuss plans for the next year.

14.  Consider any new products introduced since the company gained IMSA membership and assign team members to each to assure compliance.

15.  Designate someone to oversee the integration of your company’s Long Term Care products into the IMSA process.

16.  Get copies of the IMSA 2001 assessment handbook.

17.  Discuss plans for the upcoming self-assessment. Identify participants and necessary resources and work on a communications document for distribution to the whole organization.

18.  Have your independent assessor discuss the upcoming self-assessment and identify any potential gaps as well as training needs.

19.  Schedule and conduct necessary training for members of the self-assessment team and other people who will be involved in the process.

20.  Get cost estimates and detailed plans about the independent assessment from the independent assessor.

21.  Kick-off the self-assessment process. Begin by working with the independent assessor to select the appropriate indicators.

22.  Begin work to close potential gaps. Pay special attention to the continuous monitoring throughout and the addition of long-term care products.

23.  Assign specific individuals to close the gaps. Ask the independent assessor for input.

24.  Draft responses ~to the questions and have the independent assessor review them.

25.  Gather supporting documentation and other materials.

26.  Identify any training and communications needs and implement them.

27.  Schedule the independent assessment and set up the space for it.

28.  Prepare process owners for interviews by the independent assessor.

29.  Hold a final team meeting to make sure all is in readiness.

30.  Begin the independent assessment and prepare for process renewal.

31.  Process papers for renewal of IMSA membership.

In 1997, achieving IMSA membership was an EVENT for companies, characterized by lots of start-up efforts and a monumental effort to gather docu­mentation and put everything together. Unfortunately, qualifying for renewal membership in 2001 is going to be another major EVENT for companies who haven’t been keeping their IMSA assessments up to date. By implementing these changes, and making IMSA compliance monitoring an ongoing part of your business, you can take much of the angst and suffering out of IMSA assessments and, more importantly, position your company for continuous improvement. I’m hoping that for many companies IMSA renewal membership will be a NON-EVENT in 2004, because everyone will have been doing such a good job with the ongoing monitoring.

 5 How to Conduct onsite Training Sessions

In order to get started on this track, you are going to have to train the people you want involved. IMSA will be offering some training sessions in April and May and you should certainly send someone there, but many of you will want to get started before then. I suggest three key steps for proceeding.

•  Identify key People for training. Of course you will want to involve your compliance people. Depend­ing upon the individual’s expertise, you may even want to have your compliance officer lead the train­ing. Then you will need to train the people in the areas covered by the IMSA questions, namely, the marketing or agencies areas, law, advertising, actuar­ial, complaint resolution and internal auditing. Make sure you have all the people who will be living with this process on a day-to-day basis, but limit your class size to 15.

•  Use IMSA Revised Assessment Handbook. The Assessment Handbook contains all you will need to know about conducting any IMSA assessment. Make sure you go through the "Getting to Yes" section so that your people understand the process.

Then spend some extra time on Principle 6 where the most significant changes and improvements to the process are covered. Get into the case studies and show the people what you need to get a “yes” answer. But don’t be intimidated by them, Tailor your answers to meet your Independent Assessor’s standards. Be sure to involve your Independent Assessor, as ultimately the Independent Assessor will be the one setting the standards for how much documentation and testing you will need to satisfy the IMSA standards.

•  Make training participative and interactive. Adults learn by participation. Don’t just give them the Hand­book and lecture. Prepare some “prework,” have inter­active exchanges and quizzes during the day. Be sure to include break out sessions or small group workshops. Give the attendees an opportunity to begin formu­lating answers for some of the question in their area.

6   Building an Ongoing  Monitoring/Review System

 How should you manage the ongoing monitoring required by the higher IMSA standards? If an IMSA Steering Committee exists, it should simply incorporate this function. If not, I suggest you create a self’ directed work team led by someone from the area in charge of conducting the IMSA assessments and including all the key functional and marketing/distribution areas.

•  Work closely with Principle 6 in the Elements of Compliance. Review the handbook and take a closer look at the indicators to get ideas as to what ap­proaches you can take.

 In earlier discussions, the IMSA committees talked about setting up a special task force, or IMSA steer~ix~g committee to~ ~ monitoring. If this works for you, I recommend it. The key element, in my opinion, is building in accountability for monitoring all of the IMSA processes somewhere in your company.

•  Identify best “fit” within your organization. Obviously, you know your company better that your Independent Assessor so you have to be the one to decide where to place this monitoring function within your organiza­tion. Do you normally use a centralized approach or does each area have autonomy? Who has taken the lead in this area in the past? In most companies it  has been either the compliance or law department. You will want to go with the area that has the expertise to manage this process as well as the commitment to see it succeed.

•  Utilize existing framework and metrics. What do you monitor? The answer will vary. I think a common “default” monitoring indicator was the complaint process. This is a good monitoring tool because it reflects real-life and is customer focused. However, it addresses situations that have already become problems. Also, there are usually too few complaints in specific cate­gories, for example on “disparaging language”, for them to be meaningful in any broad context. Don’t get into, “We’re monitoring via the complaint process, and we have no complaints so we MUST be doing a good job!”

 What we need to look at are real numbers that drive the business. Numbers of hires and appointments, termination rates, pieces of advertising reviewed, not-takens, complaints, abandon rates, lapse rates, persistency rates, Flesch scores, customer satisfaction survey results, you know them better than I, because they will be unique for each organization. But try to use metrics that are already being used for other purposes rather than create something new.

 7 Choosing a Qualified IMSA Assessor from smaller pool

IMSA’s revised Assessment Handbook gives some excel­lent guidelines on this, which I won’t repeat here. Go to IMSA’s web site at “IMSAethics.org” for a list of qualified Independent Assessors and the updated Handbook with the guidelines. My advice is a little more compact.

•  Identify experience and resources that meet your needs. For those companies going for renewal membership, I suggest you begin with the assessor you had last time around. It hurts me to say that because I’d like to get as many new customers as possible, but being an ethical market conduct guy, I have to say that your previous assessor has a leg up on all the others because he or she knows your IMSA self-assessment report and has a great deal of learning accumulated from the earlier assessment. Of course if you sell long term care products you will want to make sure your Independent Assessor has the necessary product knowledge to accommodate your needs. Chances are that most will be familiar with the unique concerns impacting long-term care after attending the IMSA training planned for later this year.

 Decide what you as a company want out of the IMSA assessment. Do you want a full audit approach where you answer all 370 indicators and have the Independent Assessor validate each one? Or do you want a more targeted approach using only your strongest indicators with an eye towards improving those and eliminating weaker practices?

 Find out what innovations your Independent Assessor brings to the table this time, particularly in regard to helping you with continuous monitoring.

For those of you who have to find a new assessor, I believe that experience with your particular distribution system is the most important factor. Direct marketing of life insurance and annuities through third parties is an entirely different world than selling the same products through independent producers or through career agents in a fraternal organization. Get someone with experience.

•  Get to know the Independent Assessor. Independent assessors take their IMSA work very seriously. A good many have been involved in the ongoing committee work of “raising the bar” for IMSA 2001. They are experts in the new standards and they want to help you. Furthermore, they are the ones whose professional judgment will determine just what a “yes” answer is for your company. Bring the Independent Assessor into the process as soon as possible. I like to get involved in the training of the IMSA team. Bring your Independent Assessor into your strategic planning sessions so that you can learn from one another and so that there will be no “surprises” at evaluation day. It can also save you lots of work! The first two companies I worked with tried to answer all the indicators, even though, for them, this was impossible!

•  Get your assessment scheduled early. There were between 150 and 200 Independent Assessors available to serve the first 200 companies who became IMSA members. Expectations are that there will be about 53 around to serve those same companies in 2001. This is itself isn’t really a problem since 44 of these are the ones who did all of the 240 assessments anyway~ What complicates this is that about 175 of those companies will have to have their reassessments completed between January 28 and June 30, 2001. Companies who are aware of this are already booking Independent Assessors, and their calendars are filling up. Don’t wait until the last minute or you may put yourself in a bind.

 8 How to Effectively Use Your Independent Assessor

Treat your Independent Assessor as a part of your team.

•  Involve right at the beginning. Key decisions are made at the onset of the self-assessment process, like how many indicators to use and which ones. Your Independent Assessor has experience with this and can guide you.
•  Use to identify and close “caps.” Sometimes you will find that a process needs some work before it meets the IMSA standard. Your Independent Assessor has prob­ably worked with other companies who use similar processes and can certainly save you lots of time and effort in making the best decision on closing gaps.
•  Agree upon standards, documentation, testing and report format. The Independent Assessor, after all is said and done, is the one whose judgment determines whether you pass or fail. Find out what it takes to get to a “yes” answer. How much documentation? How many Interviews? How much testing? Which kind?

 9 Using a Coaching Model

There are some people who think that there’s something inherently “not right” about using the Independent Assessor as a consultant to help you get to a “yes” answer. While this is certainly true in some auditing situations, it is not necessarily so in the IMSA assessment process. (See # 11 in IMSA’s 14 selection points.)

•  IMSA approach is called “Getting to Yes.” Virtually all the Independent Assessors I know see their job as helping people get to “yes,” not simply as judges who turn thumbs up or down on the company’s efforts. Indeed, the most rewarding part of my job as an Independent Assessor has been as the guide through the maze of indicators and documentation to helping the company create a plan that will get them to IMSA membership.

•  Use Independent Assessor as problem-solver. The Independent Assessor knows what a “yes” answer will look like and, no doubt, has seen several during the assessments he or she has completed. Why not bring that knowledge to bear? This can save your company hundreds of hours.

•  Develop action plan for improvement. Even if you don’t ask your Independent Assessor to help you close gaps, ask for input on how you can improve. One of IMSA’s goals is continuous improvement, and your Independent Assessor can share valuable experience gained in work with other companies.

 10  Understanding the Assessor's Standards and Testing Methods

The first thing you have to do is ask. I heard one answer I liked that went like this. “You have a good answer when it will satisfy Ralph Nader, your CEO, and your mother.” Obviously, an answer must meet IMSA’s Approach, Deployment and Monitoring standards, but different Independent Assessors will interpret meeting them in different ways.

 Ask also what kind of testing methods will be used. How will samples be selected? What will acceptable error rates be? Who will you be interviewing? How will you treat the field?

•  Required by IMSA. Remember, these testing requirements are a part of “raising the bar” effort orchestrated by IMSA. Be Prepared! Don’t be surprised by the new standards, learn them ASAP and, more importantly, learn to use them to benefit your policy owners and your company.

•  Determined by choice of indicators. For example, if you select any of the 1.a.2 indicators, you will probably be triggering an interview of people responsible for the approach as well as a documentation review of their job descriptions and organizational charts. If you select any of the 1.b,1 indicators you will be triggering interviews or surveys of your distributors unless you have already conducted these and documented them.

How to Service Customers Effectively in the 21st Century

Marshall Loeb, of CBS Marketwatch.com and Quicken.com, spoke elo­quently on serving customers at a dinner on Oc­tober 28, 1999 at the LOMA/LIMRA Market Conduct Exchange at the Dolphin Hotel in Orlando. Outlining six steps in the process of building a customer-focused organization Loeb engagingly and lucidly made the following points:  

1 . Keep the customers you have.

2.  Find out who your customers really are. (He pointed out that in the demographic category of “age 55 and over” there are five cohorts with widely different interests and spending habits.)

3.  Figure out what your customers really want. (Survey them in every way.)

4,  Go out and find customers — meet them on their own turf.

5. Train workers to deal more effectively with their customers.

6.  Use every means to communicate with your customers.

 These comments were warmly received, and we trust that they will be as enthusiastically deployed, Recent research shows that retaining a customer is much more cost effec­tive that winning a new one. Yet, even up until recent times, many life companies’ revenue models and recogni­tion systems counted only new business premiums, while the renewal premiums, often ten or twelve times as much, were simply ignored. Those long-term customers generate more than renewals, however. They bring their children and grandchildre~n for more new business as well as important referrals, which are key to continuing success.

 In our IMSA world, we often see confusion over who really is a company’s customer. Typically the issue is whether the producer or the consumer is the primary customer. Before we can serve either group well, we must know who they are and what they want!

 One of IMSA’s key questions is the understandability of the sales materials presented to the consumer. Our business is complex, and difficult to understand. We once heard famous plaintiff’s attorney Mel Weiss say that comprehensibility is the core issue in class action suits against life insurers. He claimed that after working with life companies for five years he still had difficulty knowing what our sales materials said. How do we think the consumer feels? This is a real opportunity for improvement.

 Focus groups are one way we can meet customers on their own turf. Not only can we find out how customers think, but we can find out what they really want and design products to meet those needs. When we are meeting those needs, we will generate more revenue and eliminatethe ethical market conduct issues associated with the “One-Size-Fits-All” mentality of product development.

 Loeb’s fifth point corresponds to IMSA’s Principle 2: Competent, customer-focused sales and service and Principle 2: Fair and expeditious complaint handling. By training our people to think like customers and showing them how to act in the spirit of the Golden Rule, we will prepare them for needs-based selling and  

The Power of Words.. A group of frogs were traveling through the woods, when two of them fell

 into a deep pit. All the other frogs gathered around the pit. When they saw how deep the pit was, they told the two frogs that they were as good as dead. The two frogs ignored the comments and tried to jump up out of the pit with all of their might. The other frogs kept telling them to stop, that they were as good as dead. 

Finally, one of the frogs took heed to what the other frogs were saying and gave up. He fell down and died. The other frog continued to jump as hard as he could. Once again, the crowd of frogs yelled at him to stop the pain and just die. He jumped even harder and finally made it out. When he got out, the other frogs said, “Did you not hear us?”  The frog explained to them that he was deaf. He thought they were encouraging him the entire time.   

This story teaches two lessons:

1 . There is power of life and death in the tongue. An encouraging word to someone who is down can lift them up and help them make it through the day.
2.  A destructive word to someone who is down can be what takes to kill them. Be careful what you say. 

The power of words. . . . it is sometimes hard to understand that an encouraging word can go such a long way. Anyone can speak words that tend to rob another of the spirit to continue in difficult times. Special is the individual who will take the time to encourage another.

Be Special to Others

New York Times Ethicist

In case you haven’t noticed, the New York Times Magazine has been running an ethics column where readers are encouraged to raise ethical questions. You can check it out by buying the Sunday Times or by viewing it via the internet @ NYTimes.com. You can also e-mail editor Randy Cohen at randyco66@earthlink.net.  

IMSA CHAIRMAN
IDENTIFIES SUCCESS  
(November, 1999)

Lou Lower gave the opening keynote speech. After describing the background of IMSA, he identified the key conditions that will signal “MISSSION ACCOMPLISHED.” They are:

Obviously, we have a long way to go, but Lower is encouraged by the progress made so far.

 Five years ago, consumer complaints against insurers were on the rise. There were allegations of misrepresentation  life insurance sold as “investment” or “retirement” plans), churning and class action laws suits springing

from these allegations as well as a drop in interest rates and that impact on “vanishing premiums.” There were huge penalties and settlements, hundreds of millions and even billions of dollars. As a result, consumers lost trust in the life insurance industry, and agents were viewed as lower in trustworthiness than used car dealers and the media!

 But the industry did not take this lying down. CEO’s from a number of companies put together a voluntary organization to champion ethical market conduct in the sales of life insurance and annuity products. Born in November of 1996, IMSA set out to reestablish consumer trust in the life insurance and annuity industry. Lower explained how IMSA decided to operate through a commitment to six principles:

 Principle 1 : High standards of honesty and fairness. We all must become passionate about this, said Lower. We must pledge that we will act only in our customers’ best interest, and, if necessary, turn down sales that don’t meet these criteria.

 Principle 2: Competent, customer-focused sales and service. Our goal must be needs-based training process, and the elimination of those who don’t meet our standards.

 Principle 3: Active and fair competition. The key here, according to Lower, is to compete fairly and actively no matter how much pressure there is.

 Principle 4: Advertising and sales materials. . . .clear, honest and fair. Lower’s comments adumbrated those of Marshall Loeb that evening: Make sure your material is understandable. Test against focus groups!

Principle 5: Fair and expeditious complaint handling. Lower urged us to see complaints as a learning mechanism that can help us identify and eliminate problems and strengthen the processes that support ethical market conduct.

  Principle 6: System of supervision and review. Drawing an analogy with Walt Disney World, Lower said we must behave like the people here, who pick up any piece of paper or debris they seen. Everyone keeps clean. We are all in this together and must all do our part.

  While acknowledging the progress already made, Lower observed that our ethical market conduct processes will do us no good if they are confined to 3-ring binders. They need to be out in the marketplace being expressed. Citing an expert, he gave 4 “C’s” to making ethical market conduct come alive. Ethics must be:  

. Coherent — We must connect ethics to long term drivers like customer satisfaction and brand value.

. Comprehensive — Ethics must apply equally to everyone in the company, from the most senior to the most junior, and every functional area.

. Consistent — Designating in a detailed way what ethical market conduct is.

Communication — All great products come to life through dialogue and exchange.

  IMSA, Lower believes, is ready to move ahead through these means to make its commitment to continuous improvement a reality, and to achieve the five conditions cited above that will signal “Mission Accomplished.”

More from the Best Practices and IMSA Conference at Disney World’s Dolphin Resort
By Kenneth J. Kalis, CLU  
(November, 1999)

IMSA for Companies Using Independent Producers
By Kenneth J. Kalis, CLU
(November, 1999)

Preparing a company with Independent Producers for IMSA assessment is, of course, different than preparing a career agency or a direct response company. IMSA has been well aware of the unique relationship that Independent Producers have with their companies and has specifically developed distinctive standards to protect their unique relationship with their company and their own status as independent contractors. IMSA does not want to jeopardize in any way this unique relationship between company and Independent Producer that has proven so beneficial to both.

Although IMSA member companies have over 200 distribution channels using Independent Producers, there is still a need for greater understanding of the ways IMSA has provided to encourage membership for these companies.

COMMUNICATION AND TRAINING

Companies marketing through Independent Producers often have large numbers under contract, some as many as 100,000 or 200,000! For a number of reasons, many of these producers are licensed with more than one company and may not write any business for one company in a year. How does a company communicate and train such a large and independent group?

 The communication issue will vary to some degree by company, as each does what it feels is best to comply with IMSA’s requirements. Certainly, companies have been very creative in complying with the distribution to all distributors of the written statement supporting the concepts in the Principles and Code. Some have mailed a copy of the document to every one of their distributors, no matter how many thousands there are. Others have mailed to a top tier, usually representing 80% of their business, and communicated to others by including copies of the statement in commission payments or on company-distributed soft-ware or the company’s web site.

 On broader communication issues, such as encouraging producers to consider clients’ insurable needs and financial objectives, a strong and comprehensive sales agreement is a powerful tool. So too is training, which IMSA has defined as “making materials available” to distributors. Since many Independent Producers do not sell for every company they represent every year, companies’ offerings of training seminars and conferences tend to be used by the active producers and some relatively inactive producers may not benefit from this training. Often though, the producers who don’t

attend one company’s training will attend another’s and industry efforts (such as LIMRA’s IPC) are under way to address this issue.

 Another area of concern is the materials the Independent Producer’s use of advertising and other materials. Most companies have established specific advertising guidelines that they have communicated to the distributors, often through a sales agreement. Of course, companies can only control the materials used in the sales process for their products, not those of other companies. For this reason, careful monitoring through customer satisfaction surveys and complaint management is essential.

Again, companies have been creative in identifying ways to monitor the use of their materials. Some monitor usage through a centralized distribution system while others monitor the numbers of ads sent in for review from each territory, analyzing trends and “red-flagging” areas that may hold potential problems. Look for more on this in the revised IMSA Assessment Handbook.

 Perhaps the most misunderstood IMSA standard has been that of the system of supervision and review in Principle 6. Some people have misunderstood this principle and thought that IMSA was trying to impose a career agency system of supervision on companies using Independent Producers. Nothing could be further from the truth. In fact, IMSA has been committed to the integrity of the Independent Producer’s unique

relationship with the company from day one. To demonstrate this, IMSA developed and included in the “Elements of Compliance” a distinct set of standards for companies using Independent  Producers.

1.  have selection criteria for its distributors,

2.  have a written agreement with them cover licensing requirements and outlining their responsibilities,

3.  provide them with training materials that emphasize matching needs and products, and

4.  monitor the sales of its products through these distributors. 

Kenneth J. Kalis, CLU, is a Qualified IMSA independent assessor and President of the Kenneth J. Kalis Company of Gainesville, Florida. After a 21-year career with The Prudential, Ken began his IMSA involvement in 1994, working with the group building the IMSA question-naire. Nationally recognized as a writer and speaker on IMSA, Ken was on IMSA’s teams that created the IMSA Assessment Handbook and the IMSA Assessors’ Training. The Kalis IMSA team has worked with over 30 companies on their self-assessments and independent assessments and certified 25 companies for IMSA membership. Ken was again asked by IMSA to be part of the teams updating the IMSA Assessment Handbook and developing stronger standards for the 2001 assessments. He can be reached at 352-375-41 1 1, e-mailed at kkalis©aol.com or through his web site, kkalis.com.  

Excelsior Welcomes Articles From You

Our mission is to help companies deal with IMSA issues effectively. We publish articles of interest to senior executives that emphasize the strategic importance of ethical conduct in building trust in the marketplace. Please send any material you think is of interest to The Kenneth J. Kalis Company, Inc., 4609 SW 97th Terrace, Gainesville, FL 32608. Fax it to 352-338-1480, or e-mail it to kenkalis@gmail.com. This newsletter is on our web site at kkalis.com.  

Welcome, Nancy Church!
(August, 1999)

Nancy has extensive expertise in variable products and had her Series 7 license from 1982-1996. An expert in suitability management, Nancy has set up in-house broker-dealer operations for insurers and has specialized in evaluating whether companies should market through an established broker-dealer or set up their own broker-dealer, the "Buy or Build" decision. With this kind of background, a segue into IMSA was a natural for Nancy. She is a valued member of the Independent Assessor community and has served on IMSA’s committee developing standards for Independent Assessors. We have been impressed with the expertise she has shown in conducting some very complex assessments in a wide range of company environments, including one with 8 distribution systems.

Not only has Nancy’s expertise grown progressively as her career has prospered, but she has developed her professional credentials by working with some of the nation’s leading companies. These include such companies as Merrill Lynch, Providian Life and Annuity Company and Tillinghast, Tower and Perrin, where, as management consultant to life insurance companies, she led Tillinghast’s IMSA practice.

Nancy will be the 4^th Qualified Independent Assessor on the Kalis IMSA Team, joining, Ken Kalis, Norm Koefoed and Dick Weber. (The company has 12 other IMSA experienced assessors who have chosen not to complete the IMSA requirements to become Qualified Assessors.) The Kalis approach to IMSA is to have the Independent Assessor with the most applicable expertise and experience head up a company’s assessments. Usually a team of 3 or 4 people is chosen to conduct the independent assessment based upon their familiarity with the company’s products and distribution systems.

We are very pleased that Nancy has chosen to work with us as we pursue our mission of "Client-Focused IMSA Expertise." She brings to the table not only the fine credentials cited above, but a personal commitment to IMSA and its goal of improving ethical market conduct throughout the industry. She will also be working with Ken Kalis on marketing issues and on building our IMSA practice. We believe our company is stronger and better equipped to meet our customers’ needs with Nancy Church as a key member of our IMSA Team, and we welcome her.

(August, 1999)

At the July ACLI Compliance Section meeting in Boston, IMSA’s Executive Director Paul Mason announced that IMSA is expanding its standards to include Long-Term Care. Work has already begun on incorporating this product into the revised Assessment Handbook which will be ready for companies in early 2000. The decision was made to defer Disability Income because most of the issues concerning DI and consumers lie in the underwriting and claims functions, which are not now included under IMSA six principles but may be sometime in the future.

Mason also said that he would be bringing a proposal to the IMSA Board for determining budget assessments to be made to companies for 2000. IMSA has been subsidized by the ACLI during its first three years and will become self-supporting in 2000. At the time of the meeting, there were no details available as to what method of allocation would be used. As we go to press, there is still no defined approach as to how this will work. We have heard that IMSA has arrived at an over all budget dollar amount and is now working with two methods of allocation to present to the board.

IMSA will also be presenting to the Board a proposal for a budget assessment for independent assessors. The amounts I have heard from this ranged from $1,000 per year to $10,000. The adoption of this assessment will likely cause a decrease in the number of independent assessors as only 60 or so of the nearly 200 qualified independent assessors have actually performed assessments.

Improving Marketing/Sales Activity: A Powerful Spelling of IMSA
(August, 1999)

By Kenneth J. Kalis, CLU

At a 1998 national conference, IMSA’s chairman forcefully stated this view and evoked the memory of the "10 to 4 to 1" ratio. Ten phone calls lead to four interviews that lead to 1 sale. This ratio was a rule of thumb in the 1950’s, but has been seriously eroded since then with the increase in multi-wage earner families, answering machines, the Internet and more complex products. Of course the immediate impetus was the national coverage of market conduct issues involving some of the nation’s most prominent insurers and the public relations problems associated with large class action suits. But this circumstance has received so much attention that the marketing goals and objectives of IMSA have sometimes been eclipsed by compliance considerations.

1. High Standards of Honesty and Fairness

Let your customers know that you as a company are committed to ethical market conduct. IMSA requires a written statement for the concepts in the Principles and the Code to all employees and distributors. But this need not be some pro forma lifeless document that nobody reads. You can put together a powerful communication that not only says you pledge your company to act in the best interests of your customers but that gives specific examples of ways in which you have acted in your policyowners’ best interests.

The fundamental way in which you can act in the customer’s best interest is through needs analysis. This issue is at the heart of Principle 1. You can take here a very proactive role, as some companies have done. They go beyond simply checking to make sure that the product the distributor has sold is a "fit" with the buyer’s insurance needs and financial objectives. They set up a marketing file for each customer that uses a comprehensive needs analysis process to identify areas where a product or service they offer can be useful to the customer. And they don’t stop there. They look at the buyer’s characteristics to see potential needs and then schedule follow-up calls to help meet that need. When they don’t have a product that meets the customer’s needs, they get one.

2. Competent, Customer-Focused Sales and Service

You must build the needs analysis philosophy into your training and customer service policies.

In a very real sense, your distributors are your customers, and they will reflect your treatment of themselves on to the people who buy your products. Principle 1 has been called the "Golden Rule" Principle, and that is correct. The underlying thought must be to treat the customer as you would treat yourself. But this will not become a reality in your marketing organization until you treat your distributors this way.

How? You begin with the selection process, a key element in the IMSA questionnaire, choosing distributors whose ethical standards match with the Golden Rule. Then you provide them with on-going education that emphasizes the long-term value of a customer to your company. How much is it? $100.000? A million dollars? You may be surprised! But once the immense life time value of the customer is put into concrete terms and taught to your distributors you will see a change for the better in the way they relate to your customers and their needs.

3. Active and Fair Competition

Do you have a company policy on the way you compete? What is your philosophy regarding replacements? Whatever these are, you need to communicate them regularly to your distributors and make sure they are following them! You need to act decisively too to protect your policyholders from unwarranted replacements. Not just from an IMSA standpoint, but from a financial standpoint. You don’t want to let that $100,000 or million dollar customer walk out the door.

Make sure you have an UNDERSTANDABLE way of comparing policy values in a replacement situation. Then go out and work for your customer’s best interests. Establish a conservation unit, as some IMSA companies have done, that protects the company’s inforce business and make sure you know what’s going on in the field. One top company executive from a leading IMSA company writes personal letters directly to Agency managers when any agent exceeds the company replacement standard. The Agency manager then must report and remedy the situation. You can be sure that the sensitivity to this issue has been raised, and, more importantly, the example has been set for seeing the customer as a long-term, valuable asset to the company.

4. Advertising and Sales Materials….Clear, Honest and Fair

According to the attorney most successful in winning lawsuits against life insurance and annuity companies, this is the key area where companies are vulnerable. You can protect yourself and produce a more effective product by doing one simple thing: listen to the customer. IMSA has rightly given this issue a separate question under Principle 4, because at the heart of every complaint and every dissatisfaction is a misunderstanding. Very often, it is easier and cheaper, in the short run, to use surrogates for customer input, rather than customer focus groups and customer surveys. But the result can be complex concepts, insider language and technical complexities that baffle the customer.

Design simple sales materials that the customer can understand. Flesch-test them. Or better still, run them through the "grade-level" scoring tool on your word processing program. Aim for the 8^th grade level. Then expose them to your customers to validate their understanding. Keep track of their usage too, and monitor regularly, as IMSA requires, but go beyond the IMSA standards and see which materials are producing the most sales and get the highest marks from customers. Then model other materials on the ones that do best.

5. Fair and Expeditious Complaint Handling

View complaints as an important source of customer feedback. They are useful in the IMSA assessment process as monitoring tools, often when all else fails. But you want to use them to help you hear what your customers are saying and what their needs are. IMSA requires you to do root cause analysis to eliminate the source of problems with your policies and procedures, but you want to go beyond this to achieve a marketing objective. Complaints often reveal what your customer wants and needs. You can design products or product features to meet those needs and so build your relationship with your customers.

It has long been an axiom in marketing research that an unhappy customer tells three or four times as many people about an unpleasant experience as a satisfied customer does about a pleasant experience. Worse still, many customers simply go away without giving you a clue as to why you have lost them and their life-time asset value. So treat complaints as an opportunity to strengthen your long-time customer relationship. Research also shows that if your resolve a complaint quickly and satisfactorily, the now satisfied complainer will be more loyal to your company than someone who has never complained.

6. System of Supervision and Review

To get the most out of IMSA as a marketing effort, the company President or CEO must take ownership of the IMSA initiative. You must demonstrate Leadership in a visible and believable way. The approach you take will vary by company culture. One IMSA CEO has made a video in which he talks about his commitment to ethical market conduct and to customer satisfaction. He backs it up with regular communications and actions that reinforce the message that putting the customer first is the road to more sales and greater financial success.

Another CEO has taken the public position that meeting the IMSA standards and using them to improve customer relationships and company revenues is the job of every person in the company. He will not create a compliance department because he believes that that would diminish the important message that ethical market conduct in everyone’s job.

Still another company President has taken personal ownership of the IMSA process but then delegated specific Principles to his executive staff. They, in turn, have delegated questions to their people who have then assigned responsibility for specific indicators to the people working for them. Thus accountability is established throughout the whole company including the field force and distributors.

When there is accountability throughout your organization, your people will become proactive. If you have instilled in them the concepts of IMSA you will have given them the basics for energizing your marketing and sales activities and help IMSA realize its strategic goal of restoring customer trust, thus retaining old customers and winning new ones.

IMSA for Direct Response Companies
(August, 1999)

By Kenneth J. Kalis, CLU

Some Direct Response Life and Annuity Companies have been reluctant to pursue IMSA membership. They need not be. While IMSA poses some distinct challenges for direct marketing companies, they are often in a strong position to meet many of the IMSA standards. IMSA, in fact, has designed the assessment process to accommodate all types of distribution systems, including direct response. A field test of the questionnaire was conducted with several types of distribution systems, including direct response and brokerage. IMSA is sensitive to the differences between distribution channels and has included specific indicators for each type of company. Here are some suggestions on how you should approach IMSA for your direct marketing operation

Some companies balk at the idea of needs analysis or "suitability" because direct marketers handle this differently than companies distributing through agents. Direct marketers select their market up front, demographically, statistically, economically and in dozens of different ways. Because their ultimate marketing success depends so much upon this market identification and selection criteria, direct marketers put a lot of work into their marketing research. IMSA has recognized this by providing a specific indicator: 1.1.b.4.

The company uses demographic trends as an indicator of the insurable needs or financial objectives of its customers.

You need to be sure to use this indicator if it fits your situation. You should also reference your marketing research prominently in your self-assessment report and explain it in detail to your independent assessor.

You need to also make sure your company is putting needs analysis tools in your customers’ hands. This need not be complex; especially if you offer specialized products and product features that minimize ethical market conduct concerns. If, for example, you offer burial policies to people aged 65 and over with a maximum face amount limited to, say, $10,000, you again need to make this clear in your self-assessment report and to your independent assessor.

Since direct marketers don’t use agents to sell their products, some people have assumed that the questions regarding licensing and continuing education don’t apply to them. This is not the case; the standards must be applied to the people who are actually on the phones or handling the mail. Some direct marketers have very sophisticated licensing systems set up which direct incoming calls only to a person who is licensed in the state which is the source of the call! This is again something that you need to highlight in your self-assessment report and bring to the attention of your independent assessor.

Likewise, the distributor education should be directed at those people in the sales process who are responsible for the presentation of the sales information to the buyer. This sometimes means the person on the phone or handling the mail, but it can also encompass the people designing the mail campaign or web site. The key here is not to be distracted by the term distributor. It means your people who have the sales contact with the people who buy your products.

Don’t be thrown off by the mention of sales illustrations in question 4.4. Go on and read the rest of the question which talks about "other representations of premiums, considerations, costs, values, and benefits used in the sales process." The goal here is to make sure you are presenting the buyer with all the information he or she needs to make an informed buying decision.

Because of the heavy market research and customer input that direct marketing companies often rely upon, Principle 4 can be a strong point rather than a stumbling block. Once again, you need to focus on what you do well, highlight it in your self-assessment report, and make sure you communicate it thoroughly to your independent assessor.

One of the most frequently asked queries from Direct Marketing companies is "Do All 27 Questions Always Apply?" Yes, they do. Regardless of what kind of a distribution system you use, you must answer "yes" to all 27 questions. Further, you must show for each one that you have an approach (a policy or procedure and someone responsible for it), that is fully deployed (communicated and consistently used) and routinely monitored (measured and acted upon).

But while all 27 questions apply, all 370 indicators do NOT. This is where some direct marketers (as ell as many other companies using brokerage and career agency distribution systems) get bogged down. You do not have to answer all indicators. You can put together a strong self-assessment report using between 175 and 200 if you pick the right ones. IMSA has included indicators for every type of distribution system. This means that some, those specially designed for career agency and brokerage companies, will not apply at all to you. Work with your independent assessor to carefully pick out the best indicators that will demonstrate the strength of your operation, and let go those that really don’t apply.

THE BEAT GOES ON
(August, 1999)

One of you shared with us the news that Milberg Weiss has filed suit against several top companies for "deceiving and defrauding consumers"" via high commission costs. When I last spoke to Mel Weiss he said he was looking into annuities as a possible area of concern. He thought that a drop in the stock market would trigger a deluge of consumer complaints, but it looks as if he’s taken another step in the meantime.

Nationwide, American Express, American United Life and SunAmerica are the four companies. The law firm is trying to get the suit certified as a class action. Weiss is on record as saying that selling annuities to qualified retirement plans is "fraud, pure and simple."

NAILBA ON IMSA
(August, 1999)

You may have known this, but I just checked it out. NAILBA has a web page that covers its views on IMSA at www.nailba.com. There is an annotated copy of the IMSA questionnaire with suggested responses for companies who market through independent agents or brokers.

"CONSTRUCTIVE FRETTING" AT GREENBRIER
(August, 1999)

The compliance officer of a prominent IMSA company delivered a 51-page paper to the Association of Life Insurance Counsel meeting at the Greenbrier at White Sulfur Springs, West Virginia in May. In an extensive, documented analysis, Joanne Derrig looked at the implications for IMSA of:

"Whither goest the law?" Joanne asks as she considers these issues. No one knows for sure. But Joanne’s assessment of IMSA’s position vis a vis these topics is worth reading.

THE SMART-TALK TRAP
(August, 1999)

This Harvard Business Review (May-June 1999) article asserts that despite the "vast resources at their disposal," "companies are plagued with an inertia that comes from knowing too much and doing too little" – the "knowing-doing gap" the authors call it. Worth reading. As are the five methods they recommend for translating the "smart talk" into intelligent action.

1. CHARTER FOR GOOD CORPORATE BEHAVIOR

Looking for some ethical guidelines to use in your company? Check out this 10-step approach issued as the Keidanren Charter (the Japan Federation of Economic Organizations) on www.businessethics.org. It’s good stuff. Note the emphasis on Need for Continuous Follow-Up Activities.

2. INSURES NEED GLOBAL POLICY FOR ETHICS

This will be of interest for our friends expanding to Asia, Europe and South America. (These days, who isn’t?) From the March 19,1999 issue of The Journal of Commerce at www.joc.com.

3. DO CONSUMERS REALLY CARE ABOUT BUSINESS ETHICS?

You Bet! Says the Conference Board of Canada. They cite research showing:

1. A company’s ethics are an important consideration in the buying process.
2. Ethical corporate behavior is EXPECTED.
3. Customers are willing to pay more for an ethical company’s products.
4. Customers will expect lower prices for unethical companies

More information on research studies is available at www.conferenceboard.ca/ccbc/ethicsfaq.htm. See also their suggestions on what a code of ethics should include and how to determine if your company has an effective ethics program.

PRINCIPLE 5 -- JUST GOOD BUSINESS PRACTICE
(August, 1999)

By Philip D. Klein, FLMI

Phil Klein, FLMI, is President of At-Your-Service, a consulting firm specializing in marketing and customer service. Based in Vernon, Connecticut, Phil’s 28 year career in the insurance services industry was capped by his leadership of Connecticut Mutual’s Service Center and Franchise Partners Marketing program. Phil has strong expertise in customer service and complaint handling functions, as well as a good background in marketing and training. He has been a part of 4 IMSA assessment teams. (Leave Room for small picture)

When it comes to IMSA and customer service, complying with Principle 5 is simply a matter of good business practice. Principle 5 is: "To provide for fair and expeditious handling of customer complaints and disputes."

Recognizing that insurance companies to comply with state insurance complaint requirements, let’s take a quick look at the requirements of Principle 5.

1. The insurance company has to have appropriate policies and procedures in place to address complaints related to the sales and marketing of life insurance and annuity products.
2. One or more people have to be responsible and accountable for meeting legal requirements, for communication the policies and procedures, and for maintaining them.
3. The policies and procedures must be deployed. This includes dissemination, training and actual use of the policies and procedures.
4. Customers must have easy access for communicating complaints.
5. The company must be able to demonstrate that it acts on complaints and uses what it learns to eliminate root causes.
6. Lastly, the company must monitor the reporting and recording of complaints. Plus, the company must routinely report complaint activity and trends to management.

Recognizing that the above is an overview, the $64 question is: Why would any insurance company not already be in compliance with Principle 5? In fact, why would any company not welcome customer complaints about any and all areas of dissatisfaction. And, why would any company not track and report to management on all complaints?

The answer is that some companies see complaints as "bad news" or as work. However, the real nature of complaints is that they are customer feedback and a golden opportunity. Okay -- what’s golden about complaints?

1. A complaint is an opportunity to retain business and sell more! In fact, studies have shown that as many as 90% of complaining customers will buy again if the company resolves their complaints quickly.
2. A complaint is free customer feedback which can be used to improve quality and save a ton of money. If you have a 100,000 customers and 5% of them are dissatisfied, what does that cost the company in lost business and in time devoted to resolving complaints. What does it cost if a customer sues or worse yet, the company becomes embroiled in a class action suit?
3. Word-of-mouth is he most powerful advertising a company can have. Studies have demonstrated that a highly satisfied customer will tell 5 to 7 people about their wonderful experience with a company.

The bottom line is that it pays to encourage customers to complain and then resolve their complaints quickly. Your company stands to retain more business and sell more by taking its sales and customer contact people to higher levels of performance. And, by improving its products, systems, and procedures. Complying with Principle 5 is just a good start!

Agents’ and Brokers’ Principles of Ethical Market Conduct
(August, 1999)
By Richard M. Weber, CLU, ChFC, MBA.

Dick Weber has sold life insurance for 33 years, yet has also been one of the 'key players' in raising the ethical bar for the life insurance industry. One of the first Independent Assessors to be trained and certified by IMSA,  Dick has worked with Kenneth J. Kalis on two independent assessments. He brings a unique perspective to the Assessment process, approaching the 6 Principles from the standpoint of theagents who are in large part the ultimate implementers of their company's policies and procedures. Dick continues to work with agents through his seminar series "The Ethical Edge" (co-sponsored by the Society of Financial Service Professionals) and has developed his own version of ethical principles for agents who wish to be proactive with the spirit of the IMSA process. Dick offers these principles to all who will adopt them in their entirety. 

Each insurance agent and broker subscribing to these principles commits her and himself in all matters affecting the sale of individually-sold life and annuity products:

1. I will conduct business according to high standards of honesty and fairness and render that service to my clients which, in the same circumstances, I would apply to or demand for myself.
2. I will provide competent and customer-focused sales and service , and will maintain a level of professional competence through a lifetime commitment to professional growth and continuing education.
3. I acknowledge the different constituents whom I serve; insurance companies and the wider insurance industry, my clients, my clients advisers, my community, and my family -–and I will resolve ethically any conflicts that might arise between those relationships.
4. I will communicate fully and effectively so that clients receive appropriate recommendations that balance the natural inclination to maximize benefits, tempered by their unique tolerance – or lack thereof – for risk.
5. I will deliver to my client a statement of business processes, methods of compensation, and other disclosures appropriate to an open and professional business relationship.

© 1999 Richard M. Weber, CLU. All rights reserved except as expressly granted by permission.

Calendar of Coming Events
(August, 1999)

September 22-24. 1999: Life and Health Compliance Association Meeting in Newport Beach, California, hosted by Pacific Life at the Newport Beach Marriott Hotel. The Kenneth J. Kalis Company will be sponsoring a photo-shoot at the evening reception on September 22. These meetings are always valuable as between 250 to 350 companies send compliance people to share ideas about current issues. For further information call Karen J. Allen, Director Variable Annuities Division at Pacific Life, (949) 219-7301 or e-mail kallen@pacificlife.com.

October 21-22, 1999: IMSA Training Seminar for Independent Assessors and Company Personnel at the Chicago Marriott Downtown Chicago, Illinois. The program will review the assessment process and other key elements of IMSA’s Principle and Cod of Ethical Life Insurance Market Conduct. A majority of the sessions will be presented by video tape and some sessions presented by live faculty. Registration questions should be directed to the Meetings Department at (202) 624-2404.

October 27-29, 1999: 1999 Market Conduct Exchange: Best Practices & IMSA at the Walt Disney dolphin Hotel in Orlando, Florida. LIMRA and LOMA are conducting this conference which will feature IMSA Chairman and Allstate Life CEO Lou Lower as well as IMSA’s Executive Director Paul Mason. The Kenneth J. Kalis Company will be sponsoring photos with Mickey Mouse at the Thursday, October 28 evening reception. Ken Kalis and Susan Goff will be on hand to help Mickey out. Registration questions should be directed to Fran McClough at (770) 984-6453.

November 14-16, 1999: The American Council of Life Insurance Annual Meeting at the Grand Hyatt Washington in Washington, D.C. Among the featured speakers at this event will be Alan Greenspan and Doris Kearns Godwin. The Kenneth J. Kalis Company will have a booth at the Marketplace Reception on the evening of Monday, November 15. Nancy Church and Ken Kalis will be there to answer any questions about the company’s IMSA consulting services. Call Linda Cunningham at (202) 624-2404 with any questions.

May, 1999
IMSA’S Back!

Here’s a useful checklist for companies whose membership expires in 2001, divided roughly into 1999 and 2000 timeframes. We may have missed a few items, or included some that don’t apply to you. Add what you need to, and skip what you must, but start working now. It’s later than you think!

Reassessment Checklist; 1999

1. Put together the IMSA 2001 Team, a self-directed work team that will manage the IMSA process on an on-going basis.
2. Hold the first meeting of the IMSA Management Team to set plans for the year, develop a schedule.
3. Communicate your continuing commitment to IMSA and ethical market conduct through a company-wide statement from your president.
4. Set priorities, and assign responsibilities for updating documentation to the appropriate process owners.
5. Review the recommendations for improvement made by your independent assessor or your own management people and develop action plans for improvement.
6. Explore ways that you can measure the effectiveness of the policies and procedures you have in place to answer the 27 IMSA questions.
7. Identify new people, including those new to their current positions, who need to be trained in IMSA’s Principles and Code for questions 2.3 and 6.3 and schedule training.
8. Identify those new people to whom communications on policies on fact-finding responsibilities (1.2), company support for the Principles and Code (1.5) and fair competition (3.1) need to be communicated and prepare appropriate acknowledgement mechanism.
9. Ask your independent assessor for an IMSA update and incorporate relevant developments into schedule for reassessment.
10. Evaluate the effectiveness measure you have come up with and integrate them into an on-going report.
11. Conduct the necessary training for new people on questions 2.3 and 6.3.
12. Execute the communications necessary to comply with questions 1.2, 1.5 and 3.1.

 

13. Update self-assessment report as necessary, including updated documentation. Also update for any changes in process owners.
14. Have independent assessor review progress to date and discuss plans for the next year.
15. Consider any new products introduced since the company gained IMSA membership and assign team members to each to assure compliance.
16. Designate someone to oversee the integration of your company’s Long Term Care and Disability Income products into the IMSA process.
17. Evaluate progress on effectiveness measures.
18. Get copies of the IMSA 2001 Assessment Handbook..
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Reassessment Checklist; 2000

1. Discuss plans for the upcoming self-assessment. Identify participants and necessary resources and work on a communications document for distribution to the whole organization.
2. Have your independent assessor discuss the upcoming self-assessment and identify any potential gaps as well as training needs.
3. Schedule and conduct necessary training for members of the self-assessment team and other people who will be involved in the process.
4. Get cost estimates and detailed plans about the independent assessment from the independent assessor.
5. Kick-off the self-assessment process. Begin by working with the independent assessor to select the appropriate indicators.
6. Begin work to close potential gaps. Pay special attention to the new elements of IMSA. (Effectiveness measures throughout and the addition of Long-Term Care and Disability Income products.)
7. Assign specific individuals to close the gaps. Ask the independent assessor for input.
8. Draft responses to the questions and have the independent assessor review
9. them.
10. Gather supporting documentation and other materials.
11. Identify any training and communications needs and implement them.
12. Schedule the independent assessment and set up the space for it.
13. Prepare process owners for interviews by the independent assessor.
14. Hold a final team meeting to make sure all is in readiness.
15. Begin the independent assessment and prepare for process renewal.
16. Process papers for renewal of IMSA membership.
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Continuous Improvement! (Part 1)
(May, 1999)
By Kenneth J. Kalis, CLU

Yes! "Yes" was the first word that flashed in my mind when I read the quote from Lou Lower in Lynna Goch’s fine article Marketing Ethics, in April’s Best’s Review. IMSA’s chairman, also CEO of Allstate Life, closed out the story with this provocative remark: "Does IMSA membership and logo mean zero defects?" Lower asked. "No. But it does mean that its members adhere to ethical conduct and have continuous improvement processes in place."

In my mind, continuous improvement is what IMSA is all about. Like the IMSA Assessment Handbook says: "The assessment process is intended to encourage and assist insurers continually to review and modify their policies and procedures in order to improve their market conduct practices and those of the industry." Improving market conduct practices is what IMSA is all about. St. James says, "Show me your faith without works, and I will show you my faith by my works." The same holds true for IMSA. We must show our commitment to ethical market conduct by what we do, that is by continuous improvement of the processes we have in place to support ethical market conduct.

The Best’s story gave some concrete examples of innovative steps that companies like Prudential and John Hancock have taken that highlight their commitment to continuous improvement. For example, Prudential has decided to keep its independent assessor on board to help them make sure their procedures are working. They are going beyond a stated commitment and "trying to connect procedures to actual work being done in the field."

To some degree, continuous improvement is necessary as a fulfillment of the monitoring aspect of the IMSA assessments. The monitoring indicators require the company to "routinely" monitor how its procedure work and to "act upon the information received," or to improve them.

There is a danger in using the word "routinely" instead of "continuously" because the former word has the connotation of "mindlessly" or "without thinking" or "by rote." Continuous improvement, on the other hand, is motivated by commitment. This is what motivated the compliance officers of the companies to form a group to shape their corporate cultures. They get together regularly to discuss their commitment to IMSA and to talk about ways to advance it.

"Continuous Improvement" itself is a motivating concept, a "big idea" that can drive the IMSA process and organization so that it becomes synonymous with excellence in ethical market conduct. It is a bigger concept that "continuous monitoring," which IMSA uses as a standard for getting to yes, because it is more than monitoring. Continuous Improvement doesn’t just check or measure to see that nothing is going wrong. It measures to identify areas where things can be made better. And every process can be improved.

Likewise, "Continuous Improvement" goes beyond "continuous compliance." In order to be readmitted to membership in 2001, companies will have to demonstrate that they have been in continuous compliance with the IMSA standards over the last three years. But compliance is, although often challenging, only a threshold, a bare minimum that companies must adhere to.

IMSA should go way beyond the minimum, it should hold up ideals and challenge companies to live up to them. As an industry, we will get no credit for saying "I’m abiding by the law." We have to say, "I’m doing everything possible to make sure you are satisfied with my company’s products and services."

But perhaps the most valuable impact of "Continuous Improvement" is a raising of the consciousness of everyone in the organization. We move from the routine, to the uncharted, from the humdrum to the exciting from the deadly grind to an exciting new world of challenges and rewards. In this environment, a culture of commitment to excellence will grow.

How do we get there? First of all, there has to be a commitment. Then there must be a plan. People must be trained. Teams must be put in place. Processes must be examined, improvements made, rewards and recognition given. But once a "Continuous Improvement Process" is in place, benefits will begin. Some of these will be compliance related, like fewer market conduct exams, less expense in fines and litigation, and reduced compliance costs. Other benefits will accrue to the company’s broader business objectives: greater customer retention, eliminating rework, higher customer satisfaction and increased revenues.

How do we begin? I’ve laid out a paradigm in the accompanying chart. It can serve as the basis for a solid "Continuous Improvement Process" at your company. You may have to make some changes to fit your organization. But focusing on continuous improvement will not only change your compliance practices, it will change your compliance approach. Instead of going through a routine, you will now be on a journey, an exciting and rewarding journey that leads to world class results.

For IMSA, I believe, "Continuous Improvement" will create a stronger vision and give the organization a driving force that will make it a vital and energized agency for excellence. When the IMSA logo becomes a synonym for excellence in ethical market conduct, companies will flock to join, the climate of the entire industry will be improved, the public trust in life insurance and annuity companies will be fully restored.Top

Part 2: Creating a Continuous Improvement Process for IMSA in Your Company

The chart shown below, gives the elements in the IMSA Continuous Improvement Process. You will need to create teams to implement the process. The number of teams will, of course, depend on the size and complexity of your company. But you will need to start with a management level self-directed work team to manage ICIP. This team may be led by the compliance officer or manager and have as its members representatives from the key marketing, training, systems, distribution, customer service and administration areas.

Getting the team organized will be your first commitment, and while it will take some thought and time, it will be well worth it. Once the team is in place, it will be responsible for the on-going management of the IMSA assessments. In addition to the continuous improvement of the policies, processes and procedures that support ethical market conduct, the team will also keep the IMSA self-assessments up to date, supplying the necessary documentation and updates. By keeping the self-assessment current, you avoid the expense and resource commitment of performing a new self-assessment every three years.

The team will need to have a leader and a scribe. It should meet at least once a month. Twice a month will be better, especially at first. It should focus on action items identified by the independent assessor and your management team at first. Then the team will come up with its own action items and keep track of results in short reports to company executives. It will be important for the team to have access to company executives, as the exposure will be motivating to them and informative to the executives. It will also bring the entire organization into the process establishing accountabilities that will be invaluable in supporting IMSA Principle 6, establishing a system of supervision.

Because the Continuous Improvement Process will always be active, we use verbs to describe each phase:

COMMIT: This is the first, and in some ways the most important step. You, as the president or other company leader, must demonstrate your commitment visibly and continually. You must lay out your concerns and goals and communicate them to both the team members and your entire organization. You may want to do this as an update of your written statement of support for the concepts in the Principles and Code that is required to answer question 1.5.

PLAN: Next you will have to work with the team to define strategies, set policies and goals, and structure the process. You will need to have the team draw up a realistic schedule to meet the requirements you lay out, and you will need to let them know you will hold them to it. Equally important, you must let the team know that you fully support them and will back them when they need your support. The team should be seen as an extension of you, and the team members should think of themselves as your people.

TRAIN: The team will need to be trained in IMSA principles and methodology. This can be done by sending one or more members to an IMSA training session or having your independent assessor train them on site. They will also need training on working together as a team and on learning how to use the 7 basic tools for process analysis and improvement. You will want to get some professional expertise to help you with this. You will find the Team Book, by Larry Sholtes as the best resource around for this. (see review on page x.)

MONITOR: Using the evidence put together to support the IMSA indicators, the team will do a key output analysis to locate opportunities for improvement. Gathering input from customers, distributors and other associates, they will identify any problems or gaps between actual and ideal performance. They will take into consideration, timeliness, accuracy, customer satisfaction, costs and potential sales and revenue. Then they will recommend changes that will improve existing processes.

IMPLEMENT: Here the team will work with the process owners to bring about recommended changes. This will call for getting more input from the process owners, including their analysis and priorities, and scheduling the implementation. A critical part of implementation is determining what the measurement of success will be and establishing ongoing reporting systems to keep track of the impact of the change.

EVALUATE: Once a change has been implemented, the team will evaluate its impact on creating an ethical market conduct culture. It will report to top management what the benefits of the change have been in terms of timeliness, accuracy, customer satisfaction, costs and potential sales and revenue. "Flash surveys" of users, customers, distributors or other associates or stakeholders will be used to help evaluate the actions taken. These evaluations will be shared with the rest of the company so that the efforts of the team can be recognized and the commitment to continuous improvement gains higher visibility and becomes a core value of the organization.

And then, of course, the continuous improvement process renews itself with a recommitment to even higher standards of excellence. By this time, an ethical market conduct culture will be firmly established, and the concepts of IMSA’s Principles and Code will have become a way of life.

Kenneth J. Kalis, CLU, is a qualified IMSA assessor based in Gainesville, Florida. An expert on continuous improvement in the life insurance industry, Ken introduced over 650 continuous improvement process teams to the Prudential’s individual insurance area in the early 1990’s. These teams, in the three regional home offices, actuarial and product development, direct marketing, interest sensitive products, systems and administration and the Prudential Bank generated over 28,000 improvement ideas in their first year, and improved bottom line performance by nearly $10 million. Active in IMSA since 1994, Ken is currently serving on two IMSA committees, for updating the Assessment Handbook and establishing standards for independent assessors. He has worked with over 25 companies on IMSA, and personally certified 15 companies for membership. He can be reached at 352-375-4111, e-mailed at kenkalis@gmail.com or through his web site, kkalis.com.

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We find the Life and Health Compliance Association meetings to be the most valuable of all industry meetings dealing with compliance issues. The are informative, focused and practical. They deal with the real issues facing companies on a day to day basis. 300 + attendees from over 250 companies get to send in questions they have on any compliance issue, and attending company people prepare to respond. At the meeting, the moderator asks the question and people from across the industry respond. It is a great learning experience, and a great way to get a handle on how other companies are handling the issue you have to grapple with. (All within the anti-trust guidelines, of course.)

In May of 1998, at the meeting in Newport, Rhode Island, there were more than a dozen questions dealing specifically with IMSA. But in January of 1999, when the meeting was at Disney World, there were none. IMSA was back in the spotlight in May, however, when one company asked how others were preparing for reassessment. Three companies responded that they were actively preparing for reassessment. They offered to share information on their procedures with other companies who are interested. Our hope is that many more companies really are getting ready for reassessment, since the time is growing short.

KJKC was pleased to sponsor a photo-shoot at the opening reception at the Louisville Slugger Bat Factory. One thing about LHCA, although they work you hard during the day, they have great social events at every meeting. Night one in Louisville was at the bat factory. Night two was a reception on a riverboat and a 3-hour cruise down the beautiful Ohio River. If you have never attended one before, we suggest you do. The next meeting is set for September 22-24 in Newport Beach, California.

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