FAQs

2009 Enhancements
to the IMSA Process

1.      Mandatory Use of Topic Based Approach

 1.1.   Optional previously, required in 2010

1.2.   10 Topics with 15 Subtopics grouped by Topic: Needs Analysis/

1.3.   Suitability; Laws & Regulations; Policy Making; Agent Appointments;

1.4.   Training; Replacement; Advertising; Complaints; IMSA Principles and

1.5.   Code; Supervision/Monitoring.

1.6.   More efficient, less redundant

1.7.   Reformatting of previous information

 2.      Mandatory Use of IMSA Templates for New Companies

 2.1.   Standardized format for all new companies

2.2.   Gives better quality control

2.3.   Consistency from all companies

2.4.   Templates on line at IMSA site

2.5.   Format based on Elements of Compliance a la KP4 IMSA

 3.      Consulting Role for Independent Assessors

 3.1.   Assessors may work with company during self-assessment

3.2.   Restructuring of assessment process making it more interactive

3.3.   Facilitates understanding of the process for new companies

3.4.   Return to pre-2003 practice

4.      Limited offering of Streamlined Assessments for former Member Companies

4.1.   Limited eligibility for recent members

4.2.   Must be used by December 31, 2010

4.3.   Must attest to compliance with all IMSA standards

4.4.   Must engage Qualified Independent Assessor for testing

4.5.   Testing of limited number of standards, 4 of 5 sampling standards, 3

4.6.   chosen by QIA

 5.      Optional Attestation Alternative for Membership Renewal for Qualifying Companies

 5.1.   Alternative approach to regular process

5.2.   At least two cycles of IMSA membership

5.3.   CEO and CCO must attest to compliance with all IMSA standards for

5.4.   full period.

5.5.   Must comply with IMSA’s Emerging Issues and so attest.

5.6.   Submit all regulatory reports to IMSA.

5.7.   File Appendix to Attestation

5.8.   Systems or programs in place to manage compliance risk.

5.9.   Compliance with IMSA standards reviewed on on-going basis and

5.10.                    policies and procedures updated to remain in compliance.

5.11.                    Compliance trends must be regularly reported to management.

5.12.                    Description of how corrective actions are handled.

 6.      Updated Assessment Handbook and Manual

 6.1.   Handbook revision completed in topic-based approach format

6.2.   New optional attestation approach documents part of appendix

6.3.   Manual revisions ongoing by IMSA Standards Development Committee

Ken Kalis continues to serve on the IMSA Standards Development Committee which developed these changes and is available at any time to answer any questions or to facilitate your Company’s work on getting the most from your IMSA experience.  Just call at 352-505-0705 or email kkalis@kkalis.com.

 Streamlined Reinstatement

Extended Through 2010

 As many of you know, IMSA has created a streamlined reinstatement process for former members. Due to the economic downturn, this new expedited approach will be available through the end of 2010.

 To renew your IMSA membership this way, you need to:

 • Perform due diligence to determine you meet the IMSA standards.

• Prepare a CEO / CCO signed Reinstatement Attestation

• Attach all required examination reports

• Demonstrate compliance with the IMSA standards for the past 90 days

• Engage a Qualified Independent Assessor to do an abbreviated assessment

of 7 or the 25 IMSA standards

• complete the process by December of 2010.

Ken Kalis was a member of IMSA’s Working Group that created this cost effective way to renew IMSA membership and to minimize or eliminate external assessment costs in the future. A good first step is to call your Qualified Independent Assessor and start to formulate a strategy. We

are talking with a number of companies who are interested in using this approach to renew their membership, and we would be interested in talking with you about it too. If you are interested, please call us at 352-505-0705 or email to kkalis@kkalis.com.

 Frequently Asked Questions:

What is IMSA?

IMSA stands for Insurance Marketplace Standards Association. IMSA promotes high ethical standards in the sale and service of life insurance, annuity and long-term care products.  IMSA is the mark of excellence in the life insurance industry.  IMSA is the premier market conduct and compliance
organization serving the life insurance marketplace.

 What Are the IMSA Standards?

Each IMSA-member life insurance company commits itself in all matters affecting the sale of individually-sold life, annuity, and long-term care products.  There are 25 specific standards organized under the following 6 principles:

1. To conduct business according to high standards of honesty and fairness and to render that service to its customers which, in the same circumstances, it would apply to or demand for itself.
2. To provide competent and customer-focused sales and service.
3. To engage in active and fair competition.
4. To provide advertising and sales materials that are clear as to purpose and honest and fair as to content.
5. To provide for fair and expeditious handling of customer complaints and disputes.
6. To maintain a system of supervision and review that is reasonably designed to achieve compliance with these Principles of Ethical Market Conduct.

 Who are its members?

Around 100 companies ranging from small through medium sized to very large, representing about 50% of new business premium sales for individual life and annuity products.  According to the July issue of Best’s Review, 14 of the top 25 life and annuity writers are members.  Another 8 were recent drop out eligible for streamlined reinstatement.

 How does the membership process work?

Companies seeking IMSA membership are required to demonstrate that they are committed to becoming IMSA qualified by adopting IMSA standards.  IMSA qualification is a two-step process:

Step 1. The company conducts a self-assessment by comparing its current policies and procedures to IMSA standards (found within the Elements of Compliance chapter of the IMSA Assessment Handbook). In order to comply with IMSA standards, the company may establish new policies and procedures and/or make modifications to current policies and procedures, as appropriate. Once the company concludes that it can demonstrate compliance with IMSA standards, it moves to the next stage.

Step 2. A Qualified Independent Assessor, selected from a list of IMSA-approved Qualified Independent Assessors, reviews the company's self-assessment evidence and performs an independent assessment to evaluate whether there is a reasonable basis for the company's determination that it has complied with IMSA standards.

Satisfactory conclusion of the two-step assessment process will allow IMSA, upon the company's completion of the application process, to confer membership in IMSA for a period of three years. During the three-year membership period, members are encouraged to review, modify and improve their market conduct practices consistent with IMSA's "continuous improvement" concept. At the end of the three-year period, members must repeat both the self and independent assessments to renew their IMSA qualification.

How much does membership cost?

There is an annual membership fee based upon the size of the company and calculated in a way similar to that used for ACLI membership.  The annual fee ranges from $5000 for a small company to $185,000 for the largest companies.  There are also fees for the independent assessment which differ widely by provider and by company size, product line and number of distribution channels (career agents, Independent agents, direct marketing, third party distribution, etc.).  In our experience, these fees range from $20,000 to $30,000+ per distribution channel but again depending on the size and complexity of the company.

How long does it take to become a member?

The time line will vary by company, but a good estimate is six months.  If your company’s marketing and compliance policies and procedures are well-organized and up to date, that time could be considerably less.  Request our article on “90 Days to IMSA Membership” to get an idea of the steps.

 How long have you been doing this work?

We were active in the formation of IMSA and in the first group of Qualified Independent Assessors back in 1997.  We have worked with more than 50 companies on IMSA issues.

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 Please send us any questions you may have to kkalis@aol.com and we’ll answer them here.

I was then asked to participate in the field test for three of the companies. This involved visiting the companies and asking how they would answer the questions. This was a great exercise in diversity. The first company I visited was a direct marketer. For them, the question dealing with sales illustrations was too narrow. It had to be broadened to include all sales materials not simply illustrations.

The second company marketed its products through over 100,000 independent agents and brokers. Here it became clear that the communication with and the monitoring of such a large and independent field force required methods and policies that were significantly different from those that would be used with a career agency distribution system.

The third company was primarily a career agency company. In fact, it operated through a good number of independent agents as well. This meant that there would be need to be different assessment standards within the same company when there were different distribution channels. This, of course, is how many companies do operate, and it added another dimension to the process in terms of assessment criteria.

The recommendations to the ACLI from the field pilot were that changes needed to be made to the questionnaire to broaden it and include indicators that would be appropriate for these different marketing systems. The concept of continuous improvement was also strongly endorsed, so that IMSA would not just serve as a one-time crisis management tool but become a vehicle for building public trust and a tool for fostering ethical marketing. Virtually all of these recommendations were accepted, and I thought my IMSA journey was nearly over. Actually, it had just begun.

Support for IMSA (as yet un-named) was building, and I went to work developing an IMSA Self-Assessment seminar for delivery on-site to companies. I first delivered this one-day seminar to 18 people from a group of midwestern companies in June of 1996, launching the companies’ IMSA team training and my IMSA consulting career.

That was around the same time that I created a quarterly newsletter devoted exclusively to IMSA issues. Soon after I began relationships with two large eastern mutuals, and it became clear that IMSA was going to grow.

These were exciting days for me, and I was learning more and more about how different companies approached and managed ethical market conduct issues. Fortunately, I was able to put some of these experiences to good use on IMSA’s Assessment Handbook and Training teams. I was pleased that there was some representation on these teams of companies that marketed through brokers and independent agents. Two or three very large brokerage companies have been supporting IMSA from its earliest stages, and they continue to be outspoken proponents in the public arena of this approach to strengthen ethical market conduct within the brokerage community.

While I had some experience with brokerage and direct response marketing, most of my experience had been with career agents. I felt the need to create a widespread team of life insurance and annuity professionals to help conduct the IMSA assessments. Through a national recruitment drive, I identified only people who had the life insurance experience necessary to become IMSA certified assessors. Then I trained them in how to do an assessment with an eye towards continuous improvement and worked with them in three or four person teams to conduct independent assessments.

But there was also a need to work with companies on their self-assessments. One great opportunity arose in March of 1997 when a large southern company asked me to facilitate the self-assessment of their independent marketing organizations’ distribution channel. In a very concentrated time, I was able to help them complete their self-assessment for this distribution channel and use it as a model for five of its other distribution systems.

Here was a real opportunity to look at the key differences between the independent marketing organizations and the career operations. Of course, the first major distinction is in the area of training. Career agency operations must provide training for their agents while brokerage operations must make training available to their distributors. This is fairly straight forward, but the sticky questions come in defining just what criteria will satisfy the "make-available" definition, and, stickier still is how to determine adequate deployment and monitoring.

The second major distinction comes under the supervision, where companies distributing through independents are given specific criteria to satisfy the supervision requirement. These are clearly set forth in the IMSA questionnaire and include distributor selection, licensing, contracting and training criteria and, of course, monitoring. While this should give great comfort to brokerage people, there is no stipulation as to whose responsibility it is to oversee all of these, the company’s or the General Agents’. Different companies have taken different approaches, and I have worked with companies who followed each approach to satisfy the "approach, deployment and monitoring" indicators that lead to IMSA membership.

Communicating these provisions for independents has not always been easy. While there are some brokerage companies who are strongly on board, some times sparks really flew. At one large company where I was presenting our "Orientation to Self-Assessment" seminar to 25 people, someone stood up and shouted, "But you don’t understand! This just doesn’t apply to Brokerage operations!" There was a very strong perception in that company that IMSA was trying to squeeze brokerage companies into a career agency mold and threatening the independence that is the keystone of the brokerage concept.

I found this again at other brokerage companies. But as I worked with the people, explaining the provisions IMSA had intentionally established for companies marketing through independent intermediaries, the resistance changed into a new understanding of the IMSA assessment process, and people who had been animated against IMSA now become IMSA proponents.

Just after mid-year, the independent assessments began. I was pleased to be a part of the IMSA team that admitted the first two IMSA members, both brokerage companies. Using a team-assessment approach, we put together team members with expertise in the company’s distribution system and drew them, whenever possible, from the company’s geographical region. The team approach also enabled us to conduct an independent assessment in one week per distribution channel.

The last half of 1997 was filled with independent assessments for some 15 companies, some with multiple distribution systems. At the same time, I continued to work with 10 companies on their self-assessments and provided training for 12 companies just beginning their self-assessments. I am very pleased to have had the opportunity to work with so many fine companies, representing over 35 distribution systems. My conviction is that their management sees IMSA not just as a series of hoops to jump through, but as a real opportunity for improvement – improvement of their ethical market culture and strengthening of their relationships with their customers.

But our work is not done. IMSA is not a one-shot deal. Although many major companies are now IMSA members, many companies are still not there. Some have decided to wait and see, other have stronger reservations. In particular, there continue to be some reservations from people in the brokerage community. There is apprehension on their part that IMSA does not address itself specifically to their unique needs.

Some of this apprehension will be relieved when there is a fuller understanding that IMSA does indeed recognize the uniqueness of brokerage distribution. This will become clearer as more brokerage companies join IMSA. IMSA is NOT trying to force brokerage people into a relationship that would jeopardize the brokers’ status as independents. Distinct training and supervision approaches to address the unique brokerage situation are prominent in the Assessment Handbook and other IMSA materials, as I have mentioned above. But, they are prominent there because people from brokerage companies made sure they were, by giving of their time to the process so that all brokerage companies would benefit.

There are countless other opportunities for involvement for people from companies who see IMSA as an opportunity to improve their companies and the industry’s image. We can do this by working together, by continuously improving as the IMSA journey goes on.

I trust that the readers of this article will move forward on two fronts to improve ethical market conduct. First, that you will get more involved in the industry efforts to encourage IMSA membership by raising your concerns with IMSA, offering to take part in the on-going discussions to address the specific needs of your distribution system and of your customers. Second, that you will encourage your company to move ahead on the IMSA journey to strengthen the ethical market conduct culture of your company and of our industry – to rebuild the trust that is at the heart of our business.  

Isn't it time?

Did you know that 211 life and annuity companies have already attained IMSA membership? These companies account for over 70% of the market share for both ordinary life and individual annuities. Here's a more detailed picture of . . .continue