Dear IMSA Friends:

 

It’s hard to believe that it’s autumn already.  I hope you all had a good summer.  This month we are featuring some poems and prose about the beautiful month of September.  We do this not only because I love poetry, but because we think it is a good way of identifying which month the update is from at a glance.  As you may know, the Updates are filed on our newly revamped web site at www.kkalis.com.  You can check them online back through 2007 and back to 1999 by request.  I’ll assume you are checking the updates for IMSA or other compliance material rather than the poetry, much of which can be found at this great site:

                                                   http://www.egreenway.com/months/monsep.htm     

Please read on for the Executive summary and, of course, the full text of the articles.

 

September’s Articles

 

Social Networking Summit Set for October 8

  News from IMSA Today

Testimony of Donald J. Walters

Webinar Set for October 14 at 2 p.m.

Paul Volcker Backs Optional Federal Charter

Consult with Cailie!

 Best Practice of the Month – Replacements

What’s Up to at the Kenneth J. Kalis Company

 

September Update for IMSA Friends

Social Networking Summit Set for October 8 in

Washington

AARP-IMSA to Co-Host Summit to Discuss Industry Standards & Social Networking Technology 

FEATURING:

• Joseph Price, Chair of the Financial Industry Regulatory Authority’s (FINRA) Social Networking Task Force, who will update attendees on FINRA’s findings on these issues.

• Kip Gregory, a specialist in teaching agents and advisers how to leverage technology effectively, who will explain how social networking websites work in the insurance and financial services sectors, and how they are currently being used to attract new customers

Social networking has caused a convergence of consumer protection and compliance-related challenges which are rapidly escalating. This fall, AARP and IMSA will convene social networking experts, state and federal regulators, consumer representatives, distributors and IMSA-qualified companies to identify key consumer protection and compliance issues in the insurance and financial services industries presented by the increasing use of web sites such as Linked In, Facebook, Twitter and other social networking vehicles. 

Individuals invited to participate in this event include representatives of FINRA, consumer groups, IMSA-qualified insurance companies, social networks, distributors, and the NAIC and state insurance regulators.  Join us in crafting next steps toward needed solutions on Thursday, October 8th, 2009 in Washington, D.C. from 10:00 a.m. - 4:00 p.m.

Please confirm your participation via email with Margie Lopez at MargieLopez@IMSAethics.org. There is no charge to attend the event, but space is limited and your seat must be reserved in advance.

 

  News from IMSA Today   September 11, 2009

 Suitability Update

 

As IMSA has long established standards promoting suitability of life insurance and annuity product sales that are followed by IMSA-qualified companies in all jurisdictions in which they do business, IMSA plans to weigh in on suitability issues at upcoming events, including: 

 

· NAIC Fall Meeting

 

On September 5th, the NAIC Suitability of Annuity Sales (A) Working Group released another Revised Draft of possible amendments to the NAIC Suitability in Annuity Transactions Model Regulation. IMSA has consulted with its Suitability Working Group to gain reaction to key provisions of the Revised Draft in preparation for the upcoming NAIC Fall Meeting discussions. A copy of the September 5th Revised Draft can be found in the Members section at www.IMSaethics.org. Please contact Don Walters at DonaldWalters@IMSAethics.org as soon as possible if you have any questions or comments concerning the Revised Draft.

 

 

·New York State Insurance Department Hearing

 

IMSA will provide testimony at the New York State Insurance Department public hearing concerning suitability in the sale of life insurance and annuity products on September 16th. The goal of the hearing is to help determine whether additional oversight and regulation may be required to protect consumers in the purchase of life insurance and annuity products.  Please see full text of Don Walters’ talk below.

 

 

Requalification Webinar – October 14, 2009

 

IMSA will host a webinar on Wednesday, October 14, 2009 at 2:00 pm to provide additional information to companies seeking to learn more about the attestation approach to requalification as well as a simplified overview of the process needed for former member companies to reinstate their membership. This interactive forum will allow participants to field questions and to get direct answers on this important subject. More information concerning the webinar will be provided within the coming weeks. In the meantime, visit www.IMSAethics.org to view the video of Aviva USA Chief Compliance Officer Maureen Closson commenting on her experience with the attestation approach.

 

 

New Additions - IMSA Assessment Handbook

 

The IMSA Standards Development Committee has approved a new Preface to the IMSA Assessment Handbook that is designed to direct a reader to certain sections of the Handbook based upon the characteristics of the reader's organization (i.e., a company seeking initial IMSA qualification, a company seeking requalification of its current IMSA membership or a company seeking to reinstate its former IMSA membership). In addition, the Standards Development Committee also approved modifications to the commentary accompanying IMSA's Supervision standards. A copy of these documents can be found in the Members section at www.IMSaethics.org. 

 

Our thanks to members of the Standards Development Committee for their hard work leading to the successful completion of these two important projects. In the coming weeks, the Committee will begin to develop materials to assist companies pursuing the attestation process and will also begin work on revisions to IMSA's Independent Assessment Manual.  Note:  Ken Kalis is working on this committee.

 

Testimony of Donald J. Walters

 

Public Hearing

Suitability in Life Insurance and Annuity Transactions

New York State Insurance Department

September 16, 2009

 

Good morning. My name is Donald Walters and I serve as Senior Vice President, General Counsel & Secretary for the Insurance Marketplace Standards Association or IMSA. We appreciate the opportunity to be here today to share our perspectives on suitability issues in today's life insurance and annuities marketplace.

 

IMSA is an independent, not-for-profit, standards-setting organization that was established in 1996 to promote ethical market conduct practices by IMSA-qualified life insurance companies. IMSA relies upon a wide range of viewpoints through its diverse Board of Directors and our Standards Development Process to incorporate the input of many organizations including AARP, FINRA, NAIC, distributors and financial rating agencies in the development of high ethical market conduct standards.

 

IMSA's Six Principles of Ethical Market Conduct require companies to confirm the

existence of a comprehensive compliance infrastructure designed to promote suitable product sales. IMSA standards also require supervision and monitoring of sales activities to identify potential instances of inappropriate or unsuitable sales before such instances have the opportunity to cause widespread consumer harm.

 

IMSA-qualified companies must follow IMSA standards in all states in which they are

doing business. IMSA’s suitability standard implements the key provisions of the NAIC

Model Regulation into the marketplace for all IMSA-qualified companies on a

nationwide basis, regardless of whether a state has adopted the Model Regulation.

Accordingly, we are pleased to note that New York insurance consumers have been the

beneficiaries of the application of IMSA’s suitability standards for all annuity product

sales since January 2007 and also have been the beneficiaries of specific suitability

standards related to indexed-annuity product sales since October 2006.

IMSA has been at the forefront of suitability and suitability-related issues in the life

insurance marketplace for many years. IMSA's initial standards in 1996 introduced into

the life insurance industry the supervision concepts that had been well established in the securities industry for many years -- well before these concepts were introduced into

insurance regulation through development of the NAIC Suitability in Annuity Transactions Model Regulation nearly 10 years later.

 

AARP and IMSA have co-hosted a series of Summit Meetings on annuity suitability

issues over the past several years. These Summit Meetings bring together state and

federal regulators, consumer representatives, distributors and companies in a unique

forum to discuss the practical compliance challenges associated with the suitability of

annuity sales. As an outgrowth of our Summit Meeting in March 2008, IMSA was

commissioned by eight states to develop a report setting forth the range of leading

supervision and monitoring practices conducted by IMSA-qualified companies which

was provided to all state insurance departments and FINRA to promote a better

understanding of current techniques used by IMSA-qualified companies for supervision

and monitoring of sales activity. IMSA also has been asked to share its expertise before

various NAIC Committees and Working Groups on suitability-related issues for well

over a decade.  So it is from this perspective and background that we offer our comments today.

 

First, let me point to an issue of consensus upon which all stakeholders can agree. It is in everyone's best interests to promote suitable sales. Consumers, regulators and industry all gain benefits from suitable sales activity. Therefore, it is incumbent upon us all to work collaboratively to identify an appropriate insurance regulatory approach to attain that goal.

 

We believe the current requirements of the existing NAIC Suitability Model Regulation

can achieve that objective. We applaud the fact that the Model Regulation or some form thereof has been adopted in over 40 states and we support efforts to promote nationwide adoption of the Model Regulation in all states as soon as possible. We also believe that the Model Regulation should be rigorously enforced, as appropriate, as a means to deter and prevent inappropriate sales activity.

 

But while adoption of the Model Regulation is commendable, its objectives can only be

achieved through consistent application of its requirements. Through our discussions

with various stakeholders, we believe the goals and objectives of the Suitability Model

Regulation could benefit from more definitive interpretation and application of its key

provisions. Therefore, IMSA has worked closely with other stakeholders and trade organizations to develop guidance regarding the interpretation of these key provisions through use of a Model Bulletin which could be issued uniformly by the states to clarify expectations regarding appropriate demonstrations of compliance with the Model Regulation. This would provide the timely clarification of key issues that are sought by consumers, regulators and insurers today --- without having to wait for possible further revisions to the existing Model Regulation which could take months or years to implement.

 

We recognize that, since the introduction of the NAIC Suitability Model Regulation,

FINRA has gained SEC approval of FINRA Rule 2821 regarding the sale of deferred

variable annuity products. However, efforts to import the current requirements of FINRA

Rule 2821 into insurance regulation to promote a uniform regulatory system for annuity

consumers need to recognize the unique combinations of product types and distribution

systems through which annuity products are distributed today.

 

The growing role of independent distribution in the life insurance industry poses very

challenging compliance issues concerning the supervision of these sales activities. Many insurers should be commended for their efforts to establish robust supervision and monitoring schemes through the use of numerous tools such as trend analysis and other "red flag" techniques that are designed to identify patterns of questionable sales practices that may warrant closer scrutiny and possible corrective action. All insurers should be encouraged to establish such systems that are required for all IMSA-qualified companies under current IMSA standards.

 

IMSA is premised upon continuous improvement of its standards and the life insurance

marketplace and stands ready to work collaboratively with the New York State Insurance Department as it contemplates the appropriate regulatory strategy to promote suitable product sales.

 

We thank you for the opportunity to share our viewpoints today and look forward to

responding to any questions you may have. Thank you.

 

 

Webinar Set for October 14 at 2 p.m.

Do you have questions about the new attestation alternative approach to renewing IMSA membership? IMSA will be reviewing the attestation approach to requalification and the reinstatement opportunity for former IMSA companies at it October 14, 2009 webinar.  Presenting will be two companies that have gone through the attestation approach to requalification presenting.  Those companies are:

AVIVA USA; and

Great American Life.

IMSA staff will also offer a presentation on the requalification and reinstatement processes generally as well.  For an outline of the key elements in both approaches, please see the latest edition of our Excelsior newsletter or visit our web site at www.kkalis.com where it is shown on the home page.

		ACLI 2009 ANNUAL CONFERENCE FOUNDATION        FOR THE FUTURE
		OCTOBER 18-20		CHICAGO, IL
It’s not too late! You can still register for ACLI’s 2009 Annual Conference—Foundation for the Future—the premiere financial and life insurance industry meeting covering the important issues facing us today. Registration details and updated program information can be found online at www.acli.com/ann2009.

 

Paul Volcker Backs Optional Federal Charter

 

It has been widely reported that Former Federal Reserve Board Chairman Paul Volcker has come out in favor of an  optional federal charter for insurance companies and that the House Financial Services Committee could look at the issue in 2010.

 “Bring them – at least the big ones – under a framework,” Volcker said last week.  “I  think a lot of the big insurance companies would welcome a national charter and the consistencies that would provide. I don't want to permit them into the safety net. But I do think that they ought to be regulated in a consistent way.”

 

Consult with Cailie!

 As most of you know by now, Cailie Currin, President of Currin Compliance Services, LLC of Greenwich, NY and West Des Moines, IA, and the Kenneth J Kalis Company are working together to provide IMSA services to eligible companies.  In addition to being IMSA's latest Qualified Independent Assessor, Cailie is successfully using her experience as an insurance lawyer and former NY State regulator to help her many clients with a wide variety of product compliance and other broader compliance services.  You can learn more about Cailie, her company and services provided by visiting her web site at

  An even better way will be to talking with Cailie at the AICP's 22nd Annual Conference October 4-7, 2009 at the J. W. Marriott Desert Ridge in Phoenix, ( Association of Insurance Compliance Professionals) where she will be a sponsor and speaker.  In addition to her own materials on product compliance and other services, she will have some IMSA materials that you may find of interest.  Please stop by and say "hello."  You'll be glad you did.

 Later in the month, Cailie will be a sponsor at the LHCA fall meeting in Des Moines, hosted by FBL Financial Group, CUNA Mutual Group and Michael L. Granger, P.A.   Cailie is a member of the Executive Council of the LHCA   Be sure to get to know her and ask for her materials on IMSA as well as the many other services Currin Compliance offers.

 

Best Practice of the Month – Replacements

Replacements are always an important topic for companies and regulators.  Several of the IMSA standards address them specifically, and at last month’s webinar on replacements, we heard about some best practices companies are using today to protect customers’ best interest via rigorous replacement monitoring.

One company uses a threshold o 10 or more new policies with a replacement rate of 30% or more.  Replacement trending is monitored by a number of categories:

Product

Distributor

State

Distribution Channel

Tax Status

Fixed or Variable

When producers exceed company standards they can be referred to the DARC (Discipline Agent Review Committee) where a wide range of sanctions can be applied.  Interested in trying something like this at your company?  Listen to and view the whole presentation on IMSA’s web site in the members’ section at www.imsaethics.org.

 

 

 

 

What We’re Up to at the Kenneth J. Kalis Company

 We’re redoing our web site to make it more current and more responsive to the issues you are now confronting.  To this end, we’ve recast our home page with the changes to the IMSA process that will go into effect in 2010, including both the alternative attestation approach to renewing your IMSA membership and the streamlined reinstatement process for former members who are seeking to rejoin IMSA.  Also, we have added a Frequently Asked Questions segment where we will deal with question you raise that others may be interested in.  Please take a look and let me know what you think.  www.kkalis.com 

We are also currently in the midst of an independent assessment and in working with a company to use the IMSA process to create a rigorous, risk-based compliance function.  This is proving to be great fun and an excellent use of the IMSA standards.  Our marketing efforts continue as we reach out to many member companies, former members and companies who have never joined IMSA.  Our hope is that as the economy strengthens IMSA’s membership will grow considerably.

Besides all this, we are working on the IMSA Standards Development Committee on some key issues with some of you, and hope to see many more of you at the AARP/IMSA Social Media Summit in Washington on October 8. 

IMSA?……..Ken Kalis!   

 

*********************************************************************************************

And that’s it for our September Update.  Thank you for your continuing interest in IMSA, ethical market conduct, and the Kenneth J. Kalis Company.  Please let us know if we can be of help in any way, call 352-505-0705 or email kkalis@kkalis.com.  Hope to see you soon. 

God bless you all.

Ken Kalis
For I know the thoughts that I think toward you, saith the LORD, thoughts of peace, and not of evil, to give you an expected end. Jeremiah 29:11

352-505-0705

 

IMSA?

……..Ken Kalis!