Consumer protection issues are always a concern for state insurance departments -- but over the past few years, much of the focus has narrowed in on the sale of life insurance and annuities, with particular attention paid to the "senior insurance experience." With that in mind, it is critical that agents and insurers understand the current regulatory environment as it relates to senior designations and certifications.
One of the key areas that the National Association of Insurance Commissioners (NAIC) identified for a model regulation opportunity culminated in the adoption of its "Model Regulation on the Use of Senior-Specific Certifications and Professional Designations in the Sale of Life Insurance and Annuities" in September 2008. Model 278 provides standards designed to protect senior consumers from misleading and fraudulent marketing practices that could occur when "senior-specific" certifications and professional designations are used in the life insurance and annuities sales process. It is interesting to note that neither the NAIC's Model 278 nor the earlier-adopted North American Securities Administrators Association model law actually specifies which designations are permitted and which are unacceptable. Rather, both set forth standards for the continued use of terms that are neither misleading nor confusing, and which serve the spirit of senior consumer protection.
California's Assembly Bill 2150
Some states had already taken steps to address this issue before NAIC adopted the model, establishing directives or regulations similar to the final content. In fact, about 10 states took such steps in 2008, including California, where Assembly Bill 2150 became effective on Jan. 1, 2009. This bill enacted a new section of the Insurance Code, which defines a senior designation as "any degree, title, credential, certificate, certification, accreditation, or approval that expresses or implies that a broker or agent possesses expertise, training, competence, honesty, or reliability with regard to advising seniors in particular on finance, insurance, or risk management."
The California Department of Insurance (CDI) enforces prohibitions on such designations, but does offer specified exceptions for their use. Under the resulting comprehensive and detailed set of rules, with specifics not incorporated in Model 278, producers were required to stop using senior designations with seniors, defined as those age 65 or older, on Jan. 1, 2009, unless all of the following had occurred:
- The department had approved the designation or determined that the designation could continue to be used through June 30, 2010.
- The producer received at least 75 hours of education on topics relevant to the sale of insurance to seniors, as certified in a letter to the agent from the organization that issued the designation to the producer.
- The producer had been licensed for at least four years to sell the types of insurance with which the designation is associated.
A list of designations that have been approved or determined as acceptable for use through June 30, 2010, along with the above-mentioned conditions and other pertinent information, appears on the "senior designation" page of the CDI website.
Regulation, state by state
Substantial regulatory activity continued in 2009, with roughly 20 additional states adopting new or revised provisions. Most states essentially followed the provisions of Model 278, although some opted for related regulatory activity that also supported this aspect of senior consumer protection. While the pace of Model 278 adoption slowed in 2010, Connecticut, South Carolina, West Virginia, Wyoming, and the District of Columbia all finalized their regulatory process last year. (As of printing, there was still activity pending in 2010. States that had begun, but not yet concluded, their legislative or regulatory process included Kansas, Michigan, Nevada, Pennsylvania, and Tennessee.)
Wyoming is one example of a state looking to Model 278 with its adoption of a new Chapter 62, effective April 27, 2010. The newly created chapter incorporates the model's standards regarding the use of senior designations and certifications, and also acknowledges the use of job titles within organizations that a financial securities regulatory agency has licensed or registered. Wyoming's provisions -- in line with Model 278 and many other states -- recognize that some titles are not deemed a certification or professional designation, so long as they are not misleading and are used either to indicate a person's seniority or standing within the organization or specify an individual's area of specialization within the organization.
Regulators, state legislatures, and consumer groups have certainly voiced concern over the past few years about the possibility of misleading practices associated with certain designations and certifications. Clarifying the conditions under which the term "senior" is permitted within the insurance industry can be considered a standard for best practices. Of course, there are challenges that come with this process, including learning the nuances that define each state's requirements, assessing the next steps to take, and ensuring compliance. In preparation for an anticipated rollout adoption of Model 278 or a similar set of provisions across all states, it's important for agents and insurers to monitor new adoptions, as well as revisions to existing requirements.
Kathy Donovan is senior compliance counsel of insurance at Wolters Kluwer Financial. She can be reached at email@example.com.
More articles on selling to seniors from ASJonline.com
Protecting Seniors from Financial Abuse: The Rules and Regulations
AARP Q&A: A Primer for Working with Senior Clients
How to Sell to Every Type of Senior
What Does Model 278 Say?
The prohibited use of senior-specific certifications or professional designations includes, but is not limited to:
(a) Use of a certification or professional designation by an insurance producer who has not actually earned or is otherwise ineligible to use such certification or designation;
(b) Use of a nonexistent or self-conferred certification or professional designation;
(c) Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training or experience that the insurance producer using the certification or designation does not have; and
(d) Use of a certification or professional designation that was obtained from a certifying or designating organization that:
(i) Is primarily engaged in the business of instruction in sales or marketing;
(ii) Does not have reasonable standards or procedures for assuring the competency of its certificants or designees;
(iii) Does not have reasonable standards or procedures for monitoring and disciplining its certificants or designees for improper or unethical conduct; or
(iv) Does not have reasonable continuing education requirements for its certificants or designees in order to maintain the certificate or designation.