Imagine it is May 9, 1924. Calvin Coolidge is president and J. Edgar Hoover will be appointed to head the Bureau of Investigation the next day. There is a slight recession, it's a presidential election year, and Metropolitan Life Insurance Company, in one of its many public policy ads of the first half of the century, is urging people to vote. Perhaps most relevant to some, however, it has been three years since the New York Insurance Department sent letters to life insurance companies warning them and their employee agents against high pressure methods.
The department has forbade bonuses, prizes, rewards, and all increased or additional commissions or compensation for agents and brokers based upon the volume of any new or renewed business or policies written.
However, cheap items and tokens, like a pin, a ribbon or perhaps even a tin loving cup, are allowed as recognition of merit to keep the agent work force spirits up.
Results have been encouraging since the directive — for a while. Some life insurance companies' behavior apparently slipped to the point where they were misunderstanding, or worse, even ignoring the department’s rules.
Not a good idea in New York, then and now.
Silver tea services, briefcases, fountain pens and Eversharp pencils, among other things forbidden as agent prizes may be making a comeback, and that could be a problem, according to New York insurance superintendent at the time, Francis Stoddard Jr., in a letter to all state-authorized life companies.
However, Stoddard suggested — oh so slightly — that he would allow some leniency in light of unnamed conditions and allow for a sliding scale of prize values depending on the scope of the contest, the amount of premiums involved, the frequency of contests, and other factors.
“I am of the opinion that the phrase in [insurance code] § 97 ‘small intrinsic value’ should not be given a narrow interpretation in view of present day conditions,” he wrote.
But what New York is most concerned about are new abuses that go beyond the giving of a special pen or a quality umbrella (were there any other kind, then?) to life insurance agents.
This may be a good time — before heading to the NAIC summer meeting in Indianapolis; life industry meetings in New Orleans, California, Fort Lauderdale and Cancun; or to all those far-flung International Association of Insurance Supervisors (IAIS) meetings in Brussels, Basel, Bonn, Gibraltar and Paris — for insurance professionals to take heed.
Recent tendencies “toward making conventions more and more pleasure outings and less of business conventions,” have become apparent in the life insurance arena, Stoddard warned.
The New York superintendent then strongly cautioned life insurers against pleasure outings as a reward based on the volume of any new or renewed business.
“Conventions must be held at places where it is apparent that the object is to attend to the business of the company and not to subordinate such business to pleasure outings,” the department ruled.
Okay, then maybe Indianapolis is okay.
Also, there shall be no expense-paid pleasure side trips which interfere with the business of the convention, Stoddard warned.
Any violation of any of the provisions of the New York Insurance Law makes any foreign or domestic company, or any person guilty of such violation subject to prosecution, the superintendent warned.
Non-domestic insurers who also do not comport with the provisions will not be permitted to do business within the state, he warned.
This directive has been subsequently withdrawn. And Stoddard left office a month later.
It’s been 90 years since Stoddard issued his warning. Today, New York is a lot different--but it still is a land of strong consequences, with officials like Eliot Spitzer, who took down AIG's CEO, and Ben Lawsky, the state’s first superintendent of financial services, who goes after international banks and wins big fines, courted top life insurance CEOs in his first week in office to help him broker deal for a $100 million fund for short-changed annuity policyholders left behind by a company that failed two decades ago, or calls for, against the good graces of the NAIC leadership, a national moratorium on captive insurance transactions -- all before breakfast (or an early lunch).