Worksite marketing can be profitable for those who invest the time and energy in learning how to efficiently and effectively penetrate it. However, the potential rewards of successfully working in the worksite marketing arena sometimes blind agents and companies to the potential compliance risks inherent in it. Though many of these potential compliance risks are similar to those companies must deal with in individual markets, a number of risks have a unique twist that can elude agent and company attention.
Sales process risks
Enrolling employees requires an insurance license and proper training as an insurance agent. Enrollers should be licensed as insurance agents and appointed by the company prior to actively engaging in enrolling employees.
A company should exercise care that enrollers are vetted and checked to ensure they meet the company’s normal standards for agents. Lower standards for enrollers may raise questions about the company’s selection policies and practices and increase the risk that enrollers will be unsuitable or inappropriate appointments.
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Enrollers should receive adequate training to properly carry out their roles as agents. Though their job duties may sometimes appear to be primarily administrative, they must be knowledgeable about the products they sell and the companies they represent, and be able to answer questions appropriately.
In some cases, this training is the general agent’s responsibility, and in others, the company’s. The general agent’s contract should spell out who is responsible. Companies should periodically check the level of knowledge and skill of enrollers by monitoring application errors, complaints and interviews with enrollers.
During the sales process, pressure from employers to have employees participate in the program can have ERISA implications. The general agent or enroller should be sensitive to the sales environment and provide feedback to the employer regarding what is and is not appropriate. Enrollers should never suggest that participation is a requirement for employment, a company benefit or a company plan or program.
Involving current or former employees in the sales or enrollment process to provide recommendations is often inappropriate because of the potential for providing inaccurate information or for those employees becoming involved in the solicitation of a product they are not licensed to sell. The general agent should never pay a company employee to participate in the sales or enrollment process since it gives the appearance of a rebate or kickback. Participation of company employees in the sales process can also give the impression that the plan is a company plan, creating ERISA implications.
The employer should never provide sales materials or personalize approved sales material since this can have ERISA implications by making it appear that employment requires purchase or that the worksite program is a company plan.
The enrollers should be fluent in the language spoken by the employees so they can answer questions and provide proper disclosure of the features, benefits, costs, etc. of the products being sold. Differences in language often are the basis for claims of improper or inadequate disclosure.
In a worksite marketing situation, the greater the complexity of the product or the administrative process, the greater the likelihood of improper disclosure. The products sold should have limited, easily explained features, be guaranteed or simplified issue, and have simple administrative procedures.
The quality of the written sales materials provided to employees is directly related to the risk of improper or inadequate disclosure. Companies are wise to develop sales material especially for worksite sales. Specially developed sales materials are usually more effective at managing compliance risk than general application sales materials. General agents and companies should caution enrollers not to develop and use their own unapproved sales materials. These include banners, posters, meeting handouts, etc.
Conducting a need-based sale is difficult in worksite markets. There is often little time available at enrollment, and based on the market, a reluctance to follow up at a later date. The lack of information about the employees’ financial situation and needs suggests that clear, logical guidelines are needed regarding how much should be sold. For example, basing the amount of coverage to be provided on the income of the employee can help reduce potential suitability issues, but does not eliminate it. Companies are wise to caution employees that their life insurance purchase may not meet their entire need and that they should have their financial needs evaluated.