Advanced life insurance sales professionals must “get comfortable” with oversight by the National Association of Securities Dealers, warned the former president and CEO of John Hancock Life Insurance Company.
Equally important, said Jim Benson, currently president and CEO of Clark Benson, Southborough, Mass., the advanced life insurance professional must upgrade the technology he uses to interact with clients as “financial services convergence” continues.
But where the advanced life professional may prevail is that “face to face representation will always be important.
“Two things that cannot be programmed into a computer are the ability to cultivate personal relationships and the ability to persuade an individual to take action for their own best interests,” Benson said. “Those capabilities are clearly the product of human beings, particularly well-trained human beings like ourselves.”
This “distribution convergence” means that the advanced life insurance sales professional must now compete with employees of brokerages and banks, Benson explained. He spoke at the annual meeting of the Association for Advanced Life Underwriting here last month.
“I don’t think the NASD understands the insurance business, and I am sure we don’t necessarily understand the NASD,” Benson said.
For example, he explained, when an advanced life insurance sales professional talks of variable universal life, “we like to think of an insurance policy with some separate accounts.”
But when NASD officials hear of variable universal life, “they think of it as a security that has insurance features,” he said.
Benson explained that while the insurance sales professional “has a different point of view, the bad news is that we have to follow the NASD rules.”
“I am not sure we are going to be able to convince them to change all the rules, to take into account the complex nature of insurance transactions,” Benson said. “But we have to live within the rules.”
Benson noted that Mary Schapiro, whom he described as the “activist” new chairman of the NASD, thinks that everything in the financial services industry is a security.
“And she’s probably right,” Benson said. “If we are registered reps, as we ought to be, we should think of ourselves as a securities business. And we are going to have to figure out how to understand and streamline this product. This is the responsibility of the broker-dealer [we are associated with] as well as ourselves to understand.”
Benson said the broker-dealer with which an advanced life professional is associated “has to be a better teacher of what this is like and has to streamline compliance to help us get through a complex transaction.”
“The broker-dealer has to be in the business facilitation business, not the business prevention business,” Benson said.
He said many of the carrier-sponsored broker-dealers that are interested in selling insurance and have no interest in selling products and services in the broader financial services community “have big problems.”
“So the concern of the NASD for us as an industry, on the insurance side of the industry, is to get comfortable with the NASD,” he said.
Regarding technology, Benson said the insurance industry has had “a lot of issues with technology over the years because the insurance industry by and large has not invested in technology as fully and as quickly as the securities industry.”
“We have done reasonably well with illustrations, we have done OK with life model systems, but we have not done as well as we should have with technology,” Benson said.
But there are benefits, he said, noting that the industry “dodged a bullet in 2000 with the Internet bubble,” referring to the difficulties the securities industry had because of online sales and use of e-mails by representatives and analysts that were used by regulators to take enforcement action against employees as well as the brokerages that employed them. “We are not monitored as a result,” he noted.