Deloitte Warns Life Insurers to Get a Jump on Internal Audits

Life insurers should try to find and fix their own sales and communications problems before examiners from FINRA and the U.S. Department of Labor show up.

That’s the advice of analysts at a Deloitte regulatory strategy team given in a new regulatory outlook report, which talks about the need for insurers to examine their own sales and marketing operations.

What It Means

You and the companies you work with may be more likely to get questions about sales and marketing strategies.

Regulators’ Approach

Agents who find the rush to Bermuda confusing have company: many regulators “just want to have a window into the transactions, so they can monitor of their domiciled companies,” according to the report.

Analysts have also included a section on the U.S. Securities and Exchange Commission’s new Regulation Best Interest approach to setting sales standards for life insurance policies and annuity contracts.

“FINRA has noted that 2021 was the first full year that it examined firms’ compliance with the full scope of Reg BI-related measures, and in a report in 2022, it delivered a long list of shortcomings and oversights from imprecise guidance to inadequate controls, staff preparation, and training, as well as failure to comply with the conflict-of-interest obligation,” the Deloitte analysts report.

FINRA and other agencies “are now expected to act more forcefully against perceived lax performance,” the analysts add.

“Now is the time to get ahead of problems, through internal audits of sales practices and  employing technology to ferret out high-risk sales or communications that could be problematic, especially any patterns of misconduct, and addressing any instances of these with urgency,” the analysts say. “Well-managed internal company controls that ensure follow-through in all stages of the sales process along with meticulous record-keeping will be a necessity in 2023.”

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