The Opening Interview
Usually the first substantive step in the sales process is the opening interview. Its principal function is to continue to develop the rapport created in the approach step. The ethical principles governing full disclosure require that the prospective client be fully apprised of the agent’s status as an advocate for a financial product or products.
To be ethical, agents must share identifying information with the client — including the agent’s status as a stockbroker, property & casualty or life insurance agent, and if the agent represents a particular company, the status as a representative of that company, as well as any other relevant business arrangements.
Often the prospect needs to be made aware of his or her present situation before taking steps to improve it. Any effort to outline risks (premature death, outliving one’s income, etc.) should be balanced and represent realistic scenarios. When using graphics such as income tax bracket charts, make sure they do not mislead the prospect when presented without accompanying descriptive text.
If you choose to use testimonials or endorsements, they must be genuine, reflect the endorser’s current opinion, and any financial interest held by the endorser — for example, that it is a paid endorsement — must be disclosed.
The Fact-Finding Interview
Sometimes a fact-finding interview is scheduled as a separate meeting; but just as often it flows as a natural extension from the opening interview. The object is to gather sufficient information to analyze the client’s needs and support a recommendation that is suitable to the client’s situation — consistent with his or her objectives and tolerance for risk.
The agent has an ethical and legal duty to make a diligent effort to determine all of the client’s circumstances that are relevant to his financial situation, including current finances as well as hopes and dreams.
Florida Law — Testimonials & Endorsements
Florida regulations require testimonials and endorsements by third parties to be genuine, represent the current opinion of the author, be applicable to the policy advertised, and be accurately reproduced. A “spokesperson” is anyone who has a financial interest in the insurer, is in a policy-making position, or is in any way directly or indirectly compensated for making a testimonial or endorsement.
(1)Testimonials and endorsements used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial or endorsement, makes as its own all of the statements contained therein. When a testimonial or endorsement is used more than one year after it was originally given, a confirmation must be obtained.
(2)A person shall be deemed a “spokesperson” if the person making the testimonial or endorsement:
(a)Has a financial interest in the insurer or a related entity as a stockholder, director, officer, employee or otherwise; or
(b)Is an entity formed by the insurer, is owned or controlled by the insurer, its employees, or the person or persons who own or control the insurer; or
(c)Is in a policy-making position who is affiliated with the insurer in any of the above described capacities; or
(d)Is in any way directly or indirectly compensated for making a testimonial or endorsement.
(3)Any person acting as a spokesperson who performs any of the following acts in an advertisement shall be considered soliciting an insurance product, and such person shall be a licensed insurance agent pursuant to the Florida Insurance Code:
(a)Solicits insurance or procures applications; or
(b)Engages or holds himself out as engaging in the business of analyzing or abstracting insurance policies; or
(c)Engages in counseling, advising, or giving opinions to persons relative to insurance contracts; or
(d)Performs an invitation to contract, except where performed by a company officer in a manner which does not violate Section 626.112(4), Florida Statutes.
(4)The fact of a financial interest or the proprietary or representative capacity of a spokesperson shall be disclosed in the introductory portion of the testimonial or endorsement with equal prominence. If a spokesperson is directly or indirectly compensated for making a testimonial, such fact shall be disclosed by use of the phrase “Paid Endorsement” in a type style and size at least equal to that used for the spokesperson’s name or the body of the testimonial, whichever is larger.
(5)The disclosure requirements of this rule shall not apply where the sole financial interest of a spokesperson consists of the payment of union “scale” wages required by union rules for TV or radio performances.
(6)An advertisement shall not state or imply that an insurer or a policy has been approved or endorsed by any individual, group, society, association, governmental agency, or other entity, unless such is the fact, and unless any proprietary relationship between an organization and the insurer is disclosed.
(7)When a testimonial refers to benefits received under a policy for a specific claim, the specific claim data, including claim number, date of loss, and other pertinent information shall be retained by the insurer for inspection for a period of four years or until the filing of the next regular report on examination of the insurer, whichever is the longer period of time.
(8)The provisions of subsections (2), (3) and (4) shall not apply to a written endorsement which does not describe specific benefits, coverages or premiums and which is made by an association that has been in existence for more than one year, is formed for purposes other than soliciting insurance, has a valid governing constitution and by-laws, and has as its principal purpose some goal other than providing or soliciting insurance.
Privacy of Client Information
Federal law requires financial institutions — including insurance companies, banks, and brokerage firms — to safeguard the privacy of client financial information. The Financial Modernization Act of 2002, also known as the Gramm-Leach-Bliley Act, limits the ability of financial institutions to share non-public financial information. Florida’s Department of Financial Services complies with this federal mandate.
In general, the rules require insurers to notify policyholders of their privacy rights when the relationship is established, and annually thereafter. Customers must be given the opportunity to “opt-out” of information sharing for marketing and other purposes not related to the execution of the contract.