A Guide to Gathering Contract Information

As regulation of the fixed indexed annuity industry increases, state insurance departments have focused on replacement practices. Recently several states, including Arkansas, Florida, Minnesota, Missouri, and Nevada, have required that replacement and annuity suitability forms be used when replacing a life insurance or annuity product. Other states are sure to follow. Additionally, many life insurance and annuity carriers require an annuity comparison on all replacements, and more carriers are moving in that direction.

Of course, the first thing that should be done by agents is to look at alternatives to replacing the policy. Unless the annuity owner is gaining a substantial and needed benefit not available with their current policy, replacing an existing contract can harm a client financially. With replacements come the cost of acquisition and possibly surrender charges. These costs are passed on to consumers. So, if it is possible to make the existing annuity work by exercising its features, annuitizing or changing allocations, these measures should be considered first.

In the event that you are replacing business, filling out additional forms may seem like nothing more than a tedious extra step to be taken when preparing an annuity application. It should not, however, be taken lightly. It is vitally important to gather complete information from your clients about their insurance and financial needs to establish reasonable grounds for making a recommendation and, equally important, for ensuring that the case will be issued in a timely manner. Failure to gather the appropriate information and accurately fill out the appropriate suitability and replacement forms can result in a delay in the case being issued, an outright rejection of the case by the insurance carrier, and, in some cases, regulatory action against your license.

Simply ensuring that the proposed replacement is in your client’s best interest is not enough. As an agent, you must not only document that a replacement provides a substantial benefit to a client, but you must also document it properly on the required forms. To do so, an agent must be very familiar with both the old contract and the new one and, again, be able to demonstrate the benefits of a replacement using the required forms.

If you have taken a look at the requirements of the newer forms, I’m sure you have noticed that the information that they request can be both detailed and lengthy. If you are contemplating a replacement, the annuity comparison form will often ask for specific details about the annuity being replaced. Such details usually include the costs, features, benefits, and riders. As a result, it is critical that agents understand the old annuity before replacing it.

So how does an agent gather the necessary information about the old annuity? Usually, a client statement will only provide limited information about account values, surrender values, and the issue date. If possible, review the actual annuity contract and rider information to determine as much about the policy as possible. When feasible, encourage your client to gather as much information as they can.

If you cannot gather the necessary information from the annuity contract and statements, due diligence requires that you contact the carrier to ascertain the details of the old annuity and how it works. Additionally, carriers are prohibited from releasing information about an annuity unless the client gives permission. Calling the carrier with the client in the office is often the best way to collect the necessary information about the annuity. Not only will you be able to uncover the information you need to determine whether a replacement should be recommended, but it also gives you a great opportunity to build credibility with your clients by demonstrating your expertise in the annuity arena.

The following is a general outline of how the call should go:

• Locate a recent client statement. It will have the contact information for the carrier and allow you to identify the annuity by its contract number.
• Call the carrier, introduce yourself and explain that you are calling on behalf of your client who is present for the call. The carrier will speak with the client to verify the client’s
  identity before releasing any information. So, it’s imperative that the client be present.
• Once the carrier has confirmed the client’s identity and received permission to speak with you, explain that you need to gather information about the annuity the client owns and identify the annuity by the contract number.
• Make sure to have a list of questions prepared to ask about the annuity and a form to record the carrier’s responses. (A form with a list of such questions can be provided by your Creative Marketing Annuity Sales Consultant). Questions should be designed to gather information about the annuity’s issue date, surrender charge period, costs and expenses,
  withdrawal provisions, death benefit details, information about waivers and riders, crediting or investment options, and any other details needed to evaluate replacement or fill in the required replacement forms.
• Record the answers and use the information to evaluate whether a replacement is appropriate and to fill in any suitability or replacement forms.
• As an additional measure, when submitting a case, attach a copy of the most recent statement for the annuity being replaced as well. This will help the carrier positively identify what is being replaced and may result in getting your case issued more quickly.

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Developing the skills to make effective calls to carriers with your clients will help give you an edge when getting business placed, and the guidance provided here will help. If you have any other questions about this process, don’t hesitate to contact your Creative Marketing Sales Consultant.

Jeffery V. Rowe, JD
Advanced Marketing, Compliance Consultant

Jeff recently joined the Advanced Marketing team and oversees the compliance process for Creative Marketing. He also keeps the company current on developing legal and compliance issues. In the past, Jeff has worked as a practicing attorney in the professional liability arena and draws upon his legal skills to offer a problem solving approach to Creative Marketing’s challenges. He is no stranger to the agent’s side of the table having been a producer and owner of his own financial services firm. Jeff’s goal is to help agents in the field run safe, legal and highly profitable businesses. He currently holds both securities and insurance licenses.

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