In 2016, the CLHIA reference document “the Approach” was updated to help address “Fair Treatment of Customers” (FTC) through disclosure and education of customers. This document describes needs based selling practices that are intended to safeguard the interests of life and health insurance consumers.
Summarize your advice with a “Reason Why” letter:
The new document includes a recommendation that advisors provide their clients with a “Reason Why” letter following a sale. The letter is a brief understandable summary of the client’s stated wishes, the advice provided to the client by the advisor, and the reason why the product meets the client’s needs. The intent of sending a “reason why” letter is to support sales suitability, promote increased financial literacy, and help to confirm that an advisor is acting in the interests of a client.
The letter should be provided to clients no later than the time of policy delivery. They can be sent by email or delivered in hardcopy format. The Reason why letter helps protect you and your business; it builds trust with your clients and is an important aspect of sales suitability documentation. Resources are available to help guide you in writing these letters. Check out our Reasons Why FAQ for more information.
IVIC Suitability Needs-Based Sales Practices:
This reference document builds on the needs-based sales practices outlined in “the Approach”. Specific to Independent Variable Insurance Contracts (IVICs), this document outlines what information an advisor needs to have to be able to advise that an IVIC meets a client’s needs and to subsequently advise on an IVIC’s discretionary features. Sample questions are provided that an advisor can use to gather this information. To recommend an IVIC, an advisor needs to know what interests are being insured, income levels, investments, and the potential need to make their financial resources accessible. Advisors can review the best practices outlined in this document.
Remember,
Good Business is Compliant and Compliance Matters!