Financial advisor, Daniel La Tour, has lost his contract with Empire Financial Group for selling life insurance sales over the Internet.
In January, Empire informed Mr. La Tour, a Montreal advisor who holds permits in several provinces, that it had decided to cancel his contract because the company wants advisors to meet with clients in person.
After getting a quote from Mr. La Tour’s website www.justincaseinsurance.com, his clients would receive an application form by mail to complete, sign and mail back. Mr. La Tour would then countersign the document and return it to the insurer, Richard Charette, sales manager at Empire told the Insurance Journal. Empire objected to this approach.
Surprised by the insurer’s decision, Mr. La Tour examined his contract, but failed to find any bans on doing business over the Internet. “I read my contract and there is nothing that prohibits me from dealing over the Internet. We are not obliged to carry out face-to-face transactions,” he explained, adding that he helps his customers fill in their forms over the telephone or by e-mail.
Mr. La Tour has sold life insurance for six years. He has been selling policies for nearly four of those years over the Internet for insurers such as Empire. He says he works with about 20 companies who are aware he works over the Internet. Mr. La Tour says that he was stunned by Empire’s decision to cancel his contract and strongly resents the way he was treated. “It’s not a good way to maintain relations with independent brokers.”
Insurers nix Internet sales
However, insurers contacted by The Insurance Journal were unanimous that clients must be met with in person, not only to ensure that they are sold the right product, but also to visually verify their health status. “Mr. La Tour was insuring people he had never seen. He doesn’t know the physical condition of his clients and it shows in his work,” said Mr. Charette, sales manager at Empire.
Manulife Financial also stressed that meeting with clients is an absolute priority. The insurer refuses to issue a policy if this requirement is not met. “We do not endorse or allow life insurance sales over the Internet by an advisor who has not met a client, face-to-face. This process ensures that advisors have met, know and can identify who is being insured, that they witness signatures, that they deliver the correct marketing materials…,” said Tom Nunn, assistant vice-president, media relations.
These views were echoed at Sun Life Financial where such quotes would also be turned down. “It wouldn’t work at Sun Life either because the company prefers conventional networks. Internet sites are fine for consultation, but the clients must be met before a transaction,” Hélène Soulard, senior advisor, public affairs and communications, pointed out.
Still, Mr. La Tour is crying foul. The advisor said that ultimately the onus is on the client to provide accurate information in their declaration, which is a guarantee in itself. “One of Mr. Charette’s main objections is that I haven’t met my clients personally and that consequently I don’t know about their health. But this will all be set out in the client’s declaration.”
Insurers need all the facts
On the Internet discussion site, For Advisors Only (FAO), Jim Bullock, registrar at the Peel Institute of Applied Finance, describes a situation he experienced when he was active in life insurance. The insurer with which he had placed a policy contacted him to find out why it had not received any information regarding the fact that one of his new clients was a paraplegic. “I told him I had never met the client,” Mr. Bullock admitted, explaining that he used a fax machine to sell about 75% of his policies at the time. In the end, the two parties agreed that to avoid such a recurrence, Mr. Bullock would indicate on his application if he had not met with the client.
Mr. Bullock told The Insurance Journal that he supported Internet sales, as long as the insurer is aware of it. He said it may be risky for the insurer not to know. “Insurance companies, when they design the rates, assume they have all the information they need, for them and for the reinsurer, which includes the field underwriting of the agent,” he explained. Not mentioning that policies were written only via the Internet may change the picture.
Mr. Charette considers the signature issue a major headache. He admits that advisors’ contracts do not explicitly stipulate that they must absolutely meet with their clients, but they are asked to sign the client’s insurance application as a witness. “There’s nothing in the contract that spells this out, but we ask them to bear witness, and this implies that they must be present. They have to witness that they saw the person and that the answers given are correct,” said Mr. Charette. Of the 12 proposals received, none was written by hand by Mr. La Tour, Mr Charette said. “He signed as a witness without having been there.”
Welcome mat out
Empire has not completely closed the books on accepting applications via the Internet. Mr. Charette pointed out that the insurer may accept such applications in some cases, particularly if the client is known by the advisor, but lives a good distance away. The insurer has already accepted these kinds of applications, he added. But, it is out of the question that 100% of an advisor’s work be conducted this way. “In the end, I told him that if people can apply via the Internet, there will no longer be a need for brokers or MGAs,” Mr. Charette said.
Mr. Bullock agrees. He learned from his own experience that “maybe when they pay a commission to a broker, they expect to receive all the services from the broker, including the field underwriting.”
Although the insurer’s decision applies nation-wide, Empire hasn’t declared Mr. La Tour a persona non grata. They say they are willing to work with him again, if he returns to traditional methods.
Mr. La Tour says he’s not interested because he wants to continue selling via the Internet. Also, he added that advisors should have access to all the sales tools available.
For Empire, however, Mr. La Tour is still a little too ahead of his time. “It’s possible that one day we can organize our systems so as to do business on the Internet, but we’re not there yet,” Mr. Charette concluded.