Ethics: Three Rules for Avoiding Trouble

Ethics: Three Rules for Avoiding Trouble Regence

Rule 1. Know the Law • Doing Business • The Requirements of a Licensed Profession • Providing Competent Advice on Regulated Products

Finding the Law • Doing Business • corporations.utah.gov • sba.gov • Licensed Profession • www.insurance.utah.gov/legalresources • Title 31A, Chapter 23a—Insurance Marketing • R590-154 Unfair Marketing Practices Rule • R590-192 Unfair Accident and Health Income Replacement Claims Settlement Practices Rule • R590-207 Health Agent Commissions for Small Groups • Bulletins • Utah Supreme Court Case Law: Unlicensed can’t collect?

Finding the Law • Providing Competent Advice on Regulated Products • Carriers & Plan Documents • www.insurance.utah.gov • Chapters 8, 22, and 30 of the Insurance Code • http://cciio.cms.gov

Finding the Law • Tips • Figure out how subsections work together • Make sure you have confidence in the sources you use • Don’t be afraid to say what you don’t knowor that you need to look into the issue further to be able to give an answer

Following the Law • Trust Account: Not reconciling, failure to have a trust account, misuse of the trust account • Licensing: Agency not licensed-needs to be the same name as on marketing material, appointed agents not the same as UID's records, failure to update contact information within 30 days, failure to disclose administrative action or criminal charges to the UID within 30 days. • Forgery: Producers signing for the applicant-policyholder. • Failure to disclose important information in relation to a policy, example - hidden costs, penalties for early withdrawal, etc. • Selling a product that is unsuitable for the customer • Unfair inducement-offering something of value (over $3, soon to be $25) with strings attached • Cross-border sales • Unsuitable annuities for the elderly (i.e., having the elderly in their 80's do a reverse mortgage to purchase an annuity)

Following the Law • Misrepresenting to the Insurer on the application. • Not doing a 1035 Exchange to replace an annuity. • Having the husband (licensed revoked) have his wife sign the applications, when the husband actually did the solicitation and made the sale. • Unauthorized insurance • Using unlicensed producers or CSRs • Delay of recorded documents, • Fraudulent insurance • Use of unlicensed TPA's • Entities selling without a Certificate of Authority • Operating un-licensed agencies • Failure to report criminal/administrative background

Following the Law • Ignorance • Fraud • Mismanagement • Incompetence • Failing to Put Client’s Interests First

Following the Law • General Rules for HB 333 • Benefit/Service must be specified or directly related to insurance contract • Advice is generally permitted; Administration is not except for COBRA • Benefit/Service can only be given for a purchased insurance product • Social courtesy is permitted if not quid pro quo with $25 safe harbor

Written Disclosure for Noncommission Fee 31A-23-501 (2) A licensee may receive from an insured or from a person purchasing an insurance policy, noncommission compensation if the noncommission compensation is stated on a separate, written disclosure. (a) The disclosure required by this Subsection (2) shall: (i) include the signature of the insured or prospective insured acknowledging the noncommission compensation; (ii) clearly specify the amount or extent of the noncommission compensation; and (iii) be provided to the insured or prospective insured before the performance of the service. (b) Noncommission compensation shall be: (i) limited to actual or reasonable expenses incurred for services; and (ii) uniformly applied to all insureds or prospective insureds in a class or classes of business or for a specific service or services. (c) A copy of the signed disclosure required by this Subsection (2) must be maintained by any licensee who collects or receives the noncommission compensation or any portion of the noncommission compensation. (d) All accounting records relating to noncommission compensation shall be maintained by the person described in Subsection (2)(c) in a manner that facilitates an audit.

Staying Abreast of Law • Amends Qualified Plan for State Contractors • $1000/$3000 Deductible • 60% Employer Contribution for HDHP • Aligns NetCare with Federal Reform • Responsibility for Conversion Notice has Shifted to Insurers • Limits on Available Abortion Coverage • Life, Health, Fatal Defect, Rape or Incest • Grace Periods • Individual • Not in force during grace • Terminated as of last day paid in full • Group • 30 days • In force during grace • Terminated as of last day of grace

Small Group Rating Changes • As of July 1 • Gender can be factored in • Age band ratio will increase 6 to 1 • Family ratio can be as high as 6 to 1 • As of September 1, Five rating tiers will be required • Employee only • Employee plus spouse • Employee plus one dependant, other than a spouse • Employee plus more than one dependant, other than a spouse • A Family, consisting of an employee plus spouse, and a dependant or dependants

Exchange Changes • Exchange will only be available to small groups • Risk Adjustor will be limited to Exchange • NetCare plan will be available on Exchange

Federal Reform • Postponement Of Highly Compensated Employee Rules Until Plan Year After Regulations Adopted • Same Benefits • Eligibility & Participation • Reason to Grandfather • Litigation Over Mandate • 2012 Election • State Income Tax Consequences Of Under 26 • Automatically Follow Federal Law—Like Utah • Others Don’t • Valuation of Coverage • COBRA or Incremental • Mandatory to Offer, Optional to Take

Rule 2. Don’t Settle for a Bad Decision • No one wakes up in the morning and decides to rob a bank…

One thing leads to another… • Close Friend • Incapacitated Client • Access to finances • Financial Trouble • Temporary Loan • Lavish Lifestyle • Problem Came to Light

Some things lead to even more… • Prosecuted a guy • Created a Ponzi Scheme • Held himself out in the Community • Took all $450K of working class couple’s retirement • Said he could only get money back if no jail

Avoiding the Marginal Cost Mistake • How Will You Measure Your Life • Clayton Christensen • Marginal Cost Doctrine in Business • Marginal Costs and Revenues for New Investment • In this extenuating circumstance, just this once, it is OK. • Life is a stream of extenuating circumstances • Holding to your principles 100% of time is easier than 98% of the time.

A series of exceptions… • My Friend • Lack of financial controls • A willingness to go beyond professional scope • Justification based on immediate need • Personal commitment to “pay back” • One thing led to another • The Defendant • I get what I want from whoever I want • No one can hold me accountable

Playing Life Forward… • There are exceptions and then there are legitimate choices between reasonably good, competing options • Remains of the Day • Butler • Post World War II • His Choices • Family Man • Replay decision to go to Europe to advance career

Defining Moments • Joseph Badarocco • Right v. Right Decisions • Reveal our values • Test our resolve • Shapes our future • Mastering Moments • What matters most • What should be done • What is the optimum outcome

Organizational-level moments • Strategic sophistication of Machiavelli • Strong and prosperous organization • Understand competitive environment • Playing the role of fox or lion • Balancing and moderating ethos of Aristotle

Aristotle • It is the nature of moral qualities that they are destroyed by deficiency and excess, just as we can see in the case of health and strength. For both excessive and insufficient exercise destroy one’s strength and both eating and drinking too much or too little destroy health, whereas the right quantity produces, increases, and preserves it…

Aristotle • So it is the same with temperance, courage, and the other virtues. The man who shuns and fears everything and stands up to nothing becomes a coward, the man who is afraid of nothing at all, but marches up to every danger, becomes foolhardy.

Aiming High… • Avoiding Exceptions • Shaping Your Life Through Decisions Consistent with Your Values • Not Settling for Second Best Outcomes

Abraham Lincoln’s Conderum • Team of Rivals, Doris Goodman • Divided Country • Divided Union • War • Slavery

Emancipation Proclamation • Moment of Sheer Brilliance • Limited to Slaves in the South • Focused on those fighting against Union • Became the beginning to the end of slavery

Integrative Thinking • The Opposable Mind • Roger Martin • The ability to create solutions beyond obvious and unsatisfying choices • Containment over war or acquiescence • Distributing software on internet over fee or free • A willingness to embrace complexity and reject suboptimum outcomes

Good Faith • The Essence of “Getting to Yes” • Roger Fisher and William Ury • Separate People from the Problem • Focus on Interests Not Positions • Invent Options for Mutual Gain • Insist on Using Objective Criteria

Rule 2. Don’t Settle for a Bad Decision • Bad decisions can be slippery slopes that • become the rule in your life rather than the exception • fundamentally reshape your values and future decisions • Be willing to • Wrestle with complexities to find optimum solutions • Operate in good faith

Not just about Staying Out of Trouble… • Problem Solving is a Key Professional Skill • Connection Point • Keep Folks Happy • Professional Knowledge & Judgment

Rule 3. Assume a Transparent World • HB 477 • Process • Transparency • Living in a Digital World • Volume • Duration • Re-transmission • Livelihood

The $64 Question • Is what I’m saying, doing, or writing something that I’d be OK with if it was permanently captured and shared with: • My family • My current and potential clients • My co-workers • Competitors • The media • The government

The Three Rules for Avoiding Trouble • Rule 1. Know the Law • Rule 2. Don’t Settle for a Bad Decision • Rule 3. Assume a Transparent World

Thanks

Ethics: Three Rules for Avoiding Trouble