American Society of CLU & ChFC unveils new tool to curb replacement abuses.
The American Society's Replacement Questionnaire or "RQ" is a series of questions that uncover important information that will help agents identify, and evaluate the key issues involved in determining whether a particular policy should be replaced.
Policy replacement, the practice of discontinuing or exchanging in-force policies to purchase new ones, is one of the most widespread market conduct issues facing the insurance and financial services industry. Investigations and inquiries of the practice are under way in several states.
"While policy replacement is generally not in the consumer's best interest," said American Society President Millard J. Grauer, CLU, ChFC, "there are certain circumstances involving clients or issuing companies where it may be appropriate and even advantageous for a particular client to consider.
"The RQ is designed to identify those circumstances and to guide life insurance and financial professionals through the regulatory, tax, and legal issues that must be weighed before a recommendation to replace is made."
Grauer said the RQ was developed as part of the American Society's role as the insurance industry's advocate for education and ethical practices. It will be formally introduced to the American Society's members at the organization's national conference in Atlanta on Oct. 16.
While specifically designed for use by life insurance and financial services professionals, the RQ also benefits consumers by outlining the issues that should be considered and reviewed by a life insurance agent before a policy is replaced.
"The watchword for consumers is caution," said Grauer. "While there are circumstances where replacement may be warranted, consumers need to ask questions of their agent."
The RQ is the second in a series of practical educational tools introduced by the American Society to help Chartered Life Underwriters and Chartered Financial Consultants understand and deal with major issues in the area of sales practices and market conduct.
In 1993, the American Society developed the Illustration Questionnaire or IQ, which assists agents in understanding the assumptions that underlie the nonguaranteed elements found in life insurance policy illustrations. The RQ includes a section on IQ disclosures that are used to evaluate the assumptions underlying the two policies under review.
The American Society of CLU & ChFC is a national association of 36,000 insurance and financial services professionals who have earned the professional designations Chartered Life Underwriter (CLU) and Chartered Financial Consultant(ChFC).
Information and single copies of the RQ and IQ can be obtained from the American Society by calling 800/392-6900.
CONTACT: Gillespie PR, Lawrenceville, N.J.
Christine Weirsky, 609/895-0200
American Society of CLU & ChFC, Bryn Mawr
Phyllis Bonfield, 610/526-2508