Quality of Business: Trust but Verify. Scott Grandmont CLU, FALU, FLHC, FLMI Assistant Vice President & Chief Underwriter Individual Underwriting & Issue. NEHOUA ANTI-TRUST STATEMENT. Policy Statement of Anti-Trust Compliance
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Scott Grandmont CLU, FALU, FLHC, FLMI
Assistant Vice President & Chief Underwriter
Individual Underwriting & Issue
Policy Statement of Anti-Trust Compliance
The Northeast Home Office Underwriters Association (NEHOUA) is a voluntary association of individual
members. The object of the association is to advance the knowledge of sound underwriting of life
and disability insurance risks.
Because of the nature of its business – bringing together competitors for the purpose of discussing
important facts and issues in life and disability risk appraisal – NEHOUA and its members must at all
times be sensitive to both the spirit and letter of anti-trust laws, which broadly stated, prohibit any
activities that might lessen or tend to lessen the desirable competition of the Association’s
It is the policy of NEHOUA to avoid all activities which could or might appear to violate any
anti-trust competitive law.
The NEHOUA will not, through its programs, policies or practices, suggest price fixing. Pricing
suggestions which are prohibited include suggested extra ratings or proposed business actions
regarding individual applicants for insurance. “Price Fixing” can be broadly interpreted and any
semblance of it must be absolutely avoided.
At the signing of the Intermediate-Range Nuclear Forces Treaty (INF), in 1987, Mikhail Gorbachev remarked that “You repeat that at every meeting,"
To which, Reagan answered
"I like it!."“Trust, but verify”
In this context we are talking about the QB in terms of fraud prevention.
The goal of Quality of Business Initiatives is to ensure that risks we place on our books meet organizational expectations for quality and risk tolerance.
As management of this risk doesn’t reside in one functional area, coordination of these efforts needs to reside with someone (or group) vested with the authority and capability to span all boundaries.
Enterprise QB provides coordination, direction and the communication necessary to optimize the capabilities of individual QB efforts resident in each functional area.
Our clients and producers are valued stakeholders in the enterprise.
The quality vs. ease of doing business paradigm is at best, seen as a trade-off….and at worst, seen as a zero sum game.
Additional requirements & processes come with benefits in the form of protective value and certainly costs in terms of actual study costs, lengthened underwriting time and potentially degraded Producer and customer experience.
A carefully crafted approach to tactical QB efforts can help ease the tensions experienced in this trade-off.
Transparency, stakeholder buy-in and communication is essential
Who does it serve?
Visible statement of practices for internal and external constituencies
Backed up with training and screening
Bright-line understanding of company position
Sentinel Effect.QB Should Include an Anti-Fraud Policy
A well orchestrated QB initiative offer a means to leverage the most benefit from the efforts of individual business segments.
If properly calibrated, it serves to ensure that practices and processes are delivering on organizational expectations
There is no silver bullet for QB organizations or Und Practices. Each require custom crafted solutions for your unique environment.
Proper execution requires commitment, communication and continual process improvement.Making QB Initiatives Work
The percentage of people who think it is unethical to misrepresent facts in an insurance application to lower premiums fell to 82% in 2008 vs. 91% in 1997.
Professor of Behavioral Economics at Duke University, a visiting professor at MIT’s Media Laboratory, and a founding member of the Center for Advanced Hindsight.
When asked to write down names of 10 books recently read, cheating results were the same
When asked to write down the Ten Commandments, results were identical to control group – no cheating
When asked to consider a non-existent “Honor Code”, results were identical to control group – no cheating
Comm IR: Confirms income & NW on the part one…but CPA refused to verify fin data
A letter from a second CPA comes in, looks official, contains data…but short on credibility.
Website listed on letterhead is not a valid address.
CPA is not listed as licensed on state websiteThe Not So Good: Pinch-Hitter/CPA Scenario
70 Year Old Female, $5 million dollar UL for estate preservation. Cites $36 million dollar net worth
Commercial IR: cites a $2.6 million dollar net worth with detailed asset class break-down financial data confirmed by CPA.
Email from Producer: Client must have misunderstood the questions, additional details to follow
Letter from Tax Attorney: compelling letter, long relationship, detailed description of assets and estate planning strategy.
During a subsequent book of business review on this Producer, it was discovered that the Producer and this Tax Attorney were systematically misrepresenting clients financial position.
2006 – Two senior citizen women took out 12 life insurance policies worth $3M on two homeless men in California.
The women listed themselves as the beneficiaries of the policies.
The women then had vehicles run down the men in dark alleys at night, killing both of them.
Both women were convicted in April 2008.
Coalition Against Insurance Fraud, FRAUD FOCUS (Winter 2009)
Title to Real Estate
Relative Value of Real Estate
Motor vehicles Registered
Prescription History (incl. md name and fill date)
News ArticlesThis is what can be verified
HOOVERS.COM (a D&B company) Company research (some free info, $)
SEC (EDGAR) Google Earth
Social Networking Sites Blogs
Web Groups Rx databases ($)
Commercial Inspection report
Copy of the Needs Analysis
Statement of Financial Position from CPA
Tax Returns or Financial Statements
The value of verification
Supporting documentation for assets
Verify Real Estate holdings @ Zillow
Verify CPA in good standing
Secure Tax returns on-line
Contestable Financial Supplement
With Income, Assets and Real Estate verified you can make your decision with confidenceExample Net Worth: Continued
NAIC & NCOIL Model Acts (25 enacted, 13 introduced, 12 nada)
Dead, Dormant or Seeking greener pastures?
Convertible Term on older age clients (Term to Cash programs)
STranger Initiated Reinstatement: (STIR)
Do we have the right mechanisms in place to
view and react to this?
"By failing to prepare you are preparing to fail."— Benjamin Franklin
LOMA Resource Magazine, June 2009 –background