Welcome to Your New Career

Transcription

1 Welcome to Your New areer You have decided to become a life insurance agent. Welcome to a wonderful profession. You will find it challenging, demanding and also very rewarding. You will meet a wide cross-section of society and through your knowledge of the insurance industry and insurance products, you will be able to guide your clients and help them to choose the life insurance policy that best suits their needs and pocketbook. Life insurance or death insurance? Life insurance can pay debts or other expenses of the deceased, but it is primarily intended to help those who are called the survivors typically close family members after a loved one dies. Your clients will trust you. They will rely on you. Some will require a great deal of encouragement and hand holding. Never feel that your time with a client is wasted. Your diligence may bring benefits to you in the form of a good contact or referrals. The best form of advertising is word of mouth. If a client trusts you and believes in your professionalism, he or she will mention your name to family, friends, and colleagues. To be a good life insurance agent, you must know your products and know your client. Make no mistake: life insurance is a product. However, because it is a product offered within the context of the four pillars of the financial service industry it requires a special degree of knowledge, the highest ethical standards, and dedication to sales and service. The Pillars The traditional four pillars of the financial services industry have been the insurance companies, the banks, credit unions, and investment dealers. Successful completion of this course qualifies you to complete the examinations prior to attaining your life license. Then, as a life agent, you will be required to continually update your knowledge through continuing education courses so that you will provide the best possible service to your clients. Welcome to the beginning of this lifelong learning experience! The LLQP is the first building block to a successful career in the life insurance industry. opyright 2009 Oliver Publishing Inc. ll rights reserved. 3

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3 The anadian Life Insurance Industry 1 N OVERVIEW OF THE NIN LIFE INSURNE INUSTRY fter reading this, you should understand: the size and scope of the anadian life insurance marketplace insurance basics The anadian life insurance industry is a significant player in the national economy. The 105 life and health companies that were operating in anada at the end of 2007 employed about 125,600 people. These companies held over $432 billion in assets on behalf of their policyholders. In 2007, anadians purchased over 772,000 individual insurance policies, paid over $73.5 billion in premiums on existing and new life, health, and annuity policies, and by the end of the year, anadians owned over $1.9 billion in life insurance. In the same year, anadian insurers abroad generated over $77 billion from foreign clients for life and health insurance. Ratings organizations show that anadian insurers are some of the most financially secure in the world. Standard and Poor s, Moody s,.m. est ompany, Wiess Research, and uff & Phelps all provide ratings on the ability of insurers to pay according to the terms and conditions of their policies and contracts. Their ratings are based on a scale that begins with a top rating, such as the triple- rating provided by Standard & Poor s, and ends with a lowest rating, for Standard & Poor s this is represented by a double-. The top rating,, indicates an extremely strong ability to meet financial commitments. The lowest,, would apply to a company that is likely to not meet some of its commitments. espite weakening economic conditions over 2008 and 2009, anadian insurance companies continue to enjoy strong ratings. Life insurers sold over 770,000 individual life policies in opyright 2009 Oliver Publishing Inc. ll rights reserved.

4 dvantage LLQP Insurance contract n insurance contract is a unilateral contract that obliges the insurer to fulfil the terms of the contract as long as premiums are paid. Policy owner The policy owner applies for the policy and makes the premium payments. The policy owner is also called the insured. He or she may also be the life insured. Policy premiums The premium is the periodic payment made by the policyholder or his or her legal representative that is required to keep an insurance policy in force. laim When the beneficiary of a life policy or insured of a health policy seeks the benefit from the policy Face amount The amount of insurance payable on the event covered in the contract. The asics of Insurance What is insurance? Insurance is based on the concept of an insurance company issuing a contract of insurance to a policy owner that promises certain benefits, and charging a fee in the form of policy premiums to cover the payment of those benefits. The policy premiums paid to the insurer are cautiously invested so that the promise of the contract will be honoured when a claim is made. The promise of the contract varies according to the type of insurance contract issued. life insurance contract promises that a sum of money, called the face amount or the death benefit, will be paid when the life insured named in the contract dies. Some life insureds die prematurely perhaps even as soon as after one premium has been paid by the policy owner. Some life insureds will die older than predicted by the mortality tables of the life insurer, and some life insureds will not die during the period their policy is in force. Regardless of when death occurs, the promise made by the insurer to pay the benefit of the contract to the beneficiary will be honoured when proof of death of the life insured is provided. Who is the insured in an insurance contract? the beneficiary the person on whose life the insurance is based the life insured the policy owner Life insured The life insured is the person on whose health, gender and age the premiums are based. eneficiary This is the person or people to whom the proceeds of a life policy are paid when the insured dies. You will help applicants for life, disability, and health policies to determine the right amount of coverage. Your efforts help to prevent overinsurance or underinsurance. opyright 2009 Oliver Publishing Inc. ll rights reserved. 6

5 The anadian Life Insurance Industry The promise of disability income insurance is that a monthly payment, called the monthly benefit, will be paid to the insured who is sick or injured. This type of insurance replaces income lost when the policy owner is unable to work. Like life insurance, a premium is paid by the insured to the insurer. The amount of premium is based on morbidity tables that predict the likelihood of disability for the person seeking insurance. person who has a high probability of making a claim will pay a higher premium than one who is less likely to make a claim. This would be the case if one person works in a more dangerous job than another. isability income insurance isability income insurance pays a monthly benefit to the insured who is sick or injured and unable to work. Mary has a disability income policy and pays the premiums. This means she is the: life insured insured beneficiary insurer The promise of a health insurance contract is that there will be a payment or reimbursement made to the insured against a variety of medical expenses that have been incurred according to the type of policy. n accident and sickness policy, for instance, will reimburse the cost of prescription drugs or dental expenses. critical illness policy will make a lump sum payment if a lifethreatening illness has been diagnosed. Insurance for long-term care makes a monthly payment to a facility that provides specified care, usually for the elderly. Health insurance Health insurance is the broad term used to describe a number of policies that provide health coverage such as dental insurance or prescription drugs. This form of insurance provides the policy owner with the assurance that he or she will be able to obtain the care or products and services wanted, at a cost that is known and can be planned for. In what type of policy could more than one claim be made? a life insurance policy a disability income policy a health insurance policy and Insurance can be purchased by individual people, groups of people, and businesses. s an agent, you will sell life insurance, disability income insurance, health (also called accident and sickness or &S insurance), and investments to customers who are individuals, groups, and businesses. When you become an agent, you will also become a consumer of insurance. gents are required to buy personal liability insurance called errors and 7 opyright 2009 Oliver Publishing Inc. ll rights reserved.

6 dvantage LLQP omissions insurance to protect them from claims that arise from dissatisfied clients. Why is insurance important? If the income of a person or business is interrupted or unanticipated costs are incurred financial ruin is a possibility. Protection against such an occurrence and peace of mind is provided by insurance. - Life insurance provides protection against financial loss resulting from death, disability, or old age. These are referred to as the three predictable risks. - isability income insurance provides protection against financial loss when income can no longer be earned because an illness or injury prevents the insured from going to work. - Health insurance provides protection against financial loss due to unexpected or extreme health care costs that fall outside provincial government health care plans, or medical conditions. Which of the following is not a predictable risk? bankruptcy old age death disability The life insurance agent is responsible for selling policies and providing service to new and existing clients. s an agent you must be able to accurately and thoroughly answer what we consider to be THE big questions that clients ask: 1. How are you qualified to sell life insurance? 2. Why do I need insurance? 3. What type of insurance do I need? 4. How much insurance do I need? 5. Which insurance company is best for me? 6. How do I apply? 7. How do I get my money? overage overage in an insurance contract is the face amount of a life insurance contract or the benefit received from a disability income insurance contract or the reimbursement amount of a health insurance contract. The answers to these questions form the basis for this insurance module. First, you will learn about the legal and moral qualifications to become a life agent. Then, you will learn about the risks that insurance addresses and the types of policies best suited to the needs of your client. Then, you will assign a dollar figure to the amount of coverage the client needs. You may also be expected to provide guidance to your client about which insurance company is best for the type of policy the client needs. Once the insurer is selected, you will work through the process of how the client applies opyright 2009 Oliver Publishing Inc. ll rights reserved. 8

7 The anadian Life Insurance Industry for insurance and how the risk posed by the client is assessed by the insurer in the process of underwriting. Finally, you will learn how a claim is made. The claim makes good on the promise of the policy and for life insurance is the final step in the insurance process. The Life Insurance Profession The life insurance profession has six key players: - agents - brokers - insurers - regulatory agencies - courts - governments gents gents are able to sell insurance to individuals, groups, and businesses when they have signed an agency contract with a single insurance company or a number of companies. The agent then represents the products of that company or companies to new and existing customers. We will explore the concept of agency in depth in the following section of this book. gency contract The agency contract is the contract between the agent and the insurer or insurers whose policies the agent will sell. If the agent only sells the products of one company, then the agent is considered to be a captive agent. In anada, larica is a company that has captive agents. However, Manulife anada s largest insurer by assets does not use captive agents but uses brokers and their agents to distribute products. The agent s duties will be: - to find people who wish to apply for insurance, - help each one assess which insurance product is best for his or her need and how much insurance is required, - work with the applicant on correctly completing the application form, - collect the initial premium for the policy and - deliver the policy. 9 opyright 2009 Oliver Publishing Inc. ll rights reserved.

8 dvantage LLQP What binds an agent to an insurer? the process of underwriting the agency contract the existence of a broker the Uniform Life Insurance ct gents sell policies and provide service to their clients before and after a policy is issued. This is called pre-sale and post-sale service. Pre-sale service includes understanding the insurance needs of the client and designing an insurance strategy that helps the client meet his or her objectives. Post-sale service ensures that the insurance in place accurately addresses client needs as changes occur in the client s life. Events that would require reevaluation of a policy include the birth of a child, marriage, divorce, death of a spouse, or increasing or decreasing financial obligations. What kind of service does the agent provide when his or her client becomes divorced? the agent sends a note of condolence the agent provides follow-up service to the client by checking to see whether any changes in policies are required as a result of the divorce the agent provides pre-sale service by selling the client a new policy to better suit his or her needs the agent provides pre-sale service to the ex-spouse of the client gents are at the forefront of the industry when it comes to implementing the standards of the profession. It is an agent s responsibility to conduct himself or herself with the highest degree of ethical behaviour. Ethical conduct of life insurance agents is ensured by the rules and regulations of many national and provincial agencies and associations, federal and provincial statutes and regulations, legal precedence, and the codes and by-laws of provincial insurance councils. In addition, the code of ethics established by the anadian Life and Health Insurance ssociation (LHI) and industry associations provide guidelines for agent conduct. The insurers themselves provide ample guidance to agents as to ethical behaviour. You should be familiar with those codes and standards of conduct that apply in your jurisdiction. Failure to adhere to the professional guidelines for agent conduct could expose you to liability claims from clients in which you will have to rely on your errors opyright 2009 Oliver Publishing Inc. ll rights reserved. 10

9 The anadian Life Insurance Industry and omissions insurance and will lead to serious conflicts with the regulating bodies of the insurance industry. Successful completion of this LLQP course qualifies you to become licensed as an agent by your provincial insurance regulator. Which of the following would not provide a guideline or guidelines for proper conduct by agents? provincial regulators federal regulators regulations of the insurer with which the agent has an agency contract a ratings organization such as Standard and Poors rokers n insurance broker is a person who sells and services insurance policies directly or through agents to individuals, groups, and businesses and provides consulting or advisory services for insurance or reinsurance. When a group of brokers band together they form a brokerage. rokers do not have an agency contract with the insurance companies that they represent. s an agent, you might work for a broker. Insurers Insurance companies issue the insurance policies. The companies may be federally incorporated to carry on business across the country or provincially incorporated. provincially incorporated company can only operate in the province in which it is incorporated. Insurers are organized as either mutual companies, in which the company is owned by its policy owners, or as stock companies. stock company issues stock, also known as shares, that is traded on a stock exchange; the company is owned by its shareowners. When a company converts from a mutual company to a stock company it is considered to be demutualized. Which of the following is a mutual company? Manulife that is listed on the Toronto Stock Exchange larica, a division of Sun Life that is listed on the Toronto Stock Exchange 11 opyright 2009 Oliver Publishing Inc. ll rights reserved.

10 dvantage LLQP Equitable Life of anada that is a private independent company R Financial, listed on the Toronto Stock Exchange as part of Royal ank of anada In addition to distributing insurance through agents and brokers, insurers also work with associations, such as the anadian ar ssociation, or groups of individuals who share common interests, relationships, or connections, like the alumni of the University of ritish olumbia. Most groups are comprised of employees of a company. Underwriting Underwriting is the process by which the insurer assesses the risk posed by the life insured (if a life insurance policy) or policy owner (if a disability or health insurance policy) when an application has been made for insurance. The agent provides information that assists correct underwriting. ue to their size and other underwriting factors insurers are able to offer discounts to these groups on: term insurance disability insurance & insurance medical plans auto insurance home insurance travel insurance How does an insurer assess the risk presented by an applicant? use of consultants the Office of the Superintendent of Financial Institutions regulatory agencies the process of underwriting Other Sales hannels Fraternal organizations provide insurance to their members. Fraternities have traditionally been groups of people who shared the same religion, profession, or ethnic origin. Now, some fraternities are open for membership to anyone who is interesting in enjoying their insurance or social benefits. In anada, the Foresters (previously known as the International Order of Foresters) is a wellknown fraternal organization. Finally, benefits consultants are licensed to sell and distribute insurance on behalf of the insurers with whom they work. enefits consultants advise employers about the management of their group insurance. Their goal is to fully understand their client s business objectives to enhance their investment in human resources. opyright 2009 Oliver Publishing Inc. ll rights reserved. 12

11 The anadian Life Insurance Industry The management of employers group insurance involves negotiations with insurers regarding plan renewals and financial statements and finding the most appropriate insurer based on client-specific selection criteria. onsultants will also monitor plan experience, insurer expenses, and claims management to help ensure programs remain cost competitive and responsive to market conditions. Increasingly, consultants provide advice around broader human resource issues such as human rights questions, adherence to labour laws, and co-ordination with government-sponsored benefits such as employment insurance. Regulatory odies Organizations such as the anadian Life and Health Insurance ssociation (LHI) transform laws passed by governments and interpreted by the courts into rules for the industry to follow. ourts The courts interpret and apply the laws passed by governments. In turn, these laws are passed along to the regulatory agencies. Governments There are 18 separate regulatory bodies in anada: 12 provincial and territorial regulators, five provincial insurance councils, and the federal government. In general, the provinces regulate licensing and marketing while the federal Office of the Superintendent of Financial Institutions (OSFI) ensures that the companies have sufficient assets to honour their policies. In 1925, the common law provinces (all provinces except Quebec that uses the civil code adopted from French law) created common life insurance legislation. ll the provincial acts are known collectively as the Uniform Life Insurance ct. Similarly, accident and sickness insurance legislation is governed under the Uniform ccident and Sickness ct. OFSI federal agency established under the Financial Institutions and eposit Insurance System mendment ct to supervise all federally regulated financial institutions. The Uniform Life Insurance ct is: a provincial act in all common law provinces regulated by the Office of the Superintendent of Financial Institutions applicable to all federally regulated financial institutions all of these answers 13 opyright 2009 Oliver Publishing Inc. ll rights reserved.