Usually, the first substantive step in the sale process is the opening interview. The principal function of the opening interview is to continue to develop the rapport created in the approach step. The opening interview is typically followed by the fact-finding interview. As was mentioned in earlier chapters, insurance agents have a fiduciary responsibility to the insurers they represent. The ethical principles governing full disclosure require that the prospective client be fully apprised of the agent's status as an advocate for a financial product or products.
To be ethical, agents must share identifying information with the client. This includes the agent's status as a property and casualty, health or life insurance agent. If the agent represents a particular company, the status as a representative of that company needs to be disclosed, as well as any other relevant business arrangements.
Often the prospect needs to be disturbed about his or her present situation before taking any steps to improve it. There is a fine line, though, between rousing a client's interest and scaring them. Any effort to outline risks should be balanced and represent realistic scenarios.
Agents also use testimonial letters from satisfied clients. If you choose to use testimonials or endorsements, they must be genuine and reflect the endorser's current opinion. Any financial interest held by the endorser -- for example, that it is a paid endorsement — must be disclosed.
Sometimes a fact-finding interview is scheduled as a separate meeting; but just as often, it flows as a natural extension from the opening interview. The object of the fact-finding interview is to gather sufficient information to analyze the client's needs and support a recommendation that is suitable to the client's situation — consistent with his or her objectives and tolerance for risk.
Usually, the fact-finding step of the sales process presents few specific ethical issues that have not already been considered. The agent has an ethical and legal duty to make a diligent effort to determine all of the client's circumstances that are relevant to his financial situation. For the financial services agent seeking to make a suitable recommendation, these circumstances include the prospect's current finances as well as his or her hopes and dreams.
Whenever interacting with the prospect, care must be taken to ensure that your questions don't inadvertently lead the prospect to believe that you are in the business of providing services not actually provided. For example, a general lines agent is discussing an auto policy’s personal injury protection (PIP) and questions an applicant about her current health care coverage as part of the fact-gathering process. The agent should not suggest that PIP is a substitute for comprehensive health coverage, nor should the agent imply that he is a health insurance agent unless that is indeed the case.
Likewise, the marketing tools that the agent uses could lead the prospect to erroneous conclusions. For example, suppose the data-gathering form shown to the prospect is titled Financial Planning Form. It would be reasonable for a client to come to the mistaken conclusion that the agent is in the business of providing financial advice for a fee – as opposed to earning a commission on sales. Agents have the responsibility to avoid anything that could reasonably be expected to mislead the prospect. Additionally, you have the ethical responsibility to correct any misperception of which you become aware.
Privacy of Client Information
Federal law requires financial institutions, including insurance companies, banks, brokerage firms, etc., to safeguard the privacy of client financial information. The Financial Modernization Act of 2002, also known as the Gramm-Leach-Bliley Act, limits the ability of financial institutions to share non-public financial information. This federal law requires state regulatory authorities to enforce restrictions on the use of such client information — Florida's Department of Financial Services complies with this federal mandate.
In general, the rules require insurers to notify policyholders and other customers of their privacy rights (what type of information is collected and disclosed, the types of affiliates and other third parties with whom information might be shared, etc.) This disclosure is required when the relationship is established, and an annual notification thereafter. Customers must be given the opportunity to "opt-out" of information sharing for marketing and other purposes not related to the execution of the contract. Non-public information may be disclosed to the extent it is necessary to implement the contract. This rule also extends the policyholder's privacy rights to health information collected by the insurer. Agents should be aware that information collected during the fact-finding interview is "privileged" and the consequences of unauthorized disclosure of financial and medical information.