What triggers increased surveillance by a financial services company? What causes companies to spotlight some producers and ignore others? What gets a producer on a company "watch list"? With companies using information technology to collect, process and interpret more and more information on producers, it is easy for companies to identify potential red flags and producers who deserve special attention.
The following are some of the most typical red flag warnings that companies use to trigger heightened monitoring and supervision. While there are other red flags that companies use based on the product sold or the distribution channel, the ones below tend to be the most common.
Replacements, exchanges and switches
o Large number of replacements or a high percentage of business coming from replacements–signals increased risk of improper replacements.
o Several replacements from the same company-signals potential targeting of a company for replacement sales.
o Use of the same rationale or explanation for the replacement on all replacement forms or use of a rationale based on the client's dislike of the current company-signals that the producer is avoiding fully answering or addressing the rationale for replacement.
Suitability
o A number of sales to seniors-signals increased potential risk for improper suitability.
o Use of the reason, "Customer refused to provide data" as why no suitability data is provided-though this may be a valid excuse for some applications, over-use leads to concern that the producer is using the excuse to avoid dealing with suitability.
Complaints
o Number of complaints from customers- the greater the number of complaints, the greater the likelihood that something is definitely wrong with the producer's sales process.
Applications
o Incomplete applications that require follow up by underwriting or new business-incomplete apps may signal an attempt to hide information.
