Not long ago, the Iowa insurance department put out a Bulletin that cautions advisors against "making statements that disparage other insurers or are derogatory to the financial condition of any insurer."
That should be a heads up for any financial advisor, including those in the secondary market for life insurance.
The making of such remarks is an unfair or deceptive act or practice, Bulletin 09-04 warns.
Granted, the Bulletin focuses on carriers and producers licensed in the state of Iowa, and much of it addresses policy replacement activity. Still, advisors everywhere would benefit from a no-disparagement rule, as a matter of everyday business practice.
After all, news of rating downgrades, negative court decisions, carriers seeking funds from the Federal Troubled Assets Relief Program, and other worrisome carrier developments spreads in nanoseconds. Suddenly, advisors start checking around, trying to determine if they should work with products of the affected companies or not.
This happens in the secondary life market as well as primary.
Of course, checking up on carriers has a healthy side to it. Professionals want–and need–to know the status of the carriers they represent, interact with, and encounter. It's due diligence, and customers deserve no less.
However, when the questioning turns to indiscrete bad-mouthing, without supporting facts and information, those "disparaging" words can do a lot of damage.
The words can sully the brand. They can spur advisors and consumers to pass on otherwise suitable transactions, thus impairing revenue growth. They can inject doubt and suspicion that hampers relationships with vendors, the public, and more. Can lawsuits be far behind?
