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Insurance Marketplace 

Standards Association 

Assessment Handbook 

September 2006 

The IMSA Assessment Handbook and the standards contained 

herein are the property of the Insurance Marketplace Standards 

Association (IMSA) and may not be copied, reproduced or excerpted 

without permission. Unauthorized use of these materials is prohibited 

and may subject those who infringe IMSA’s copyrighted work to legal 

action including civil and criminal sanctions, statutory damages and 

attorney’s fees. 

© IMSA 2006 All rights reserved. September 2006

ACKNOWLEDGMENTS 

IMSA would like to thank the members of the 2006 Subject Matter Standards Committee, 

Standards Review Committee, and Standards Advisory Committee for their invaluable 

contributions to the development of this 2006 edition of the IMSA Assessment 

Handbook. 

Subject Matter Standards Committee 

Name Company 

William J. Dauksewicz Liberty Life Assurance Company of Boston 

Lori Evers Thrivent Financial for Lutherans 

Anne Marie Graceffa John Hancock Life Insurance Company 

Mark E. Grimmett Genworth Financial, Inc. 

Dennis M. Groner Groner & Associates 

Gary C. Harriger Law Office of Gary Harriger 

Tracey M. Hulme Sun Life Assurance Company of Canada (U.S.) 

Glenn R. Jones AEGON USA 

Joanne Logue Metropolitan Life Insurance Company 

Gregory D. Morris Oxford Life Insurance Company 

Jo Ellyn Reimers Allstate Financial 

Mark S. Wessel Liberty Life Insurance Company 

Standards Review Committee 

Name Company 

Lisa Belli-Fuchs Northwestern Mutual Life Insurance Company 

Billy J. Bostick Bostick & Crawford Consulting Group 

James J. Buddle Genworth Financial, Inc. 

Steven D. Buhr AEGON Financial Partners Division 

David P. Griffin The Baltimore Life Insurance Company 

Phillip J. Harrington The Prudential Insurance Company of America 

Kenneth J. Kalis The Kenneth J. Kalis Company, Inc. 

Mitchell A. Karman John Hancock Life Insurance Company 

Deanna D. Osmonson AIG American General Domestic Life Companies 

Sharon Pacheco Pacific Life Insurance Company 

Jeffrey L. Smith Jefferson-Pilot Life Insurance Company 

Carol S. Stern ING U.S. Financial Services 

John Vaccaro New York Life Insurance Company 

Ellen C. Walsh PricewaterhouseCoopers, LLP 

Gary L. Weimer MTL Insurance Company 

Elliot Wohl National Benefit Life Insurance Company 

Standards Advisory Committee 

Name Affiliation 

Ed Easop A. M. Best Company, Inc. 

George Gaberlavage AARP 

Larry Kosciulek NASD 

Tim Mullen NAIC 

Ron Panneton NAIFA 

Randy Scritchfield Montgomery Financial Group, Inc. 

Robert Swanton Standard & Poor’s 

James J. Buddle Genworth Financial, Inc. 


I M S A 

TABLE OF CONTENTS 

INTRODUCTION 1 

PREPARING FOR ASSESSMENT 29 

DEMONSTRATING COMPLIANCE WITH IMSA STANDARDS 39 

GLOSSARY 49 

ELEMENTS OF COMPLIANCE 63 

APPENDICES 123 

A. HELPFUL TOOLS 

B. POLICIES AND GUIDELINES 

C. REPORT FORMS 

© IMSA 2006 All rights reserved. September 2006 

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I. IMSA - AN OVERVIEW. 

A. Executive Summary. 

INTRODUCTION 

INTRODUCTION 

In March 1994, the American Council of Life Insurers (ACLI), formed a CEO Task Force to 

promote ethical standards within the life insurance industry and strengthen consumer trust 

and confidence. The work of the Task Force, which was endorsed by ACLI's Board of 

Directors, led to the formation of the Insurance Marketplace Standards Association or 

IMSA and the creation of IMSA's Principles and Code of Ethical Market Conduct. 

IMSA's mission is to be the premier market conduct and compliance standard-setting 

organization serving the life insurance marketplace. 

IMSA has established ethical standards for the sale of individual life insurance, and annuity 

and long-term care insurance products (hereinafter referred to as "covered products"). 

IMSA qualified companies demonstrate a commitment to high ethical standards by 

developing and maintaining policies and procedures to promote ethical business practices. 

In so doing, IMSA qualified companies demonstrate a commitment to operating according 

to high standards of honesty and fairness in the advertising, sales and service of covered 

products. 

II. THE ASSESSMENT HANDBOOK. 

A. Purpose of the Assessment Handbook. 

This Handbook is intended to provide guidance to new companies seeking to become 

IMSA qualified and companies seeking to renew their current IMSA qualification. It will 

help companies understand the assessment process and provide practical assistance in 

conducting the company's self assessment. Guidance on IMSA's independent 

assessment process can be found within IMSA's Independent Assessment Manual. 

Companies of many different types will use this Handbook -- ranging from the very large to 

the very small. Although large enterprises have greater resources, they also have more 

levels in their hierarchy, may be located at multiple sites, may offer multiple types of 

products, may have several types of distribution systems and are likely to have greater 

complexity in their activities. As a result, the smaller company - which probably has a 

simpler management structure and a single location - may find it faster and easier to 

collect the information needed for the assessment. 

B. Overview of the Handbook. 

1. Preparing for Assessment. 

This chapter provides step-by-step suggestions on how to approach the self and 

independent assessment process. Although relevant for all companies seeking initial 

© IMSA 2006 All rights reserved. 1 September 2006

INTRODUCTION 

or renewal membership, this section is particularly helpful to those companies seeking 

initial membership. This section includes information on: 

-- understanding the assessment process; 

-- organizing for self-assessment; 

-- defining company’s organization structure; 

-- identifying market conduct policies, practices, and procedures; 

-- performing the self-assessment; 

-- preparing for independent assessment; 

-- selecting a Qualified Independent Assessor; and 

-- a checklist for companies renewing membership. 

2. Demonstrating Compliance with IMSA Standards. 

This chapter provides guidance on what is required to comply with IMSA standards. All 

indicators must be interpreted according to their appropriateness for the particular 

company — for example, its size, its distribution system, and its product mix. This 

section describes the broad features of the analysis needed to assess whether, a 

company does in fact (1) have, (2) use, and (3) monitor policies and procedures that 

relate to each Topic and/or Subtopic. The chapter contains information on the 

assessment process including testing methods as well as the concept of reasonable 

assurance that forms the basis for an assessor’s conclusions. 

3. Glossary. 

The Glossary is an integral part of the Handbook and provides a definition of terms. 

4. Elements of Compliance. 

The main chapter of the Handbook, Elements of Compliance, contains the 

Topics/Subtopics, Principles, Code, and Comments that form the integrated system 

required for IMSA qualification. 

5. Appendices. 

The Handbook has a number of important Appendices. 

Appendix A contains Helpful Tools so the reader can quickly understand how the 

various elements of the Program relate. These Helpful Tools include: 

-- Principles of Ethical Market Conduct; 

-- Principles and Code of Ethical Market Conduct; 

-- Labeling System for Indicators; and 

-- Templates. 

Appendix B contains Policies and Guidelines issued by IMSA on various topics 

including Mergers and Acquisitions Policy, Market Conduct Reporting Policy, Qualified 


INTRODUCTION 

Independent Assessor Engagement Reporting Guidelines, Complaint Handling 

Guidelines and Records Retention Policy. 

Appendix C contains Report Forms such as the Qualified Independent Assessor 

Report and the Membership Application and Self Assessment Report. 

Appendix D contains templates which can be used as “helpful tools” to assist 

companies to comply with IMSA’s Principles and Code under a Topic Based Approach 

to Assessment. 

C. Six Principles of Ethical Market Conduct. 

The IMSA qualification process is premised upon IMSA's Principles of Ethical Market 

Conduct: 

Principle 1: To conduct business according to high standards of honesty and 

fairness and to render that service to its customers which, in the same 

circumstances, it would apply to or demand for itself. 

Principle 2: To provide competent and customer-focused sales and service. 

Principle 3: To engage in active and fair competition. 

Principle 4: To provide advertising and sales materials that are clear as to purpose 

and honest and fair as to content. 

Principle 5: To provide for fair and expeditious handling of customer complaints 

and disputes. 

Principle 6: To maintain a system of supervision and monitoring that is reasonably 

designed to demonstrate the company’s commitment to and compliance with 

IMSA’s Principles and Code of Ethical Market Conduct. 

D. Principles and Code of Ethical Market Conduct and Commentary. 

Every Principle has accompanying Code provisions. To become IMSA qualified, a 

company must demonstrate compliance with each of IMSA’s Principles and Code 

provisions. To clarify the intent and application of the Principles and Code, companies and 

Qualified Independent Assessors are encouraged to review the commentary that 

accompanies many Principles and Code provisions. 

III. PRINCIPLES AND CODE OF ETHICAL MARKET CONDUCT 

Principle 1: 

To conduct business according to high standards of honesty and fairness and to 

render that service to its customers, which, in the same circumstances, it would 

apply to or demand for itself. 


Code A. 

INTRODUCTION 

The insurable needs and financial objectives of its customers are determined based upon 

relevant information obtained from the customer and, at the time of the transaction, the 

company enters into life insurance transactions which assist the customer in meeting his or 

her insurable needs and financial objectives. 

Comment: IMSA has a needs-based selling standard and suitability standard. For 

purposes of compliance with IMSA standards, IMSA’s needs-based selling standard 

applies to life insurance whereas its suitability standard applies to sales of annuities and 

long-term care insurance products. 1 Companies should review the covered products 

offered through their distribution systems to determine the appropriate applicability of each 

of the standards. 

Companies selling only life insurance must provide evidence of compliance with IMSA’s 

needs-based selling standard. Companies selling only annuities and/or long-term care 

insurance must provide evidence of compliance with IMSA’s suitability standard. 

Companies selling all covered products must provide evidence of compliance with both 

IMSA’s needs-based selling and suitability standards. 

The company may demonstrate compliance with IMSA’s needs-based selling standard 

through a variety of different means. The company may have sales promotion materials to 

consider insurable needs and financial objectives or may provide, directly and indirectly, a 

source for obtaining fact-finding tools for determining customers’ insurable needs and 

financial objectives. These tools could include: questionnaires, software packages, 

financial plans, customer profiles, capital needs analyses, and financial needs analyses. 

The company also may provide producers with fact-finding tools to use with customers in 

life insurance transactions. The company can demonstrate the use of these tools by such 

means as contractual provisions or other agreements requiring their use, developing 

criteria that must be used in producer-developed tools, providing a comprehensive list of 

resources, making available formal or informal training programs or materials regarding the 

use of such tools, and audit questions regarding fact-finding tools used. 

The marketing and sale of covered products may often encompass a variety of distribution 

methods and practices. In some instances it may not be practical or appropriate to consult 

individually with each customer. For example, in mass-marketed direct response sales, 

the structure of the product design and its intended markets may satisfy the requirements 

for determining insurable needs and financial objectives. 

1 

It is recognized that sales of variable life insurance will be subject to the suitability requirements found under 

NASD Conduct Rule 2310. 


INTRODUCTION 

In other instances, basic fact-finding and needs analysis provide the appropriate relevant 

information to recommend a product. For example, customers who are purchasing a new 

house may only wish to consider the single need of mortgage protection. In this situation, 

basic information about customers and their needs (e.g., the amount and term of 

coverage) constitute adequate relevant information for term life insurance 

recommendations. 

Multiple needs will require more extensive fact-finding and needs analysis to determine 

appropriate product recommendations. For example, customers typically have both 

immediate cash and income protection needs that, after review of the relevant information, 

may lead producers to recommend either term insurance, permanent insurance, or a 

combination of both. 

When conducting a needs-based analysis for life insurance products, information could 

include: 

-- relevant information to determine cash or income needs; 

-- insurance products owned currently by the customer; 

-- premium commitment; 

-- time horizon; and 

-- related financial needs. 

If the customer refuses to provide some or all of the information requested by the 

insurance producer, or the insurer where no producer was involved, the file should be 

documented to reflect that the customer refused to provide the information requested. 

The company is also required to have policies and procedures in place to reasonably 

assure that product recommendations by producers to customers at the time of purchase 

are based upon relevant information obtained through needs-based analyses. Techniques 

to provide reasonable assurance could include: 

-- sampling of applications; 

-- interviews with producers; 

-- review of producer files; 

-- technological review systems; 

-- new business review procedures; and 

-- customer survey results. 

Code B. 

Producers, or the company if no producer is involved in a sale, make recommendations 

based upon relevant information obtained from customers and the company has policies 

and procedures designed to reasonably assure that recommendations to purchase 

annuities and/or long-term care (LTC) insurance are suitable based upon the relevant 

information obtained from the customer. 


INTRODUCTION 

Comment: IMSA has a needs-based selling standard and suitability standard. For 

purposes of compliance with IMSA standards, IMSA’s needs-based selling standard 

applies to life insurance whereas its suitability standard applies to sales of annuities and 

long-term care insurance products. 2 Companies should review the covered products 

offered through their distribution systems to determine the appropriate applicability of each 

of the standards. 


needs-based selling standard. Companies selling only annuities and/or LTC insurance 

must provide evidence of compliance with IMSA’s suitability standard. Companies selling 

all covered products must provide evidence of compliance with both IMSA’s needs-based 

selling and suitability standards. 

The company may demonstrate compliance with IMSA’s suitability standard through a 

variety of different means. The company may have sales promotion materials that 

consider relevant suitability information or may provide, directly or indirectly, a source for 

obtaining relevant suitability information. These tools could include: questionnaires, 

software packages, capital needs analyses, financial needs analyses, and customer 

profiles. The company also may provide producers with fact-finding tools to use with 

customers in annuity and/or LTC insurance transactions. The company can demonstrate 

the use of these tools by such means as contractual provisions or other agreements 

requiring their use, developing criteria that must be used in producer-developed tools, 

providing a comprehensive list of resources, making available formal or informal training 

programs or materials regarding the use of such tools, and audit questions regarding factfinding 

tools used. 

Customers may look to companies and their producers to provide products to help them 

accumulate funds for long-term financial objectives, such as retirement or college funding, 

or products designed to provide benefits to meet long-term income or long-term care 

planning objectives. 

There are also instances where customers’ special circumstances (e.g., one or more 

family member in military service, customers with special needs due to disabilities) require 

additional care in making product recommendations. 

Relevant suitability information may be more extensive than that required to address 

insurable needs. For example, long-term accumulation objectives require that financial 

status, tax status and financial objectives of customers be taken into consideration to 

determine if fixed-rate products, or investment products, such as those offered through 

registered representatives of NASD member firms, may be appropriate. In addition, if 

investment products are considerations, then customers’ risk profiles need to be assessed 

to determine an appropriate asset allocation recommendation. 

2 




INTRODUCTION 

Also, there may be a wider array of product choices available to address customers’ 

broader financial objectives, particularly if the product designs also offer features and 

benefits that meet insurable needs. For example, annuities may offer guaranteed death 

and/or income benefits in addition to accumulation features. LTC insurance products may 

offer other features, such as lump-sum payments at death, or guaranteed cost-of-living 

adjustments, that require additional information to identify the appropriate product features 

and benefits that may address customer needs. 

In these instances, reasonable inquiry to obtain relevant information as the basis of 

appropriate product recommendations to meet customers’ stated objectives is required. In 

securities sales, and increasingly in the sale of annuities and LTC insurance products, 

suitability is a regulatory requirement. 

Relevant information must include financial status, tax status and financial objectives. 

Depending on the type of product, additional types of information could include: 

-- annual income; 

-- net worth, including percentage of net worth the product represents; 


-- risk tolerance; 

-- source of funds; 

-- liquidity needs; 

-- affordability; 

-- time horizon; 

-- financial experience; and 

-- potential impact of product purchase on eligibility for other benefit programs. 




The company is also required to have policies and procedures in place to reasonably 

assure that producers obtain relevant information to have reasonable grounds for believing 

product recommendations to customers are suitable at the time of purchase of annuities or 

LTC insurance products. Techniques to provide reasonable assurance could include: 


-- sampling of acknowledgment forms; 







Code C. 

It maintains compliance with applicable laws and regulations. 

INTRODUCTION 

Comment: Code C of this Principle is intended to focus on a company’s overall system or 

process for complying with laws and regulations which apply to the products within the 

scope of the Principles and Code of Ethical Market Conduct. In this regard, Code C is 

designed to determine that the company has an infrastructure in place to identify changes 

to existing laws and regulations and introductions of new laws and regulations and this 

information is used to update policies and procedures, as appropriate. It is not intended to 

determine the company’s actual compliance with such laws and regulations. 

Code D. 

In cooperation with consumers, regulators and others, it affirmatively seeks to improve the 

life insurance industry’s practices for marketing and sales of covered products. 

Comment: The company must demonstrate that it participates, in a way appropriate to its 

size, in external activities that support the enhancement of the life insurance industry’s 

ethical market conduct practices. 

Code E. 

The company has adopted and supports the concepts in IMSA’s Principles and Code of 

Ethical Market Conduct. 

Comment: The company can demonstrate its adoption of IMSA’s Principles and Code by 

different means including, among others, a formal adoption by the company’s Board of 

Directors or a directive by senior management noting support for IMSA’s Principles and 

Code. The company must provide to captive producers and appropriate company 

employees and make available to independent producers a written statement which 

includes full support for the concepts in IMSA’s Principles and Code of Ethical Market 

Conduct. Companies are encouraged to outline consequences specifically associated with 

non-compliance with the concepts of ethical market conduct in the company’s statement. 

Principle 2: 

To provide competent and customer-focused sales and service. 

Comment: Company actions appropriate in complying with Principle 2 will differ among 

companies according to the relationship between a company and its particular distribution 

system. For example, the relationship between a company and its career agents is 

significantly different from that of another company which uses brokerage relations with 

producers, which in turn is different from companies distributing products through 

securities brokers or banks. Indeed, some companies within an affiliated operation utilize 

many different distribution structures for different or the same products. A company may 

fulfill its obligations under Principle 2 by relying on its managing general agents or other 


INTRODUCTION 

third parties, depending upon the nature of its distribution system and agency contractual 

provisions. If a company relies on its managing agents or other third parties, it should 

include appropriate provisions in the contract or agreement that clearly outline the 

expectations in support of this principle. However, a company is accountable under 

Principle 6 (the “monitoring and supervision” provision) for carrying out these Principle 2 

responsibilities. 

Code A. 

Its captive and independent producers and appropriate company employees are of good 

character and business repute, and have appropriate qualifications. 

Comment: Companies must have policies and procedures concerning the manner in 

which the company selects producers to distribute the company’s products. There are 

several sources of information that can assist companies in developing selection criteria 

for their producers. Companies are encouraged to use and rely upon, to the extent 

applicable, central sources of information on producers including the NAIC Producer 

Database (“PDB”) or the NASD Central Registration Depository System (“CRD”). Whether 

through these systems or others, companies should utilize some independent source for 

checking on the history of producers before entering into a relationship with them. Such 

sources of information also can be helpful in making decisions about continuing existing 

relationships. 

The company must have, use and monitor its selection criteria or guidelines concerning 

the qualifications of its captive and independent producers and appropriate company 

employees with a view toward determining whether they are of good character and 

business repute. The company’s selection criteria or guidelines may take into account 

such things as: state licensing; production and/or persistency; financial standing (e.g., 

bankruptcy, bondability, debt owed to an insurance company or government regulatory 

body, outstanding judgments, etc.); litigation (e.g., arrests or convictions, lawsuits, pending 

or current litigation, etc.); regulatory action or sanction (e.g., license suspension, 

revocation, etc.); customer complaint history; due diligence check through NAIC Producer 

Database; complaints filed with the U.S. Securities and Exchange Commission or the 

NASD; professional designations; membership in industry organizations; and issues of 

character through use of a standardized selection test, such as the Background 

Assessment Questionnaire. The company also may want to consider having a 

documented process for its selection criteria or guidelines to review possible exceptions as 

they occur, and make recommendations to management, as appropriate. 

Code B. 

Its captive and independent producers and appropriate company employees are duly 

licensed, appointed or otherwise qualified under state law. 

Comment: Principle 2, Code B is designed to address a company’s use of persons who 

have complied with state-mandated licensing requirements in selling its products. 

Companies must have a process to provide reasonable assurance that captive and 

independent producers and appropriate company employees are licensed or meet other 


INTRODUCTION 

applicable requirements and, where required, are appointed for writing business on behalf 

of the company. The company’s process may include controls with respect to licensing 

and appointment processes, such as: systematic cross-reference between new business 

systems, licensing systems or databases and commission systems; satisfaction of 

requirements prior to policy issue; satisfaction of requirements prior to payment of initial or 

renewal commission; systematic production of control listings that detail exception 

processing (for example receipt of new business application for an unlicensed producer); 

recent audit or check of licenses; identification of person responsible for proper licensing 

and appointment; and verification of NASD registration, where applicable. 

This Code provision focuses upon having companies substantiate whether their producers 

are authorized by state law to sell the company’s products, as appropriate. Some states 

permit producers to engage in sales activities of insurance products prior to issuance of a 

license, and, in those instances, it is appropriate for the company to substantiate whether 

such producers are qualified under state law to write insurance. 

Code C. 

Its captive and independent producers and appropriate company employees are 

adequately trained regarding compliance with laws and regulations, company policies and 

procedures and IMSA’s Principles and Code of Ethical Market Conduct in the marketing 

and sale of covered products, as appropriate to the company’s distribution system. 

Comment: It is an aim of these Principles and Code of Ethical Market Conduct that 

companies utilize duly qualified, not merely licensed, producers as a key to providing 

quality sales practices in the marketplace. Principle 2, Code C attempts to incorporate that 

concept by requiring that a company’s producers and appropriate company employees are 

trained in the company policies and procedures, applicable laws and regulations and 

IMSA’s Principles and Code of Ethical Market Conduct. To comply with these 

requirements, training shall include: 

-- how to analyze customer insurable needs and financial objectives to assist them with 

making buying decisions about what is appropriate for them; 

-- the use of fact finding tools for determining customer needs and financial objectives; 

-- complaint handling; 

-- use and approval of marketing and sales material; 

-- fair competition guidelines, including those related to disparaging competitors or 

inappropriate statements regarding competitors; 

-- replacement policies and procedures, including definitions and when replacements are 

appropriate; 

-- licensing and appointment requirements; 

-- qualifications for potential producers; 

-- company product features: benefits, limitations, costs, values, charges and 

operations; 

-- preparation and use of sales illustrations; 

-- updates on changes in the laws and regulations and related changes to company 

policies and procedures; and 

-- ethical market conduct practices. 


INTRODUCTION 

It is recognized that training will reflect a company’s distribution systems. In this regard, 

training must be provided to captive producers and appropriate company employees and 

made available to independent producers. The company’s training activities should take 

into consideration the educational needs of captive and independent producers and 

appropriate company employees. Company distribution systems may include producers 

with varying levels of experience. Most company distribution systems will include 

experienced producers who have been licensed and working in the life insurance industry 

for many years. The training needs for experienced producers may be substantively 

different than the training needs for new producers. For example, training for experienced 

producers may focus upon updating information whereas training for new producers may 

focus upon providing specific product information. Where training is required, the 

company also should identify consequences for failing to meet compliance training 

requirements, and take corrective action, as appropriate. 

Code D. 

Its captive and independent distributors and appropriate company employees have 

adequate knowledge of the company’s products and their operation. 

Comment: For purposes of Principle 2, Code D, companies are encouraged to inform 

producers about a company’s products and their operation by providing items such as: 

descriptive materials, face-to-face training, telemarketing scripts, computer software, 

underwriting manuals or other materials that explain the product features. 

Code E. 

Its captive and independent producers and appropriate company employees participate in 

continuing education. 

Comment: Continuing education is part of the National Association of Insurance and 

Financial Advisors (NAIFA) Code of Ethics and is incorporated here. Participation by a 

company’s producers in continuing education is part of providing “competent” sales and 

service to its customers. The provisions of Code E are part of, not in addition to, otherwise 

applicable continuing education requirements of state law or imposed by other authorities. 

Continuing education should be provided as appropriate to the company’s distribution 

systems. 

Principle 3: 

To engage in active and fair competition. 

Comment: Focus on fair competition in the marketplace provides an opportunity to identify 

certain negative practices that can be targeted for attention, such as inappropriate 

replacement and competitor “bashing.” A company’s undertaking to engage in active and 

fair competition does not necessarily mean that such member is expected to compete in all 

covered product market segments or with all possible products. A company must be free 

to compete in limited segments or with limited products according to its own ability to serve 


INTRODUCTION 

its targeted customers and according to its own marketing plans and goals, both financially 

and in the marketplace. 

Code A. 

The company maintains compliance with applicable state and federal laws and regulations 

fostering fair competition and requires its captive and independent producers and 

appropriate company employees to refrain from disparaging competitors. 



replacement and competitor “bashing.” A company’s undertaking to engage in active and 

fair competition does not necessarily mean that such member is expected to compete in all 

covered product market segments or with all possible products. A company must be free 

to compete in limited segments or with limited products according to its own ability to serve 

its targeted customers and according to its own marketing plans and goals, both financially 

and in the marketplace. 

The company is encouraged to establish guidelines for fair competition, communicate 

these guidelines to producers and appropriate company employees and make such 

guidelines available to independent producers. The company guidelines to support 

compliance with state and federal laws and regulations related to fair competition may 

include such issues as: free dating, disparaging remarks, churning/twisting, unreasonable 

restraint of trade, price-fixing, gathering competitive information, conduct of meetings with 

competitors, joint ventures with competitors, tying or bundling, exclusive dealing, 

discriminatory pricing, and inaccurate comparisons with competitors. “Disparaging 

remarks” do not include relevant, factually accurate information. 

Code B. 

The company or its captive and independent producers and appropriate company 

employees provide information to customers in a manner consistent with Principle 4 prior 

to replacing covered products. 

Comment: Companies must provide customers in all states in which the company is doing 

business with information they need in order to ascertain whether replacements of covered 

products are appropriate. Such communication on replacement policies or contracts 

should include providing the customer with reasons why replacement might not be 

appropriate. 

The company’s replacement policies and procedures must apply to internal and external 

replacements and include definitions of both. The company also may develop descriptive 

materials or disclosure forms to assist the customer in determining whether a replacement 

is appropriate. 

Code C. 

The company has policies and procedures to review replacement activity. 


INTRODUCTION 



replacement and competitor “bashing.” 

The company must be able to demonstrate they have policies and procedures in place for 

reviewing replacement activity. Such policies and procedures should include a system for 

tracking, identifying and addressing deviations from the company’s replacement policies 

and procedures. Companies also may want to consider how the company’s commission 

policy regarding replacements complements the company’s replacement policies and 

procedures. The company’s policies and procedures may include a procedure for 

conserving policies and contracts targeted for replacement, as warranted. 

Principle 4: 

To provide advertising and sales materials that are clear as to purpose and honest 

and fair as to content. 

Comment: Current state laws and regulations on advertising, unfair trade practices, and 

sales illustrations provide a fairly detailed set of public policy requirements for advertising 

and sales materials. Companies should acknowledge and incorporate those ideas into 

their development of advertising and sales materials for covered products. 

Code A. 

Presentation of any advertising and sales material designed to lead to sales or solicitation 

of covered products is done in a manner consistent with the needs of the customer. All 

such sales or solicitation communications should be based upon the principles of fair 

dealing and good faith, and will have a sound basis in fact. 

Comment: One of the important areas identified for improvement of market conduct is fair 

disclosure of the product sold to a customer. Code A, among other things, seeks to 

emphasize accurate disclosure about the product sold. The intent of Code A is to promote 

upgrading, and making meaningful use of tools, such as a “buyer’s guide” and the “cost 

disclosure” at the point of sale. Other examples of such information may include: 

-- financial plans; 

-- investor profiles; 

-- capital needs/financial objectives; and 

-- other analytical needs analysis tools. 

Advertising and sales material include such items as sales presentations, prepared sales 

talks, letters of solicitation, email, faxes, direct mail solicitations, direct phone solicitations 

(both inbound and outbound), web sites, radio, television, and print advertisements and 

illustrations. 


Code B. 

INTRODUCTION 

Materials presented as part of a sale are comprehensible in light of the complexity of the 

product being sold. 

Comment: Companies must have policies and procedures in place to reasonably assure 

that advertising and sales materials used in the sales process are clear and 

understandable in light of the complexity of the product and the sophistication of the buyer. 

For example, the company may require enhanced disclosure for products that encompass 

newer concepts such as indexed products and/or enhanced disclosure for products that 

will be marketed directly. 

Code C. 

It maintains compliance with applicable laws and regulations related to advertising, unfair 

trade practices, sales illustrations, and other similar provisions. 

Comment: The company’s policies and procedures for registered products must be 

designed to provide reasonable assurance that sales materials comply with NASD, state 

and federal requirements, if applicable. The company also must maintain policies and 

procedures for defining, reviewing, approving, filing (where required), and maintaining files 

of advertising and sales material (regardless of the source) used in the solicitation and sale 

of covered products. Advertising and sales material include such items as: sales 

presentations; prepared sales talks; communications with policyholders or potential 

policyholders urging them to purchase, increase, modify, reinstate or retain a policy; direct 

mail solicitations; telemarketing scripts (both inbound and outbound); web sites; radio, 

television, and print advertisements and illustrations. 

Code D. 

Illustrations or other representations of premiums and considerations, costs, values, and 

benefits are accurate, fair, and complete and contain appropriate disclosures. 

Comment: Companies are required to implement policies and procedures designed to control the 

use of sales illustrations and other representations of premiums and considerations, costs, values 

and benefits including procedures to prevent unauthorized modifications. 

Principle 5: 

To provide for fair and expeditious handling of customer complaints and disputes. 

Code A. 

Complaints are identified, evaluated, and handled in compliance with applicable laws and 

regulations related to consumer complaint handling. 

Comment: The appropriate handling of customer complaints and disputes related to sales 

and marketing of covered products is an important element of ethical market conduct. 


INTRODUCTION 

State laws and regulations require certain processes. Companies are also encouraged, 

but not required, by IMSA’s Principles and Code of Ethical Market Conduct to consider 

additional methods of resolving complaints and disputes related to sales and marketing 

practices such as Alternative Dispute Resolution (ADR) or other alternatives designed to 

deal with disputes without requiring civil litigation. The American Arbitration Association or 

alternate organizations might be sources available to assist companies in establishing 

ADR processes. 

The company’s policies and procedures must define a complaint in a manner consistent 

with IMSA definitions and applicable laws and regulations. These policies and procedures 

must include methods for routinely recording and responding to complaints in compliance 

with applicable laws and regulations. 

Code B. 

The company provides an easily accessible way for customers to communicate 

complaints. 

Comment: The company must provide a means for customers to communicate complaints 

in a manner appropriate to the company’s target market. Means of communication may 

include: 

-- toll-free or call-collect phone number(s); 

-- mailings that include pre-addressed return envelopes; 

-- customer response cards; 

-- accessibility beyond normal business hours; 

-- voice response capability; 

-- fax capability; and 

-- internet. 

Code C. 

The company has policies and procedures designed to reasonably assure that the 

complaint information gathered is analyzed and efforts are made to eliminate their root 

causes. 

Comment: The company must analyze complaints with a view toward eliminating the root 

cause of complaints. The complaint analysis policies and procedures must require the 

identification and recommendation of solutions to eliminate root causes of complaints. 

Companies are encouraged to provide management with complaint trends analysis 

reports. The company complaint trend analysis may identify patterns or trends of 

complaints: 

-- by producer; 

-- by product type; 

-- by target market; and 

-- by category of complaint. 


Code D. 

INTRODUCTION 

The company has policies and procedures to reasonably assure that it makes good faith 

efforts to resolve complaints and disputes without resorting to civil litigation. 

Comment: Good faith efforts to resolve complaints and disputes may include: 

-- ready access to policyholder information; 

-- prompt written acknowledgment to customer of receipt of complaint; 

-- prompt investigation and communication with producer or other operating unit involved 

in the complaint; and 

-- analysis of unresolved complaints. 

The company may consider complaint appeal policies and procedures and alternative 

dispute resolution mechanisms, in appropriate situations, to attempt to resolve complaints 

through means other than litigation. 

Principle 6: 

To maintain a system of supervision and monitoring that is reasonably designed to 

demonstrate the company’s commitment to and compliance with IMSA’s Principles 

and Code of Ethical Market Conduct. 

Comment: Principle 6 is one of the key components of the Code. It addresses the 

maintenance of an effective system of compliance supervision and monitoring which 

includes general training on compliance with the company’s policies and procedures and 

its commitment to and compliance with IMSA’s Principles and Code of Ethical Market 

Conduct. 

A critical element in the establishment of an effective market conduct compliance program 

is management support throughout the organization. Market conduct and compliance 

leadership that permeates throughout an organization is embodied within the "culture of 

compliance" concept that has been espoused favorably by regulators and others. 

A "culture of compliance" can be demonstrated through a variety of different means. 

However, the following elements may be helpful guideposts to determining whether a 

"culture of compliance" exists within an IMSA qualified company: 

-- tone at the top; 

-- training of company employees and producers; 

-- empower employees to question conduct; 

-- build compliance risk assessments into business decisions; 

-- continually self assess; 

-- regularly update policies and procedures for monitoring and feedback; 

-- dedicate adequate budget for compliance; 

-- when problems are detected, deal with them quickly and appropriately; 

-- keep senior management and the Board of Directors informed; and 

-- keep regulators informed through self-reporting of violations. 


Code A. 

INTRODUCTION 

Management establishes and enforces policies and procedures reasonably designed to 

demonstrate the company’s commitment to and compliance with IMSA’s Principles and 

Code of Ethical Market Conduct. 

Comment: Management may designate individuals or established cross-functional teams 

and/or committees who are responsible for reviewing such things as: 

-- the company’s commitment to and compliance with IMSA’s Principles and Code of 

Ethical Market Conduct; 

-- the company’s system of supervision and monitoring; and 

-- trends and patterns relating to the company’s sales and marketing processes 

addressed by IMSA’s Principles and Code of Ethical Market Conduct. 

Code B. 

There is an adequate system of supervision of the sales and marketing activities of its 

producers and appropriate company employees and the company’s policies and 

procedures in order to reasonably assure the company’s commitment to and compliance 

with IMSA’s Principles and Code of Ethical Market Conduct. 

Comment: Companies are required to have a system of supervision to reasonably assure 

that the sales and marketing practices of its captive and independent producers and 

appropriate company employees comply with IMSA’s Principles and Code of Ethical 

Market Conduct and applicable laws and regulations. Responsibility for supervising sales 

and marketing activities and the company’s policies and procedures may be assigned to a 

variety of individuals within the company or may be delegated to independent 

intermediaries. However, ultimate responsibility to reasonably assure whether supervision 

has taken place must be borne by the company. Accordingly, in those instances in which 

the obligations under Principle 6, Codes B, C and D are delegated to independent 

intermediaries, the company must continue to supervise the performance of those 

obligations and bears ultimate responsibility for compliance with all other provisions of 

IMSA’s Principles and Code of Ethical Market Conduct in the sales and marketing of its 

covered products. The company must review its system of supervision to reasonably 

assure it is operating properly and providing relevant, accurate data. 

If a company delegates any supervisory responsibility to an independent intermediary, the 

company shall enter into a written agreement with such intermediary which specifies the 

responsibilities delegated. Examples of such responsibilities might include: 

-- responsibility for ascertaining the good character, business repute, and qualifications 

of the Independent Producer in accordance with Principle 2, Code A; 

-- adherence to the company’s and the independent intermediary’s compliance 

requirements; 

-- restrictions or directions on the use of sales materials related to the company’s 

products; 


INTRODUCTION 

-- a requirement for prompt reporting to the company of customer or regulatory 

complaints or inquiries; 

-- maintenance of licenses and books and records according to company standards or 

required by applicable laws and regulations; 

-- training in accordance with Principle 2, Codes C, D, and E, and Principle 6, Code C; 

and 

-- penalties for the breach of the agreement. 

A company must monitor whether the independent intermediary is performing according to 

the terms of the written agreement. 

Company policies and procedures may assign to independent intermediaries, 

responsibility for supervising compliance with company policies and procedures and 

applicable laws and regulations in the following areas: 

-- needs-based selling and suitability; 

-- the use and approval of advertising and sales materials and fact-finding tools related 

to the company’s product(s); 

-- prompt reporting to the company of customer or regulatory complaints or inquiries; 

-- maintenance of licenses; 

-- maintenance of books and records; 

-- penalties for breach of the agreement; and 

-- compliance with the company’s statement of values and applicable laws and 

regulations. 

Companies must have a system of supervision in place prior to conducting the 

independent assessment. The system of supervision must be operational before, during 

and after the independent assessment and should provide routine information on a 

periodic basis to allow the company to conduct ongoing supervision. The company must 

monitor its system of supervision to provide reasonable assurance that it complies with 

IMSA’s Principles and Code of Ethical Market Conduct and applicable laws and 

regulations through testing methods consistent with Principle 6, Code D. 

The company's system of supervision of its sales and marketing activities should reflect 

the structure, functions and risks of the company and its distribution systems and must 

include, at a minimum: 

-- assignment of responsibility and accountability for reasonably assuring supervision of 

all distribution systems for covered products; 

-- procedures for routinely and systematically supervising compliance and identifying 

instances of non-compliance with company policies and procedures, IMSA’s Principles 

and Code of Ethical Market Conduct; 

-- procedures for responding to identified instances of non-compliance with policies and 

procedures, IMSA’s Principles and Code of Ethical Market Conduct, where 

appropriate; and 

-- means of reasonably assuring that corrective action has been taken, where 

appropriate. 


INTRODUCTION 

The company’s policies and procedures may be designed to reasonably assure that the 

system of supervision complies with NASD requirements, where applicable. The company 

policies and procedures also may include consequences of non-compliance with 

supervisory procedures. 

Code C. 

Compliance training sessions are conducted for appropriate company employees on the 

company’s policies and procedures, IMSA’s Principles and Code of Ethical Market 

Conduct and applicable laws and regulations. 

Comment: It is an aim of Principle 6, Code C provision that the company conducts general 

compliance training sessions for appropriate company employees on the company’s 

policies and procedures and IMSA’s Principles and Code of Ethical Market Conduct. 

Principle 6, Code C is designed to address training that is more general in nature than the 

training requirements presented under Principle 2, Code C. Principle 6, Code C is focused 

upon providing general training concerning the company’s commitment to and compliance 

with IMSA’s Principles and Code. 

Company training sessions may include the following topics: 

-- IMSA’s Principles and Code of Ethical Market Conduct; 

-- policies and procedures developed by the company to implement IMSA’s Principles 


-- the company’s commitment to IMSA’s Principles and Code of Ethical Market Conduct 

requires appropriate company employees to ensure that the company designs, sells 

and issues products that meet customer insurable needs and financial objectives; 





appropriate; 

-- company product features: benefits, limitations, costs, values, charges and 

operations; 

-- updates on changes in the laws and regulations and related changes to company 

policies and procedures; and 


Code D. 

It establishes and enforces policies and procedures reasonably designed to monitor 

compliance with IMSA’s Principles and Code of Ethical Market Conduct and applicable 

laws and regulations. 

Companies are required to have a monitoring system to reasonably assure that the sales 

and marketing practices of its captive and independent distributors and appropriate 

company employees comply with IMSA’s Principles and Code of Ethical Market Conduct 

and applicable laws and regulations. Similar to the supervision requirements under 


INTRODUCTION 

Principle 6, Code B, responsibility for monitoring sales and marketing activities may be 

assigned to a variety of individuals within the company or may be delegated to 

independent intermediaries. Ultimate responsibility to verify whether monitoring has taken 

place must be borne by the company. The company should review its monitoring system 

to reasonably assure it is operating properly and providing relevant, accurate data. 

Accordingly, in those instances in which the obligations are delegated to independent 

intermediaries, the company must continue to monitor the performance of those 

obligations. 

Companies may assign responsibility to independent intermediaries for monitoring 

compliance with company policies and procedures and applicable laws and regulations in 

the following areas: 

-- lapse rates; 

-- survey results; 

-- replacement reports; 

-- complaint analysis; 

-- production reports; 

-- internal audits; 

-- “ride-alongs” or observation of performance; 

-- underwriting exception reports; 

-- on-site visits; 

-- customer file review (surrenders, withdrawals, not-takens); 

-- secret or mystery shopper; 

-- customer focus groups; 

-- producer focus groups; 

-- instances of the use of unapproved advertising; and 

-- disciplinary history or compliance record. 

Companies must have a monitoring system as a minimum standard that reasonably 

assures compliance with Principle 6, Code D. The monitoring system should include 

elements that will permit the company to review its home office and field sales and marketing 

practices to determine whether they are consistent with the company's policies and procedures, 

IMSA’s Principles and Code of Ethical Market Conduct and applicable laws and regulations. 

Companies and Qualified Independent Assessors may employ a variety of testing methods to 

provide reasonable assurance that compliance monitoring activities provide meaningful 

information regarding the company’s sales practices that is used to take corrective action, if 

warranted, at the home office and field distribution levels. 

Companies may fulfill monitoring requirements through various means, including, but not limited 

to, internal auditing, telephonic or written surveys of captive or independent producers or 

appropriate company employees, LIMRA CAP surveys or other customer surveys, complaint 

analysis and information, lapse trends, replacement activity reports, customer transaction 

histories (surrenders, withdrawals, not-takens), underwriting exception reports, lists or numbers 

of rejected field advertising pieces submitted for home office review and approval, disciplinary 

records, etc. 


INTRODUCTION 

A company must also reasonably assure that corrective action has been taken, where 

appropriate. Methods may include: performing on-site office inspections, interviewing 

customers or captive or independent producers or appropriate company employees, surveying 

customers or captive and independent producers or appropriate company employees, using 

"mystery shoppers," or other means. On-site office inspections may be appropriate for 

distribution systems where trends are identified through exception reports or other monitoring 

tools. The company should conduct any field validation at the appropriate level of the 

distribution system. For example, as part of a routine audit or field visitation program, the 

company may interview the head of the distribution channel and then select a sample of 

supervisors; however, issues may arise through the monitoring procedures that will require field 

validation at the writing agent level. 

IV. IMSA's ASSESSMENT PROCESS. 

The Principles and Code are the foundation of a rigorous, overall system designed to provide 

reasonable assurance that the company has adopted, communicated and continuously monitors its 

policies and procedures related to market conduct and sales activity for covered products. IMSA 

standards are comprised of the following elements: 

Topics/Subtopics. Topics and subtopics are used to identify the subject matters reviewed as part 

of the IMSA qualification process. 

Principles. Six Principles of Ethical Market Conduct that establish the high standards by which 

IMSA members conduct business. 

Code. The twenty-five Code sections specify the means for achieving the standards set forth in the 

Principles. 

Comments. Comments provide guidance and clarification concerning the intent and application of 

the Principles and Code of Ethical Market Conduct. 

Elements of Compliance - Indicators. Indicators are examples of business policies, procedures 

and practices which demonstrate that the company has satisfied the intent of the Topic/Subtopic. 


A. The Principles and Code and Topics/Subtopics. 

INTRODUCTION 

Companies and Qualified Independent Assessors may use the following charts as “helpful 

tools” to display the interrelationships between the Principles and Code and 

Topics/Subtopics and indicators of compliance. 

Chart Showing Relationship between Topic/Subtopic and the Principles and Code 3 

Topic 

Sub-Topic 

Insurable Needs/Suitability Need-Based Selling 1A 

Suitability 1B 

Compliance 

General 1C 

Compliance with advertising, unfair trade practices, and sales 

illustrations laws and regulations 

4C 

Compliance with complaint laws and regulations 5A 

Policy Making Support for Enhancement of the Life Insurance Industry’s 

Ethical Market Conduct Practices 

1D 

Support for IMSA’s Principles and Code of Ethical Market 

Conduct 

1E 

Fair Competition 3A 

Licensing and Appointment Company’s Selection Criteria for its Producers 2A 

Licensing and Appointment of the Company’s Producers 2B 

Training Market Conduct Training of Producers 2C 

Product Training 2D 

Continuing Education 2E 

General Compliance Training 6C 

Replacement Information to Customers 3B 

Replacement Review 3C 

Advertising Information to Customer 4A 

Clear and Understandable Sales Materials 4B 

Illustrations 4D 

Complaints Customer Communication of Complaints 5B 

Root Cause Analysis of Complaints 5C 

Complaint Resolution 5D 

Compliance with Principles & 

Code 

Commitment to and Compliance with IMSA’s Principles and 

Code 

Supervision and Monitoring Supervision 6B 

Monitoring 6D 

3 Moving to a Topic Based Approach to Assessment required introducing new Code provisions. See, Elements of 

Compliance – Topic Based Approach to Assessment. 

© IMSA 2006 All rights reserved. 22 September 2006 

Principle 

and Code 

6A

Topic Subtopic Principles Elements of Compliance 

and Policies and 

Code Procedures 1 

Responsibility 1 Communication/ 

Consistent Use 2 

Supervision and 

Monitoring 2 

INTRODUCTION 

Insurable Need-Based Selling 1A P1 P2 C1, C2, C3, C4, M1, M2, M3, M4, 

Needs/ 

C5, C6, C7 M5, M6, M7, M8 

Suitability 

Suitability 1B P1, P3*, P4* P2 C1, C2, C3, C4, M1, M2, M3, M4, 

C5, C6, C7 M5, M6, M7, M8 

Compliance General 1C P1 P2 C1, C2, C3, C4 M1, M2, M3, M4, 

M5 

Compliance with 4C P1 P2 C1, C2, C3, C4, M1, M2, M3, M4 

advertising, unfair 

C5, C6 

trade practices, and 

sales illustrations 

laws and regulations 

Compliance with 5A P1 P2 C1, C2, C3, C4, M1, M2, M3 

complaint laws and 

C5, C6 

regulations 

Policy Making Support for 

1D P1 P2 C1, C2, C3, C4, C5 M1, M2, M3, M4, 

Enhancement of the 

M5 

Life Insurance 

Industry’s Ethical 

Market Conduct 

Practices 

Support for IMSA’s 1E P1 P2 C1, C2, C3, C4, M1, M2, M3 

Principles and Code 

C5, C6 

of Ethical Market 

Conduct 

Fair Competition 3A P1 P2 C1, C2, C3 M1, M2, M3, M4 

Licensing and Company’s Selection 2A P1 P2 C1, C2, C3, C4, C5 M1, M2, M3, M4 

Appointment Criteria for its 

Producers 

Licensing and 2B P1 P2 C1, C2, C3 M1, M2, M3, M4 

Appointment of the 

Company’s 

Producers 

B. Elements of Compliance by Topic/Subtopic. 


Topic Subtopic Principles Elements of Compliance 

and Code Policies and 

Procedures 1 

Responsibility 1 Communication/ 

Consistent Use 2 


Monitoring 2 

Training Market Conduct 2C P1, P3* P2 C1, C2, C3, C4, M1, M2, M3, M4, 

Training of Producers 

C5, C6 

M5, M6 

Product Training 2D P1 P2 C1, C2, C3, C4 M1, M2 

Continuing Education 2E P1 P2 C1, C2, C3, C4, C5 M1, M2, M3 

General Compliance 6C P1 P2 C1, C2, C3, C4 M1, M2, M3, M4 

Training 

Replacement Information to 3B P1 P2 C1, C2, C3, C4, M1, M2, M3, M4 

Customers 

C5, C6 

Replacement Review 3C P1 P2 C1, C2, C3, C4, M1, M2, M3, M4, 

C5, C6, C7 M5, M6, M7 

Advertising Information to 4A P1, P3* P2 C1, C2, C3, C4, M1, M2, M3, M4 

Customer 

C5, C6, C7 

Clear and 

4B P1 P2 C1, C2, C3, C4 M1, M2, M3 

Understandable 

Sales Materials 

Illustrations 4D P1 P2 C1, C2, C3, C4 M1, M2, M3, M4, 

M5, M6 

Complaints Customer 

5B P1 P2 C1, C2, C3, C4 M1, M2, M3, M4 

Communication of 

Complaints 

Root Cause Analysis 5C P1 P2 C1, C2, C3, C4, C5 M1, M2, M3, M4 

of Complaints 

Complaint Resolution 5D P1 P2 C1, C2, C3 M1, M2 

Compliance Commitment to and 6A P1 P2 C1, C2, C3, C4 M1, M2, M3 

with Principles Compliance with 

& Code IMSA’s Principles 

and Code 

Supervision Supervision 6B P1 P2 C1, C2, C3, C4 M1, M2, M3, M4 

and Monitoring 

Monitoring 6D P1 P2 C1, C2, C3, C4 M1, M2, M3, M4 


INTRODUCTION 

1 Mandatory indicators. 

2 

A company must select at least one or more "C" indicator(s) to demonstrate they communicate and consistently use applicable policies and 

procedures and must select at least one or more "M" indicator(s) to demonstrate they supervise and monitor and take appropriate corrective action 

regarding applicable policies and procedures. 

* Mandatory indicators for companies issuing indexed annuity products.

C. The Assessment and Membership Process. 

Companies seeking IMSA membership are required to demonstrate that they are 

committed to becoming IMSA qualified by adopting IMSA standards. 

IMSA qualification is a two-step process: 


INTRODUCTION 

Step 1. The company conducts a self-assessment by comparing its current policies and 

procedures to IMSA standards (found within the Elements of Compliance chapter of this 

Handbook). In order to comply with IMSA standards, the company may establish new 

policies and procedures and/or make modifications to current policies and procedures, as 

appropriate. Once the company concludes that it can demonstrate compliance with IMSA 

standards, it moves to the next stage. 

Step 2. A Qualified Independent Assessor (selected from a list of IMSA-approved 

Qualified Independent Assessors available via IMSA’s website (www.IMSAethics.org)) 

reviews the company's self-assessment evidence and performs an independent 

assessment to evaluate whether there is a reasonable basis for the company’s 

determination that it has complied with IMSA standards. 

Satisfactory conclusion of the two-step assessment process will allow IMSA, upon the 

company’s completion of the application process (see Appendix C - IMSA Report Forms), 

to confer membership in IMSA for a period of three years. However, if the company 

experiences i) material organizational changes, ii) acquisitions and/or iii) market conduct 

problems or adverse regulatory activity during the membership period, these events may 

require additional interim assessments. During the three-year membership period, 

members are encouraged to review, modify and improve their market conduct practices 

consistent with IMSA's "continuous improvement" concept. At the end of the three-year 

period, members must repeat both the self and independent assessments to renew their 

IMSA qualification. 

Companies seeking membership may become “individual” or “fleet” members. “Individual” 

denotes a single company seeking membership whereas “fleet” signifies a holding 

company or group of related companies. 

V. CONTlNUOUS IMPROVEMENT. 

"Continuous Improvement" is a fundamental concept that underlies IMSA, its standards and 

qualification process and its member companies. Continuous improvement is premised upon 

the notion that IMSA and its member companies are committed to improving overall 

marketplace practices through active review, monitoring and analysis of how existing 

processes can be strengthened. By seeking continuous improvement rather than settling for 

the status quo, IMSA can achieve its mission of being the premier standard-setting 

organization serving the life insurance marketplace.

A. IMSA. 


INTRODUCTION 

IMSA plays an active and vital role in working with key stakeholders in the life insurance 

marketplace including its member companies, Qualified Independent Assessors, 

regulators, financial rating agencies, consumers, producer organizations, industry 

organizations and others to promote sound marketplace practices. IMSA is a "thought 

leader" with respect to identifying innovative solutions to current compliance challenges 

and is contacted by leading governmental and industry organizations for insights on 

market conduct related issues. 

IMSA applies the same continuous improvement concept to itself organizationally that it 

applies to its member companies. Through its work with a wide variety of committees 

comprised of representatives of broad segments of the life insurance marketplace, IMSA 

seeks regular feedback that is used to improve the organization's practices. For example, 

IMSA regularly conducts meetings of its member companies and Qualified Independent 

Assessors to identify current market conduct challenges and explore possible solutions. 

B. IMSA Standards and Qualification Process. 

One of the key ways IMSA demonstrates its commitment to continuous improvement is 

through periodic review and updating of its standards. The IMSA Standards Development 

Process is a detailed process that reflects upon the practical experiences of companies 

that have undergone IMSA's rigorous qualification process. These companies are 

confronted with a variety of market conduct compliance challenges on a regular basis. 

IMSA utilizes this highly specialized expertise to bring together the best and most talented 

practitioners of life insurance market conduct compliance practices to discuss possible 

improvements to the IMSA qualification process. 

Through the use of a comprehensive committee process designed to incorporate the 

perspectives of as many stakeholders in the life insurance marketplace as possible, IMSA 

standards are continually undergoing review and revision with the goal of attaining 

continuous improvement of its qualification process. 

VI. MEMBER COMPANIES. 

In committing to IMSA membership a company agrees to hold itself to standards that are in 

many cases more rigorous than existing regulatory requirements. For example, IMSA requires 

member companies to develop, implement and monitor procedures to help determine whether 

covered products being sold meet the customers' needs and financial objectives. Among other 

things, IMSA requires companies to: 

-- enhance systems and procedures to supervise and monitor company and distributor 

compliance with laws and regulations, IMSA standards and any company Codes of 

Conduct and take corrective action, where appropriate; 

-- monitor customer satisfaction with products and sales practices; 

-- monitor and analyze replacement activity and take action as appropriate;


INTRODUCTION 

-- analyze complaints and make efforts to eliminate their root causes; and 

-- provide enhanced training for distributors and appropriate company employees on 

covered products, IMSA standards, and applicable laws and regulations. 

IMSA members can expect that the performance of these and other activities to comply with 

IMSA standards will result in continuous improvement in their market conduct practices. 

A visual representation of continuous improvement shows the several steps involved: 

Policies & Procedures 

Act Upon 

Monitor 

Regulators, auditors and Qualified Independent Assessors have observed that this continuous 

improvement has been seen in the form of: 

-- a “tone at the top” demonstrating a commitment to compliance; 

-- well organized and better documented policies and procedures; 

-- coordinated, cross-functional teams with responsibility for identifying and resolving market 

conduct issues; 

-- use of systems to analyze aspects of the company's business (i.e. complaints, 

replacements, training and advertising materials, agent operations, etc.); and 

-- proactive compliance programs through which companies identify and address potential 

market conduct issues at an early stage. 

Each company's efforts are focused upon continuously evaluating its overall approach to 

market conduct and compliance and analyzing whether this approach results in the sale of 

appropriate products to informed consumers by trained and qualified agents. Where 

monitoring and independent testing procedures indicate this is not happening, the company 

has responsibility for identifying why it is not happening, and how to remedy the situation. 

VII. CLOSING COMMENTS. 

Continuous 

Improvement 

Responsibilities 

Communication 

Used 

This Handbook will change as companies and Qualified Independent Assessors use it and 

formulate suggestions for its continued improvement, many of which have been incorporated in 

this latest edition. Your comments and suggestions concerning the Program and the 

Handbook should be sent to the President and CEO of The Insurance Marketplace Standards 

Association, 4550 Montgomery Avenue, Suite 700 North, Bethesda, Maryland 20814. 

Up-to-date information about IMSA, including training programs, Qualified Independent 

Assessors, policy statements and protocols, Frequently Asked Questions (FAQs), guidelines 

and bulletins, etc., can be found on our website located at www.IMSAethics.org



PREPARING FOR ASSESSMENT 


This chapter serves as a guide to prepare for the self assessment process leading to IMSA 

qualification. 

Additional information including a list of Frequently Asked Questions (FAQs) can be found on 

IMSA's web site located at www.IMSAethics.org. 

I. UNDERSTANDING THE ASSESSMENT PROCESS. 

A. Before undertaking the self-assessment, it will be important to have a good 

understanding of IMSA's standards and its assessment process leading to IMSA 

qualification. 

B. Read through the Assessment Handbook including its Appendices. Pay particular 

attention to IMSA standards found within the Elements of Compliance chapter of this 

Handbook as well as the definitions found in the Glossary; especially, “covered products.” 

C. Identify and gain an understanding of applicable Protocols and Policy Statements via 

the IMSA website (www.IMSAethics.org) or other communications that have been issued 

by IMSA to supplement the Assessment Handbook. 

D. Consider attending workshops and training programs offered by IMSA. 

II. ORGANIZING FOR SELF-ASSESSMENT. 

A. Identify a person or team to be responsible for conducting or coordinating the selfassessment 

and individuals who will have ongoing responsibility for maintaining and 

updating IMSA policies and procedures and related documentation. The company may 

need to assign a separate individual or team for each covered product or distribution 

system. 

B. Create a tentative timeline for completing the self-assessment. 

C. Obtain the support of senior management and encourage them to emphasize, 

throughout the company, the importance of IMSA qualification and the broad internal 

support needed to complete the assessment process. 

D. Consider selecting your Qualified Independent Assessor early in the process. Each 

Qualified Independent Assessor has tools and processes they prefer to use when 

conducting an independent assessment. Gathering information about these preferences 

prior to undergoing a company's assessment may be helpful and may make the 

independent assessment process more efficient. 

E. Communicate management support, self-assessment expectations, and assigned 

responsibilities to captive and independent producers and appropriate company 

employees. 



F. Determine the resources to be allocated to self-assessment. Consideration may be 

given to involving outside consultants familiar with the insurance business and specific 

covered products or distribution systems, sales and marketing activity, and IMSA 

standards. Such consultants could provide guidance on the elements of the IMSA 

qualification process and may recommend improvements to the company’s marketing and 

sales activities. Bear in mind, that the Qualified Independent Assessor you select to 

conduct your company's independent assessment would be prohibited from providing 

consulting services during your company's self-assessment. 

G. Research and decide on various documentation standards, protocols, controls, 

applicable procedures and systems. 

III. DEFINING COMPANY’S ORGANIZATIONAL STRUCTURE. 

A. Identify and describe the company’s covered products and related distribution 

channels, including any third-party administration arrangements effecting sales, marketing 

and customer services. 

B. With respect to each covered product and distribution channel, identify those business 

units, company committees, third-party administrators, and specific personnel with 

responsibility for: 

1. Implementing and administering operations relating to the various market conduct 

and compliance matters covered by IMSA standards; 

2. Supervising and exercising oversight over such operations; 

3. Monitoring compliance with laws and the company’s market conduct policies and 

procedures; 

4. Establishing overall market conduct policy, practices and procedures; and 

5. Providing support to these functions. 

IV. IDENTIFYING MARKET CONDUCT POLICIES, PRACTICES, AND PROCEDURES. 

A. Identify the company’s current policies and procedures and compare them to the 

requirements of IMSA standards to determine whether the introduction of new policies and 

procedures or the modification of existing policies and procedures may be appropriate. A 

company must provide evidence of written policies and procedures or documented 

company practices, as appropriate, for each Topic/Subtopic. The Elements of Compliance 

chapter provides a number of different indicators to demonstrate support of IMSA’s 

standards. Certain indicators of compliance are mandatory and for certain products (e.g., 

indexed annuities) there are product-specific indicators that are required. 

B. Determine by inquiry and interview of responsible personnel whether the company has 

a policy or procedure in place to address each of the Topics/Subtopics and applicable 

IMSA standards. 



C. Collect and review copies of all written manuals, bulletins, and procedures relating to 

market conduct matters covered by IMSA standards, including but not limited to any policy 

statements on ethics, compliance manuals, and procedures on needs-based selling, 

suitability, compliance with laws and regulations, advertising, complaint handling, 

replacements, hiring, training and sanctioning of captive and independent producers and 

appropriate company employees. Review the company's supervising and monitoring 

policies and procedures related to marketing and sales activities associated with covered 

products by reviewing written policies and procedures and interviewing personnel 

responsible for those policies and procedures. Identify resources and tools used in 

training (e.g., educational programs), marketing (e.g., computer applications) and 

monitoring marketing and sales activities (e.g., audit programs). 

D. With respect to any third-party administrators and captive and independent producers 

and appropriate company employees, identify practices and obtain documentation (e.g., 

written agreements describing the responsibilities of and restrictions on the third party) 

which are designed to establish compliance with IMSA standards including procedures for 

selection, training, and monitoring activities of the third party. 

E. Document external activities (e.g., participation in industry groups, customer surveys, 

etc.) which relate to or promote ethical market practices. 

F. Review any examination reports prepared by federal and state regulators or selfregulatory 

organizations and any internal monitoring documentation. 

G. Identify any areas where there does not appear to be existing information to satisfy a 

Topic and/or Subtopic. Research further and/or establish appropriate policies and 

procedures to address these areas. 

V. PERFORMING THE SELF-ASSESSMENT. 

A. Discuss the Topics/Subtopics, Principles and Code, Comments, and Indicators with key 

personnel in business units to review and determine the policies and procedures which 

demonstrate the presence of an indicator. Note, a company may need to choose different 

indicators for different covered products or distribution channels. 

B. Prepare your company’s evidence to demonstrate compliance with IMSA’s standards 

based on the interviews with business management and staff of the appropriate business 

units and the information collected on market conduct policies, practices, and procedures. 

Companies seeking to become IMSA qualified for the first time should see the Point in 

Time section of this chapter. Companies renewing their existing membership should 

gather evidence over the previous three year period (See, IMSA Independent Assessment 

Manual). 

1. Describe and document which of the indicators demonstrate compliance with IMSA 

standards pertaining to the Topic and/or Subtopic. Be sure to identify the distribution 

channel and covered product to which they apply. 



2. Identify any alternate indicators which can be provided to demonstrate and support 

compliance. 

3. If no indicator is present, identify appropriate steps and actions, which may be taken 

to comply with IMSA standards. 

C. Document how the indicator supports compliance with IMSA standards. The following 

examples might be considered in providing guidance for effective documentation and 

recordkeeping: 

1. When documenting implementation dates of policies and procedures, consider 

including the original implementation date as well as any recent revision dates. Include 

in the write-up how the information regarding the date was obtained (i.e., printed on a 

manual or memorandum, by inquiry, etc.). 

2. When documenting the names of individuals or teams responsible for establishing, 

maintaining, communicating, using, and monitoring these policies and procedures and 

acting upon the results, where appropriate, document the individual(s) title and the date 

that the individual was given those responsibilities. A position name and the date of the 

position descriptions may not be enough in some cases due to turnover, vacant 

positions, etc. Companies may find it helpful to create a responsibility matrix and to 

keep the matrix up-to-date as changes in staff and responsibilities occur over time. 

3. Where interviews are conducted, for captive and independent producers and 

appropriate company employees, create and file in the workpapers the population lists 

used and the samples chosen from them. 

4. When identifying captive and independent producers and appropriate company 

employees create a document that can be referred to, and refer to the document in 

each indicator where it is applicable or necessary. 

5. When documenting the “communication” of policies and procedures, document how 

they were communicated (memorandum, e-mail, etc.), when and to whom they were 

communicated. 

6. Avoid including more information on policies and procedures than is necessary to 

demonstrate compliance with IMSA standards. 

7. Use evidence to support the existence of monitoring indicators and to demonstrate 

that action is being taken based on the results of the reporting mechanisms. Document 

examples of specific actions that have been taken. Provide evidence that it applies to 

all applicable distribution systems. 

8. When referencing information sources or tools, indicate whether they are written or 

electronic. 

9. Indicate that policies and procedures used to support an indicator apply to the 

specific distribution system that is being documented. 



10. If evidence of the existence of an indicator was obtained through observation, 

inquiry or interview, document specifics of what was observed, to whom the inquiry was 

made and the persons interviewed. 

11. Where evidence (e.g., memos, job descriptions) used in the self-assessment is 

dated, perform follow-up procedures such as inquiry or interview to determine that the 

information is still current and document as such. If more recent documentation is 

available, use it instead. 

12. Refer to the distribution channels in the documentation. For example, if a 

memorandum is sent out, indicate that it was sent to the captive and independent 

producers and appropriate company employees, as applicable. 

13. Consider what group of individuals each indicator is referring to (i.e., employees, 

producers or both). Document specifically which items of evidence are applicable to 

which distribution channels. 

14. When referring to articles, guidelines, and bulletins in company publications used as 

evidence, include the date that the article was published to demonstrate that it is 

reasonable relative to the assessment date. 

D. Where appropriate in the context of IMSA's standards, determine by interview of 

persons or testing techniques whether a particular compliance procedure related to the 

marketing and sales activities of covered products is consistently used and whether 

compliance with the procedure is monitored by the company. 

E. Testing the procedures will assist the company and Qualified Independent Assessor in 

determining whether the policies and procedures reasonably assure compliance with IMSA 

standards. This may include such procedures as obtaining written policies and 

procedures, obtaining independent confirmation that policies and procedures are being 

used, and observing the operation of policies or procedures. The documentation of such 

testing should be as specific as possible regarding the method used by the company to 

verify the information provided in the company’s self-assessment documentation. For 

example, state whether the information was verified by review of a manual, a 

memorandum, through an interview or inquiry, observation, etc. When testing is done, 

create and keep a copy of your population list as well as the sample chosen and document 

these specifics in the workpapers. 

VI. PREPARING FOR INDEPENDENT ASSESSMENT. 

Assemble your evidence, together with supporting documentation, to demonstrate compliance 

with IMSA standards. The supporting documentation should be appropriately cross-referenced 

to the indicators it supports. The evidence should identify the indicators and supporting 

documentation relied upon to demonstrate compliance with IMSA standards. 

VII. SELECTING A QUALIFIED INDEPENDENT ASSESSOR. 

The company may wish to consider the following when selecting a Qualified Independent 

Assessor: 



A. Obtain the list of approved Qualified Independent Assessors from IMSA’s web site 

(www.IMSAethics.org). 

1. If the company has identified one or more Qualified Independent Assessors to 

interview, determine whether they are on the list. Only Qualified Independent 

Assessors on the approved list are authorized to perform independent assessments for 

IMSA purposes. 

2. If the company has not identified a Qualified Independent Assessor, review the list 

and select several to interview. Referrals from other companies or business 

professionals may be useful. 

B. Considering your company’s policy for using external consultants and other factors, 

evaluate whether a formal Request For Proposal is appropriate. If not required or deemed 

necessary, consider conducting an interview with several approved Qualified Independent 

Assessors or requesting a proposal from each. 

C. Identify or establish the criteria upon which you will evaluate the bidders, such as 

experience, cost, qualifications of personnel, participation of key personnel, etc. Develop 

your weighting factors based on the criteria most important to your company. 

D. The interview or proposal should cover the following topics: 

1. The company’s objectives for the independent assessment, including the scope, 

such as the subsidiaries or affiliates (and products) to be part of the assessment. 

2. The Qualified Independent Assessor’s understanding of the company’s business, 

products, and distribution channels. Please note, companies should specifically inquire 

about the Qualified Independent Assessor familiarity with the company's covered 

products. 

3. A discussion of the work plan or process to be used in performing the independent 

assessment, including phases of the assessment, if any, and the deliverable 

product(s). 

a. Included in this discussion would be the identification of company locations 

where the work would need to be performed, company personnel to be interviewed 

and their physical locations, procedures which may be performed with respect to 

field locations, distributors, and others associated with the company, records which 

are likely to be requested, as well as the nature and types of procedures that are 

likely to be performed. 

b. A discussion of the Qualified Independent Assessor’s methodology and how he 

or she will determine whether compliance with IMSA standards has been attained. 

c. A discussion of communication checkpoints and frequency, as well as status or 

progress reports. 



4. Identification of the Qualified Independent Assessor and professional staff who will 

assist in the performance of the assessment and their relevant experience or resumes. 

The scope and complexity of any given assessment may be beyond the capacity of 

some Qualified Independent Assessors, who may not have sufficient time or resources 

to accomplish the job. 

5. A description of the Qualified Independent Assessor’s qualifications and relevant 

experience. As approved Qualified Independent Assessors will have varying 

backgrounds and come from differing professions, determine those qualifications that 

are important to your company. 

6. An estimate of the hours, fees, and out-of-pocket expenses to be incurred. 

7. A discussion of the level of assistance the company will be able to provide to the 

Qualified Independent Assessor during the independent assessment. 

8. A discussion of an estimated commencement and completion date. 

9. The level and types of documentation or workpapers the company expects to have 

available for the Qualified Independent Assessor and when they will be available. 

10. Clear discussion and explanation of what you expect from the Qualified 

Independent Assessor’s services. 

11. A discussion with the Qualified Independent Assessor of any possible factors that 

might compromise his or her independence. While a prior or existing non-employee 

relationship, such as auditor, lawyer, or consultant, will not disqualify a person from 

being a Qualified Independent Assessor, one factor the company should consider is 

whether or not a particular relationship might detract from the appearance of 

independence. This judgment is left up to the company. Applicants for membership 

will, however, be required to disclose all relationships with a Qualified Independent 

Assessor in the Membership Application and Self-Assessment Report. 

12. Provide information on other related services that may be provided. 

13. Evaluate the Qualified Independent Assessors interviewed. Select the one that best 

meets your criteria. 

14. Obtain an engagement letter from the Qualified Independent Assessor that 

describes, at a minimum, the services to be rendered, the scope of the engagement, 

limitations, if any, deliverables, and a description of the fee and out-of-pocket expense 

arrangements. 

For more information on the independent assessment process, please refer to IMSA’s 

Independent Assessment Manual found on IMSA's web site at www.IMSAethics.org. 


IMSA MEMBERSHIP RENEWAL CHECKLIST 


This checklist serves as a menu of items IMSA-member companies should consider prior to 

the self-assessment process and before the independent assessment is planned. 

STEPS 

I. Confirm senior management’s commitment to IMSA, its standards and membership 

renewal process. 

II. Identify responsible individual or team to coordinate the self-assessment. 

III. Review the Handbook to identify revisions during membership period. 

IV. Create tentative timeline for completing the self-assessment. 

V. Initiate Qualified Independent Assessor selection process. 

VI. In consultation with selected Qualified Independent Assessor, determine appropriate 

documentation standards and protocols. 

VII. Review prior assessment reports to identify any major company changes. 

ISSUES TO CONSIDER 

Was the company impacted by any merger or acquisition activity during the prior membership 

period? 

I. Did the company acquire or sell any blocks of business since the last assessment period? 

II. Did the company cease selling any of the IMSA covered products in the last three years? 

III. Were there significant changes to any policies and procedures included in the IMSA 

Principles and Code since the last assessment? 

IV. Did the company add or eliminate any distribution channels since the last assessment 

period? 

V. Is the company applying for renewal for the same fleet of companies that were reviewed 

during the previous assessment period? 



You may find the following industry resources and their website addresses helpful. 

ACLI 

www.acli.com 

LHCA 

www.lhca.net 

LIMRA 

www.limra.com 

LUTC 

www.lutc.org 

LOMA 

www.loma.org 

NAIC 

www.naic.org 

NAIFA 

www.naifa.org 

NASD 

www.nasd.com 

SEC 

www.sec.gov 




DEMONSTRATING COMPLIANCE WITH IMSA STANDARDS 


This chapter provides guidance on how companies can determine compliance with IMSA 

standards. To become IMSA qualified, a company must demonstrate compliance with each of 

the applicable Principle and Code provisions and comments associated with each 

Topic/Subtopic. 

I. ELEMENTS OF COMPLIANCE. 

For each Topic/Subtopic, a company must demonstrate the following Elements of Compliance: 

A. It has policies and procedures in place for this purpose; 

B. It has assigned appropriate responsibilities to an individual or team for these policies 

and procedures; 

C. The policies and procedures have been communicated; 

D. The policies and procedures are consistently used; 

E. A system of supervision and monitoring is in place; and 

F. It acts upon the results of the supervision and monitoring and takes corrective action, 

as appropriate. 

A company must provide evidence of written policies and procedures or documented company 

practices as appropriate for each Topic/Subtopic. 

II. ELEMENTS OF COMPLIANCE - INDICATORS. 

Companies will select indicators to demonstrate compliance with IMSA standards. (Indicators 

may be found within the Elements of Compliance chapter of the Handbook.) 

A. Selection and Use of Indicators. 

Indicators are used to guide a company in gathering its evidence to support compliance 

with IMSA standards. A company will select indicators based upon its covered 

products, distribution systems and organizational structure. 

The first two Elements of Compliance of the IMSA qualification process require 

companies to demonstrate that policies and procedures are in place and that 

appropriate responsibility for these policies and procedures have been assigned to an 

individual or team within the organization. Generally, a company has wide latitude with 

respect to the selection of indicators it will use to demonstrate compliance with IMSA 

standards. However, with respect to the first two Elements of Compliance (policies and 

procedures, responsibility), companies must demonstrate compliance with each P1 and 

P2 indicator for each Topic/Subtopic under IMSA standards. In this respect, all P1 and 

P2 indicators are mandatory. 



The IMSA qualification process also requires companies to demonstrate they 

communicate, consistently use, supervise and monitor and take appropriate corrective 

action based upon these policies and procedures. Therefore, for each Topic/Subtopic, 

companies must select at least one or more "C" indicator(s) to demonstrate they 

communicate and consistently use applicable policies and procedures and must select 

at least one or more "M" indicator(s) to demonstrate they supervise and monitor and 

take appropriate corrective action regarding applicable policies and procedures. 

Although companies may need only one indicator to demonstrate compliance with each 

of the Elements of Compliance, companies may wish to select additional indicators of 

compliance with IMSA standards. 

The following chart may be helpful to demonstrate how indicators may be used to 

support these requirements: 

Topic/Subtopic 

and 

corresponding 

Principle and 

Code Provision 

Advertising/Clear 

and 

Understandable 

Sales Materials, 

Principle 4, Code 

B 

Complaints/ 

Customer 

Communication 

of Complaints, 

Principle 5, Code 

B 

Policies and 

Procedures 

Elements of Compliance 

Responsibility Communication Consistent Use Supervision 

and 

Monitoring 

P1 P2 C1, C3, C4 M1, M2, M3 

P1 P2 C1, C2, C5, C6 M1, M2 


Corrective 

Action 

In this example, the company has demonstrated compliance with the mandatory P1 and 

P2 indicators (policies and procedures and responsibility, respectively) for each of the 

topic/subtopics under review. For Advertising/Clear and Understandable Sales 

Materials under Principal 4, Code B, the company selected the C1 indicator to 

demonstrate it has communicated the applicable policies and procedures and the C3 

and C4 indicators to demonstrate the applicable policies and procedures are 

consistently used. In addition, the company selected the M1 and M2 indicators to 

demonstrate its supervision and monitoring requirements and the M3 indicator to 

demonstrate it takes corrective action, as appropriate. 

For Complaints/Customer Communication of Complaints under Principle 5, Code B, the 

company also demonstrated compliance with the mandatory P1 and P2 indicators but 

selected the C1 and C2 indicators to demonstrate communication of these policies and 

procedures and the C5 and C6 indicators to demonstrate consistent use. In addition, 

the company selected the M1 indicator to demonstrate supervision and monitoring of 

these policies and procedures and the M2 indicator to demonstrate corrective action, as 

appropriate.

B. Indexed Annuity Indicators. 


IMSA has developed standards for indexed annuity policies and procedures related to 

suitability, disclosure and producer training. These indicators are located as follows: 

1. Suitability: P3 and P4; 

2. Advertising/Information to Customers: P3; and 

3. Training/Market Conduct Training for Producers: P3. 

Any company that issues indexed annuity products must demonstrate compliance with 

these indicators as well as all other applicable requirements concerning responsibility, 

communication, consistent use, supervision and monitoring and acting upon results, as 

appropriate. 

C. Principles, Codes and Comments. 

Each Topic/Subtopic has a corresponding Principle and Code provision as well as 

accompanying Comments. The Comments are provided to clarify the application of the 

Principle and Code provision and guide companies and Qualified Independent Assessors 

with respect to issues to be considered when demonstrating compliance with the 

applicable Topic/Subtopic. 

The Comments for each Topic/Subtopic should be read carefully. Please contact IMSA to 

obtain more information concerning the appropriate application and interpretation of any 

provision within the Comments sections accompanying the Principles and Code. 

Also, in keeping with IMSA’s continuous improvement paradigm, IMSA intends to 

periodically update Comments in the Handbook in order to keep abreast of new and 

evolving compliance standards. Any such updates to Comments in the 2006 edition of the 

Handbook will be developed with advice and guidance of IMSA’s Standards Development 

Committees and communicated to member companies and Qualified Independent 

Assessors. 

III. REASONABLE ASSURANCE. 

It is important that companies and Qualified Independent Assessors understand the concept of 

reasonable assurance. Reasonable assurance is the applicable standard to be used by the 

company to determine whether the company complies with IMSA standards. 

As part of the self-assessment, the company must gather sufficient evidence to support 

compliance with the applicable IMSA standards (i.e., the Code provision and its accompanying 

comments under each Topic/Subtopic). Therefore, under a topic based approach to 

assessment, Code provisions and their accompanying commentary take on more prominence. 

To determine whether sufficient evidence exists to support compliance with IMSA standards, 

no single standard of sufficiency can be applied to all companies because every company has 

its own distinctive combination of products, distribution channels, and compliance environment. 

Accordingly, the company must rely upon the concept of reasonable assurance to determine 



whether the evidence used can support compliance with IMSA standards. A company’s 

policies and procedures can provide only reasonable assurance to management that its 

objectives will be achieved. The actual achievement of those objectives is affected by 

limitations inherent in all internal control systems, including the realities that breakdowns in 

these systems can occur as a result of unintentional behavior or misconduct. Such 

unintentional behavior might arise as a result of a simple error or mistake, faulty judgment, or 

misconduct by fraud or collusion. The inherent limitations of internal control systems and the 

inconclusive nature of evidence available to the company, make an absolute assurance 

standard unattainable. 

The Testing Process section of this chapter contains information on the testing methods that 

are designed to provide guidance to companies with regard to selecting and performing 

appropriate procedures for testing evidence. 

In the Handbook chapter “Elements of Compliance,” each Topic/Subtopic is accompanied by 

indicators of compliance that may be used to support an affirmative response. These 

indicators are intended to provide examples of how a company, regardless of its size or 

complexity, could demonstrate compliance with IMSA standards. It is important to note that a 

company is not required to, nor expected to, demonstrate compliance with all indicators 

provided in the Handbook. At a minimum, companies must select at least one indicator to 

satisfy each Element of Compliance (i.e., policies and procedures, responsibility, 

communication, consistent use, supervision and monitoring and corrective action. 

The company will determine which of the indicators listed it will use to support its affirmative 

answer to any given Topic/Subtopic. The Qualified Independent Assessor will use the 

company’s selection of indicators, with supporting documentation, to review and, when 

appropriate, test the company’s evidence used to demonstrate compliance with IMSA 

standards. Collectively, for any given Topic/Subtopic, the indicators used must support each 

of the Elements of Compliance. 

It is important to note that not every indicator listed in the Handbook need be or is expected to 

be present to support compliance with each Topic/Subtopic. Some indicators listed in the 

Handbook may not even be applicable to a company’s covered products and distribution 

channels; for example, certain indicators may be wholly inapplicable to companies that 

distribute a limited number of products through a limited number of distribution channels. 

Some indicators may not be necessary because the existence of another indicator or 

indicators adequately demonstrates compliance with an Element of Compliance and ultimately 

the Topic/Subtopic. 

IV. THE ASSESSMENT PROCESS. 

A. Overview. 

The Assessment Process involves both a self-assessment and an independent 

assessment. As explained in the Preparing for Assessment chapter, a company should 



begin the assessment process by focusing its attention on collecting evidence in support of 

those indicators that provide the company with reasonable assurance that the 

requirements of the Topic/Subtopic are being met. 

Once the company has collected sufficient evidence to support compliance with IMSA 

standards, the company should perform a self-assessment. The company’s selfassessment 

should include appropriate testing of the evidence. Once the company is 

satisfied that its self-assessment confirms its eligibility for IMSA membership, the Qualified 

Independent Assessor will perform an assessment. The Qualified Independent Assessor 

will evaluate whether the indicators selected by the company support compliance with the 

Topic/Subtopic and perform appropriate tests on the evidence. 

B. Dealing with Exceptions. 

In the course of performing both the self and independent assessments, instances of 

noncompliance or exceptions may be identified. Careful judgment is required to determine 

if these exceptions are isolated instances, or indications of systemic weaknesses which 

would preclude a company’s ability to become IMSA qualified. The Qualified Independent 

Assessor’s consideration of the impact and significance of exceptions is affected by the 

nature and frequency of the exceptions noted, as well as qualitative considerations, such 

as the complexity of the policy or procedure being considered. Whenever an exception is 

identified, there should be additional inquiries about that exception in order to determine 

the context in which it occurred. It may also be appropriate to expand the sample of items 

being tested to determine if the condition is isolated or systemic. There should be a 

reasonable basis for concluding that any exception is isolated. Also, exceptions should be 

considered in the aggregate. Isolated instances in the context of an individual 

Topic/Subtopic may, when considered together, reveal patterns that suggest a systemic 

weakness in some aspect of the company’s market conduct compliance. The company 

should have a process in place to evaluate systemic weaknesses. The identification and 

correction of systemic weaknesses shall occur during the initial self-assessment for new 

member companies and throughout the company’s membership period for current member 

companies. 

C. Point in Time. 

As noted in the earlier discussion on “reasonable assurance,” a self or independent 

assessment looks at policies and procedures in place at a point in time. However, 

companies are expected to “consistently use” and “routinely monitor” in order to satisfy the 

various aspects and components of the question. This discussion on “point in time” is 

meant as guidance for when these two concepts are in conflict. 

In an effort to obtain their initial or renewal IMSA membership, companies may adopt new 

policies and procedures. If a procedure was adopted, for example a day or week before 

the assessment begins, there will be limited evidence that it has been consistently applied 

for any length of time. In such cases, the company must be able to demonstrate that 

sufficient action has been taken to provide reasonable assurance that the required 

objective will be achieved through the new procedures. 



Current IMSA member companies seeking membership renewal can be expected to 

demonstrate that policies and procedures have been adopted and operational during the 

previous membership period. (Refer to Independent Assessment Manual.) 

The Qualified Independent Assessor should seek reasonable assurance that the company 

has exercised efforts consistent with IMSA standards in the operation of the policy or 

procedure during the prior membership period to determine that systemic weaknesses do 

not exist. The Qualified Independent Assessor will be asked to exercise professional 

judgment to assess whether the operation of policies and procedures during the previous 

membership period, in conjunction with evidence of newly adopted or revised policies and 

procedures, will support an application for membership renewal. In the event that a 

dispute may arise between a company and Qualified Independent Assessor concerning 

whether the company is eligible for initial membership or membership renewal, either party 

or both parties may appeal to the President and CEO of IMSA for a resolution of the 

dispute (For additional information, refer to the Dispute Resolution section in this chapter). 

V. TESTING PROCESS. 

A. Overview. 

The self assessment process shall be followed by appropriate testing procedures. Despite 

the diversity of product lines, distribution channels, or size and complexity of life insurance 

companies, testing is required to be performed by the company to reasonably assure the 

company’s compliance with IMSA standards. The company has the responsibility to test 

the evidence that it has gathered to demonstrate indicators and support compliance with 

IMSA standards. A company’s day-to-day monitoring of the policies and procedures that 

were implemented to support the indicators supplements the testing process. 

Companies shall perform ongoing testing during the membership period. This testing is 

designed to determine if the company is monitoring its policies and procedures with a view 

toward achieving the intended result. Results of this testing may be used to modify the 

policies and procedures during a membership period. 

The testing method(s) used will vary with the size and complexity of the company and the 

nature of its business. However, using just one of the testing methods may not be 

sufficient to obtain reasonable assurance. When the company or Qualified Independent 

Assessor is evaluating the company’s evidence, a combination of testing methods will 

generally be used. 

A system of routine monitoring may produce reports, memos and audits that can be used 

to satisfy the requirement for testing. In addition, such reports, memos and audits should 

include evidence of monitoring of company level and producer level sales and marketing 

activities. Responsibility for monitoring sales and marketing activities may be assigned to 

a variety of individuals within the company or may be delegated to independent 

intermediaries. However, responsibility to verify whether monitoring has taken place must 

be borne by the company itself during the self assessment. 



Companies should also consider resources beyond traditional compliance functions for 

assistance with testing. For example, internal audits or operating area audits may provide 

sufficient information to satisfy the requirement for testing. 

While the company bears ultimate responsibility to reasonably assure that monitoring has 

taken place at the home office and field distribution levels, Qualified Independent 

Assessors must review the company's monitoring system during the independent 

assessment. To the extent the company maintains a monitoring system that routinely uses 

various testing methods to identify instances of compliance and non-compliance with its 

policies and procedures, a Qualified Independent Assessor may not need to conduct 

additional testing methods beyond those methods conducted previously by the company. 

The Qualified Independent Asssessor may, instead, elect to review the company's 

evidence gathered through its monitoring system or self-assessment process. 

Alternatively, in those instances in which a Qualified Independent Assessor determines 

that additional testing methods may be necessary and determines that contacting a 

company's producers and employees beyond the home office may be warranted as part of 

the testing process, the Qualified Independent Assessor will follow the protocol outlined in 

the Protocol for Qualified Independent Assessor Access to Producers and Employees 

section found later in this chapter. 

Factors that can influence the extent and nature of the testing include: 

1. Regulatory concerns about particular market conduct practices, as indicated by 

regulatory reviews of the company or of other companies in the industry; 

2. Diversity of distribution channels; 

3. Complexity of products; 

4. Targeted market for various products; 

5. Policyholder concerns expressed through complaints or litigation; 

6. Length of time that products and distribution channels have been available and/or 

used; 

7. Relative volume (and unexpected volumes) of business for different products and 

distribution channels; 

8. Changes in regulations or laws governing various product lines; and 

9. Issues identified in prior self-assessments and independent assessments. 


B. Testing Methods. 


Testing of the evidence gathered to support an indicator is intended to allow the company 

and Qualified Independent Assessor to evaluate whether such evidence supports the 

company’s compliance with IMSA standards. There are five major testing methods: 

1. Documentation Review – obtaining, inspecting and analyzing documentation to 

determine if the documentation supports the intended indicator. Documentation can be 

in printed or electronic format; 

2. Interview/Field Validation - interviewing individuals (e.g. management, employees, 

producers, etc.) who have key responsibility for establishing, maintaining, 

communicating, using, and monitoring the process or procedure and acting upon the 

results of such monitoring. (This may be done on-site or telephonically. Whenever 

interviewing is used to support an indicator, the interview should be documented.); 

3. Direct Observation - observing the operation of the applicable process or procedure; 

such as an illustration system, computer based training system or website; 

4. Case Sampling - sampling a relevant portion of company documents, files, reports, 

etc. and testing that sample to determine if company policies and procedures are being 

followed. Sampling techniques used would vary according to the type of indicator 

being addressed. Both judgmental and statistical sampling methods may be used. For 

example, a statistical sample may be used when assessing whether the policies and 

procedures related to the company’s complaint handling process are used consistently 

throughout the company. A judgmental sample may be used for determining that the 

policies and procedures have been communicated to producers by interviewing 

selected producers. In most instances, a sample is evaluated against a number of 

criteria to determine if company’s policies and procedures demonstrate compliance 

with IMSA standards. Whenever sampling is used as a testing method, the testing 

criteria used by the Qualified Independent Assessor should be identified and 

documented. These criteria should be relevant to the purpose of the testing. (For 

more information about when sampling is the required testing method, refer to IMSA’s 

Independent Assessment Manual.); and 

5. Surveys - conducting written or verbal surveys of relevant employees and/or 

producers and customers regarding IMSA practices and procedures. When a sample of 

relevant employees, etc. is surveyed, the sampling considerations listed above should 

be used. 

VI. PROTOCOL FOR QUALIFIED INDEPENDENT ASSESSOR ACCESS TO PRODUCERS 

AND EMPLOYEES. 

If the Qualified Independent Assessor selects a testing method that requires contact with the 

company’s producers and employees involved in the sales process, companies must allow 

IMSA Qualified Independent Assessors to have access to the company’s producers and 



employees involved in the sales process. Such access shall be in accordance with the 

protocol set forth below. 

Through discussions and agreement with the company, the Qualified Independent Assessor 

may select and contact a representative sample of the company’s producers and employees 

involved in the sales process. Once a representative sample of the company’s producers and 

employees involved in the sales process has been identified, the Qualified Independent 

Assessor will allow the company to arrange in advance a mutually agreeable date, time and 

nature of the contact(s). There may be instances in which a producer and employee involved 

in the sales process may be appointed with more than one company. In these cases, Qualified 

Independent Assessors should strive to coordinate a single contact on behalf of several 

member companies. 

VII. USE OF ALTERNATE INDICATORS. 

It is possible that a company will develop an indicator that is not listed in the Handbook to 

demonstrate compliance with IMSA standards. These alternate indicators must be submitted 

to IMSA for approval in advance of their use. In situations where an alternate indicator(s) is 

used, the alternate indicator(s) must be identified in an attachment to the Qualified 

Independent Assessor Report. The Qualified Independent Assessor must include the 

language of any such alternate indicator(s) in that attachment. 

Periodically, IMSA’s Standards Development Committees will review any alternate indicators 

to determine if they should be incorporated into the Handbook. 

VIII. DISPUTE RESOLUTION. 

Occasionally, disputes may arise between a company and its Qualified Independent Assessor 

over the application of the assessment criteria set forth in the Handbook. In most instances, it 

is likely that such differences of opinion will be resolved by the parties themselves. In the rare 

case of an impasse, either party or both parties may appeal to the President and CEO of IMSA 

for a resolution of the dispute. Upon such an appeal, the President and CEO will promptly 

designate a panel of 3 or 5 persons to hear the appeal and render a decision. The panel will 

be evenly divided between persons representing companies and Qualified Independent 

Assessors who are knowledgeable as to the assessment process and its background. The 

odd member of the panel shall be the President and CEO or his or her designee, such 

designees being members of the IMSA Board of Directors or members of IMSA staff 

knowledgeable about the assessment process. Decisions of the panel shall be binding on the 

parties to the dispute and any successor Qualified Independent Assessor with respect to the 

pending assessment. 




GLOSSARY 

This glossary provides a definition of terms as they are used in this Handbook. 


GLOSSARY 

Act upon 

Information gathered by the company must be examined by persons with the 

responsibility and authority to take appropriate action. The company/appropriate 

company employee shall take appropriate action on information obtained from the 

monitoring process to correct identified deviations and reduce the probability of future 

deviations. 

Advertising and sales material 4 

In those jurisdictions where law or regulation establishes a higher standard than the one 

in this Glossary, then that higher standard shall supersede the one given here. 

“Advertisement” means material designed to create public interest in covered products 

or in a company or in an insurance producer; or to induce the public to purchase, 

increase, modify, reinstate, borrow on, surrender, replace or retain a policy including: 

-- Printed and published material, audiovisual material and descriptive literature of a 

company or insurance producer used in direct mail, newspapers, magazines, the 

Internet, radio and television scripts, billboards and similar displays; 

-- Descriptive literature and sales aids of all kinds, including computer software, 

authored by the company, its insurance producers, or third parties; issued, 

distributed or used by the company or insurance producer; including but not limited 

to circulars, leaflets, booklets, depictions, illustrations, and form letters; delivered in 

any medium, including electronic; 

-- Material used for the recruitment, training, and education of a company’s insurance 

producers which is designed to be used or is used to induce the public to 

purchase, increase, modify, reinstate, borrow on, surrender, replace or retain a 

policy; and 

-- Prepared sales talks, presentations, and material for use by insurance producers. 

Advertising and sales material does not include: 

-- Communications or materials used within an insurer’s own organization and not 

intended for dissemination to the public; 

-- Communications with policyholders other than material urging policyholders to 

purchase, increase, modify, reinstate or retain a policy; and 

-- A general announcement from a group or blanket policyholder to eligible 

individuals or persons on an employment or membership list that a policy or 

program has been written or arranged, provided the announcement clearly 

indicates that it is preliminary to the issuance of a booklet explaining the proposed 

coverage. 

4 Adapted from the NAIC Rules governing the advertising of life insurance.


GLOSSARY 

Affiliated operation 

Operations that share common ownership or control. The term is not intended to 

include relationships that are contractual but do not include elements of ownership or 

control. Examples of relationships that would not be included are strategic alliances or 

relationships with independent marketing or administrative organizations. 

Alternate indicators 

An indicator created by the company that is used to demonstrate compliance with IMSA 

standards. Alternate indicators must be identified in an attachment to the Qualified 

Independent Assessor Report. 

Annuity 

A contract between a customer and an insurance company that provides for 

accumulation of assets and/or the periodic distribution of those assets; A product filed 

as such by the company and approved as such by a state insurance regulator. 

Appointment 

An agreement between a person who is licensed and a sponsoring insurance company 

that authorizes the licensed person to represent the sponsoring company in the 

distribution of its products and services in a specified jurisdiction. 

Appointment requirements vary by state, and not all states require appointment. States 

that require appointment demand that the licensed person be appointed with every 

sponsoring company they represent. 

Appropriate company employee 

An employee of the company, whether located in the home office or field who has a 

supervisory or support role in the company’s activities related to marketing and sales 

practices of covered products. Appropriate company employees may include 

individuals in the customer service, claims, marketing, licensing, advertising, 

underwriting, policyholder service, compliance, law or other departments depending 

upon the company’s structure and procedures. 

Appropriate to size 

Company activities and control procedures should bear a reasonable relationship to the 

volume of a company’s business, the variety and complexity of its products, and the 

resources available to it. 

Bashing 

Behavior that occurs when, in a sales situation, a company or its producer put the 

primary focus on negative attributes, other than relevant and factually accurate 

information, of a competitor or its producers rather than on the positive attributes of that 

company or its products and services. (See disparaging.)

ChFC 

CFP 

CLU 


GLOSSARY 

Chartered Financial Consultant (ChFC) is the professional designation earned upon 

the successful completion of a series of courses and examinations in a program 

sponsored by the American College. ChFC students learn to use the financial planning 

process to analyze a client’s total financial situation, set financial goals for the client, 

and create a plan to achieve those goals. 

Certified Financial Planner (CFP) is the professional designation earned after 

successful completion of a client-based financial planning program, sponsored by the 

National Endowment for Financial Education. Candidates examine techniques of 

personal financial management, insurance planning, investments and tax planning, 

retirement planning and employee benefits, and estate planning. 

Chartered Life Underwriter (CLU) is the professional designation earned after 

successful completion of a series of courses and examinations in a program sponsored 

by The American College. Candidates study economic security and individual life 

insurance, life insurance law and mathematics, accounting and finance, investments 

and family financial management, pension planning, and taxes and estate planning. 

Captive producer 

See Producer. 

Complaint 

A written or documented verbal communication received by a company or its producers 

which primarily expresses a grievance. 

Complaint handling 

The process by which a company records, tracks, resolves and monitors received 

complaints. 

Consistently use 

Policies and procedures implemented with no major gaps or material deficiencies and 

that have been in place over a period of time. Sufficient time should have elapsed 

during which consistent use is demonstrated. 

Continuing education 

An educational process typically using materials, seminars or other training programs 

designed to provide producers and employees involved in the marketing and sales 

process with current knowledge regarding products, industry issues and emerging 

trends. Continuing education may be company-specific or more generic. It may be 

provided by insurers, industry or professional trade groups and independent third-party 

vendors. Regulatory bodies, such as state insurance departments, often evaluate and 

grant accreditation to specific continuing education courses.


GLOSSARY 

Control environment 

The values, operating style, policies, and procedures of a company that influence and 

set the tone of the insurer’s behavior. Could also be described as the system through 

which reasonable assurance of compliance with stated objectives is achieved. 

Cost disclosure 

A generic term used to describe the disclosures required to be made by a life insurer 

pursuant to the NAIC Model Life Insurance Disclosure Model Regulation and its various 

forms as enacted by law or regulation in most states. 

Covered products 

Individually-sold life insurance, annuity and long-term care insurance products. 

Customer 

The owner or purchaser of covered products. While many companies consider the 

producer or marketing entity as their customer, for purposes of the program documents, 

a customer is the owner or purchaser of a company’s covered products. 

Disparaging 

Negative statements, either written or verbal, which are untruthful, deceptive or 

misleading or otherwise unlawful with regard to competitors. Such statements are 

usually intended to dissuade a customer from doing business with a competitor. 

Disparaging statements do not include relevant, factually accurate information. (See 

bashing.) 

Dispute resolution 

Disputes that arise between a company and Qualified Independent Assessor over the 

application of the criteria set forth in the qualification process and that can’t be resolved 

by the parties themselves, are referred for appeal to the President and Chief Executive 

Officer of IMSA for a resolution of the dispute. A panel of 3 or 5 persons hears the 

appeal and renders a decision that is binding on both parties. 

Distribution channel 

The specific system of sales and marketing by which products are sold to the customer. 

The distribution channel is determined by the type of producer used by the company 

during the sales and marketing of its covered products. 

When a company sells directly and no field representatives are involved in the sales 

process, it is commonly referred to as a direct response system. Other types of 

distribution channels include, but are not limited to: 

-- Career/exclusive agent (also known as captive); 

-- General agent; 

-- Independent Broker; 

-- Independent Producer; 

-- Managing General Agent (MGA); and 

-- Personal Producing General Agent (PPGA).

Distributor 

See Producer. 


GLOSSARY 

Duly qualified 

Producers who are appropriately licensed, and, if required, appointed. May also refer to 

producers who are trained to focus on customers’ needs and objectives. 

Elements of Compliance 

A company’s integrated system for IMSA qualification that includes policies and 

procedures, assignment of responsibility, communication, consistent use, a system of 

supervision and monitoring and corrective action, when appropriate, for each 

Topic/Subtopic. 

Exceptions 

Instances of noncompliance with policies and procedures, discovered during either the 

self or independent assessment and which could prevent a company from 

demonstrating compliance with one or more Elements of Compliance. Judgment by the 

Qualified Independent Assessor is required to determine if exceptions are isolated 

instances or indications of systemic weaknesses. 

Fact-finding tool 

A documented, analytical and information-gathering mechanism used to determine a 

customer’s insurable needs and financial objectives. Examples include questionnaires, 

customer profiles, capital needs or financial needs analyses. 

Fair competition 

Competition based on the elements of price, quality, and service subject to federal and 

state antitrust laws and state insurance laws and regulations. Focus on fair competition 

can identify certain negative practices to be eliminated, such as inappropriate 

replacement and bashing of competitors. 

Financial objectives 

A prospective customer's stated goals or needs as disclosed through fact finding, some 

or all of which can be addressed through the purchase of covered products. 

FLMI 

Fellow, Life Management Institute (FLMI) is the professional designation earned upon 

successful completion of a series of courses and examinations focusing on the life, 

health, and financial services industries. The Program sponsored by LOMA covers 

various topics of the insurance business, including marketing, accounting, investments, 

mathematics, law, and human resources. 

Good faith efforts 

Efforts made with the intention that the desired outcome will be produced. The program 

documents refer to good faith efforts with respect to the resolution of complaints and 

disputes. The desired outcome, as specified in the program documents, is to resolve 

complaints and disputes in an attempt to avoid civil litigation.


GLOSSARY 

Guaranteed elements 

The premiums, benefits, values, credits or charges that are specifically provided and 

guaranteed on a covered product at the time of issue, or subsequently by rider or 

endorsement. 

Have-in-place 

Company policies and procedures must be in effect for a sufficient length of time in 

order to demonstrate that appropriate action has been taken to provide reasonable 

assurance that the required objective has been achieved. 

IMSA standards 

IMSA’s Principles and Code of Ethical Market Conduct and the accompanying 

commentary that serve as the applicable standards by which companies must 

demonstrate compliance in order to become IMSA qualified. 

Independent intermediary 

An individual, corporation or other entity not affiliated with a life insurance company, 

holding a contract with the company to supervise its captive and independent 

distributors. 

Independent marketing organization 

See Independent intermediary. 

Independent producer 

See producer. 

Individually-sold 

Sales and marketing efforts directed to an individual purchaser of a covered product. 

The individual may be a member of a group, and the product may have been filed and 

approved with a state regulator as group insurance. The concept of “individually-sold” 

does not include sales and marketing to groups of persons where that activity is 

directed primarily to the group contract holder and not to a specific member of the 

group. Whether products are “individually-sold” will be determined through a factspecific 

analysis subject to the sound judgment of the insurer and its Qualified 

Independent Assessor. 

“Individually-sold” products would include: group universal life insurance that requires 

individual consultation with and solicitation of the insured to purchase insurance, and 

group products sold in conjunction with 403(b) plans where a commissioned producer, 

sometimes in competition with other producers, meets with individual prospects or small 

groups to promote purchase of the insurer’s products. 

Further guidance regarding the meaning of “individually-sold” may be found in the IMSA 

“Group Products White Paper” available at www.IMSAethics.org.

Insurable needs 

Risks associated with premature death or extended life which can be managed 

appropriately with covered products. 


GLOSSARY 

Licensing 

Obtaining formal documentation establishing that the person or entity has complied with 

all applicable laws and is authorized by a state or other unit of government to engage in 

the insurance activities specified in the license or certificate of authority granted. 

Life insurance 

A contract between an insurance company and a customer that pays a death benefit 

upon the death of the insured life covered by that contract; A product filed as such by 

the company and approved as such by a state insurance regulator. 

LIMRA CAP 

LIMRA International Inc.’s Customer Assurance Program is a survey program 

independently administered for participating insurers to test the level of the customer’s 

understanding of the covered product purchased. 

LUTCF 

Life Underwriter Training Council Fellow is a professional designation earned upon 

successful completion of courses by members of local chapters of NAIFA. 

Long-term Care 

Long-term care is defined as a variety of services necessary for someone 

who requires some form of on-going care or assistance. Long-term care is 

different from traditional medical care as long-term care helps an 

individual live as he/she is now rather than improve or cure a medical 

condition. Long-term care services include: help with the activities of 

daily living, assistance/supervision needed due to a cognitive impairment, 

home health care, respite care, adult day care, or care provided in a 

nursing home or an assisted care living facility. 

Long-Term Care Insurance 

A contract between an insurance company and a customer that reimburses the 

customer for expenses of long-term care as set forth in the contract. A product filed as 

such by the company and approved as such by a state insurance regulator. 

Management 

A person or persons within an organization who have accountability, responsibility, and 

authority to direct or control the business affairs of that organization.


GLOSSARY 

Managing General Agent (MGA) 

An independent business (individual, partnership or corporation) that performs 

administrative functions (similar to home office or branches) which may include claims 

administration and payment, marketing administration functions, premium accounting, 

premium billing, coverage verification, risk inspection, underwriting authority or 

certificate issuance. The MGA may or may not sell directly to the public. The MGA may 

appoint and supervise producers. Due to their performance of (one or more) insurer 

functions, as mentioned above, MGAs come under special scrutiny (via statutes, rules 

and regulations) in many states. 

Monitor 

To check routinely and systematically with a view to collecting certain specified 

categories of information, to investigate and resolve anomalous or unexpected 

information, and to identify the need for or to make recommendations designed to 

reduce the probability of future anomalies. The program documents indicate that 

monitoring must be performed to provide reasonable assurance that policies accurately 

reflect management's (or other applicable governing bodies') point of view that 

procedures are designed to support those policies, and that procedures are 

appropriately executed. 

Needs-based selling 

The process of obtaining relevant information from a prospective customer to form a 

reasonable belief that insurance product recommendations meet the customer's 

insurable needs and/or financial objectives. 

Persistency 

The measure of how long a policy (or block of policies) remains in force. Persistency is 

used to monitor the effectiveness of marketing of products and quality of customer 

service and varies as a result of many factors including but not limited to underwriting 

expense, product design, and interest rates. 

Point-in-time 

Policies and procedures that have been adopted and operational during a specific 

timeframe and provide reasonable assurance that the required objective is achieved. 

(Also see “Have-in-place” definition) 

Policies and procedures 

Policies refers to the plan or course of action adopted by the company designed to 

influence and determine decisions and actions. Procedure refers to the specific 

methods required to effect the decisions and actions articulated within the policies. 

Policies and procedures provide reasonable assurance that a point of view held by 

management or imposed by a governing body such as a regulatory authority is used 

consistently among those units within the company responsible for enforcing or 

supporting that point of view.


GLOSSARY 

Each of the Principles of Ethical Market Conduct espouses a point of view with respect 

to market conduct. Management’s assertion of compliance with that point of view is 

expressed through policies which, when consistently applied, reflect an understanding 

of the point of view and through procedures which, when consistently implemented, 

result in an outcome compatible with the point of view. 

Practices 

Sales or market conduct-related actions that are performed by company employees and 

producers of its products. 

Principles and Code of Ethical Market Conduct 

See, IMSA standards. 

Producer 

A person or marketing entity licensed to sell, solicit or negotiate covered products 

including the following: 

Captive producer 

An individual or entity (partnership, corporation, association or other legal relationship) 

employed as a common law employee by the insurer or an affiliate of the insurer, which 

markets or sells to the customer and whose compensation is paid directly by the insurer 

or an affiliate of the insurer. Examples include, employed agents or representatives, 

direct marketing employees. 

Independent producer 

An individual or entity (partnership, corporation, association or other legal relationship) 

which markets or sells the company’s products on an independent contractor basis. 

Examples include licensed and appointed: general agents and their contracted agents, 

registered representatives of broker-dealers, bank employees, third-party administrators 

or marketers. 

Independent intermediary 

An individual, corporation or other entity not affiliated with a life insurance company, 

holding a contract with the company to supervise its captive and independent 

producers. 

Qualified Independent Assessor 

An individual approved by IMSA as qualified to perform an assessment of a company’s 

evidence that demonstrates compliance with IMSA standards. Independent means that 

the individual is not an employee of the company, has no direct or materially indirect 

financial interest in the company, and has no significant influence over the company or 

its operations. It also means the individual will provide an objective consideration of the 

facts and unbiased judgments, and will maintain honest neutrality in forming and 

expressing conclusions.


GLOSSARY 

Reasonable assurance 

In the context of the program documents, the term reasonable is used to modify 

assurance, as an acknowledgment that it is virtually impossible to provide absolute and 

certain assurance that an event will happen (e.g., that a policy will address every 

possible circumstance, or that procedures will be applied without exception). 

Reasonable, as a qualifier, suggests that there exists a standard in both design and 

performance, and that such a standard, while conforming to the judgment or 

discernment of a knowledgeable person, is neither excessive nor extreme. 

Regulator 

A person possessing authority pursuant to law prescribing the management or 

government of the business of life insurance. Depending upon the context, such person 

may possess such authority under state insurance laws (a state regulator) or federal 

securities or other laws (a federal regulator). 

Replacement (internal and external) 5 

A transaction in which a new policy or contract is to be purchased, and it is know or 

should be known to the proposing producer, or to the proposing insurer if there is no 

producer, that by reason of the transaction, an existing policy or contract has been or is 

to be: 

-- lapsed, forfeited, surrendered or partially surrendered, assigned to the replacing 

insurer or otherwise terminated; 

-- converted to reduced paid-up insurance, continued as extended-term insurance, or 

otherwise reduced in value by the use of nonforfeiture benefits or other policy 

values; 

-- amended so as to effect either a reduction in benefits or in the term for which 

coverage would otherwise remain in force or for which benefits would be paid; 

-- reissued with any reduction in cash value; or 

-- used in a financed purchase. 

When one or more of the above-listed activities has occurred, the original policy should 

be considered to have been replaced. 

When the policies or contracts affected are all within the same underwriting company 

the process is referred to as internal replacement. When the policies or contracts 

affected are underwritten by non-affiliated companies, the process is referred to as 

external replacement. In some states, replacements between affiliated operations may 

be deemed to be internal replacements. 

5 Adapted from the NAIC Replacement of Life Insurance and Annuities Model 

Regulation. In those jurisdictions where law or regulation establishes a higher standard 

than the one in this Glossary, then that higher standard shall supersede the one given 

here.


GLOSSARY 

Responsibility 

Personal accountability for the performance of specific duties and consequent 

awareness of the penalty for failure to perform such duties. The implication is that the 

person(s) given responsibility will provide trustworthy performance of assigned 

obligations or activities without the need for superior authority. 

Sales illustrations 

As used, a term generally used to describe numerical and/or graphical presentations 

that contain variable data to demonstrate how life insurance and annuity products might 

perform over time. Illustrations are a tool to explain guaranteed and non-guaranteed 

features of a policy. They are used to explain the underlying assumptions of the 

underwriting company. These assumptions include interest crediting, mortality, 

expenses, persistency, and company philosophy. 

Sales process 

All of the activities linked to support the prospecting, presentation and conclusion of the 

sales activities. Generally, the process involves combinations of people, machines, 

tools, techniques, and materials in a systematic series of steps or actions. It includes 

oral and written presentations, as well as advertising in publications, TV, radio, and the 

Internet. Like advertising materials, a sales process that is a systematic presentation of 

a product or service may be subject to insurance regulation. (See related sales 

processes such as advertising, sales materials, fact finding, replacements, and sales 

illustrations.) 

Self-regulatory organization 

As used, means an organization that governs the activities of broker-dealers pursuant to 

its own rules and the Securities Exchange Act of 1934. The NASD develops rules and 

regulations, conducts regulatory reviews of members’ business activities, and designs 

and operates marketplace services and facilities. 

Specialty independent marketing organization 

See independent intermediary 

Statement of values 

A value is a principle, standard or quality that is considered to be desirable. The 

program documents are predicated on the belief that the practice of ethical market 

conduct is one of many values embraced by the life insurance industry, and attempts to 

provide companies with guidance on those characteristics that contribute to the 

realization of such a quality. The company's statement of values provides management 

with an opportunity to articulate those qualities or principles that it considers to be 

important, including principles relating to ethical market conduct, and to articulate its 

commitment to conducting business in a way that is consistent with achieving its values.


GLOSSARY 

Suitability 

The process of a producer obtaining relevant financial, needs and objectives information 

from a prospective customer prior to recommending a product to that customer. The 

producer obtains enough information to form a reasonable belief that the recommended 

product addresses the customer’s stated needs and objectives. 

System of supervision 

The company's system of supervision of its sales and marketing activities should reflect 

the structure, functions and risks of the company and its distribution channels and must 

include, at a minimum: 

-- Assignment of responsibility and accountability for reasonably assuring supervision 

of all distribution channels for covered products; 

-- Procedures for routinely and systematically supervising compliance and identifying 

instances of non-compliance with company policies and procedures, IMSA 

standards and applicable laws and regulations; 

-- Procedures for responding to identified instances of non-compliance with policies 

and procedures, IMSA standards and applicable laws, regulations, where 

appropriate; and 

-- Means of reasonably assuring that corrective action has been taken, where 

appropriate. 

Third-party administrators 

Independent organizations (other than insurance companies) that provide specialized 

services as outlined in a TPA agreement or service contract. Administration services 

may include policy or contract administration, benefit management, and claims 

administration (e.g., claims payments, reporting), and administration of benefit 

disbursements. The TPA may also be retained to provide specified services such as 

premium remittals, billing, and employee enrollments. TPA organizations may also be 

affiliated with a marketing organization for selling insurance products. These separate 

entities would be set up under the laws and regulations governing insurance agencies. 

Timely, accurate, and thorough information 

Information provided to a customer that will be used by the customer to determine 

whether to purchase a covered product. Timely, accurate, and thorough information will 

enable the customer to make an informed buying decision with respect to the covered 

product under consideration. The information must reflect correctly the conditions of the 

policy or contract at the point in time at which the buying decision will be made, and 

must be presented in such a way that the company may be reasonably assured that the 

customer understands what he or she is or is not purchasing. 

Training 

Instruction or education designed to impart an acceptable level of knowledge in the 

subject for which training was provided. IMSA’s Elements of Compliance provide that 

companies should reasonably assure that captive producers and appropriate company 

employees participate in training, whether provided by the company, third parties or 

outside vendors, manuals, product brochures or other sources. IMSA’s Elements of


GLOSSARY 

Compliance also provides that companies should reasonably assure that training 

programs, materials and resources are made available to independent producers. 

Unfair competition 

Unethical, dishonest, false or fraudulent rivalry in the business of life insurance 

generally, particularly related to improper practices that endeavor to substitute one 

insurer’s products or services in the market for those of another insurer. Some unfair 

competition practices have been specifically identified and addressed in federal antitrust 

and trade practices law and regulation (with corresponding state laws on those same 

subjects) and in some states the NAIC Model Unfair Trade Practices Act (as adopted in 

those several states). 

Unfair Trade Practices (Act) 

An NAIC model act, and its various forms as enacted by law or regulation in most 

states, intended to assure appropriate market conduct in the business of insurance by 

addressing unfair methods of competition and unfair and deceptive acts and practices. 

Specifically, this Act defines proscribed conduct in such areas as: 

-- misrepresentations; 

-- false information; 

-- defamation; 

-- boycott, coercion, and intimidation; 

-- false statements and entries; 

-- unfair discrimination; 

-- rebates, and 

-- unfair financial planning practices. 

In those jurisdictions where law or regulation establishes a higher standard than the one 

in this Glossary, then that higher standard shall supersede the one given here.



ELEMENTS OF COMPLIANCE 


Each company subscribing to these Principles and Code of Ethical Market Conduct commits 

itself in all matters affecting the sale of covered products: 

I. To conduct business according to high standards of honesty and fairness and to 

render that service to its customers which, in the same circumstances it would apply to 

or demand for itself. 

II. To provide competent and customer-focused sales and service. 

III. To engage in active and fair competition. 

IV. To provide advertising and sales materials that are clear as to purpose and honest 

and fair as to content. 

V. To provide for fair and expeditious handling of customer complaints and disputes. 

VI. To maintain a system of supervision and monitoring that is reasonably designed to 



Comment: IMSA’s Principles are designed to set out general standards that are universally 

agreed upon. The Code specifies the means for achieving the broad Principle statements. 

The “Comments” within the Handbook are designed to provide further guidance and 

clarification as to the intent of IMSA’s Principles and Code of Ethical Market Conduct. IMSA’s 

Principles, Code, and Comments are integral to each other and must be viewed together as 

parts of a whole design. The Handbook, Principles, Code and Comments are intended to apply 

to covered products and are intended for use by companies in their U.S. operations. (See 

Glossary definition of “covered products.”) 


TOPIC 1: NEEDS-BASED SELLING/SUITABILITY. 

Subtopic: Needs-Based Selling (Life Insurance). 

Principle 1 - Code A. 


TOPIC – NEEDS-BASED SELLING/SUITABILITY 

The insurable needs and financial objectives of its customers are determined based 

upon relevant information obtained from the customer and, at the time of the 

transaction, the company enters into life insurance transactions which assist the 

customer in meeting his or her insurable needs and financial objectives. 

Comment: IMSA has a needs-based selling standard and suitability standard. For purposes 

of compliance with IMSA standards, IMSA’s needs-based selling standard applies to life 

insurance whereas its suitability standard applies to sales of annuities and long-term care 

(LTC) insurance products. 6 Companies should review the covered products offered through 

their distribution systems to determine the appropriate applicability of each of the standards. 


needs-based selling standard. Companies selling only annuities and/or LTC insurance must 

provide evidence of compliance with IMSA’s suitability standard. Companies selling all 

covered products must provide evidence of compliance with both IMSA’s needs-based selling 

and suitability standards. 

The company may demonstrate compliance with IMSA’s needs-based selling standard through 

a variety of different means. The company may have sales promotion materials to consider 

insurable needs and financial objectives or may provide, directly or indirectly, a source for 

obtaining fact-finding tools for determining customers’ insurable needs and financial objectives. 

These tools could include: questionnaires, software packages, customer profiles, capital 

needs analyses, and financial needs analyses. The company also may provide producers with 

fact-finding tools to use with customers in life insurance transactions. The company can 

demonstrate the use of these tools by such means as contractual provisions or other 

agreements requiring their use, developing criteria that must be used in producer-developed 

tools, providing a comprehensive list of resources, making available formal or informal training 

programs or materials regarding the use of such tools, and audit questions regarding factfinding 

tools used. 

The marketing and sale of covered products may often encompass a variety of distribution 

methods and practices. In some instances it may not be practical or appropriate to consult 

individually with each customer. For example, in mass-marketed direct response sales, the 

structure of the product design and its intended markets may satisfy the requirements for 

determining insurable needs and financial objectives. 

6 






In other instances, basic fact-finding and needs analysis provides the appropriate relevant 

information to recommend a product. For example, customers who are purchasing a new 

house may only wish to consider the single need of mortgage protection. In this situation, 

basic information about customers and their needs (e.g., the amount and term of coverage) 

constitute adequate relevant information for term life insurance recommendations. 

Multiple needs will require more extensive fact-finding and needs analysis to determine 

appropriate product recommendations. For example, customers typically have both immediate 

cash and income protection needs that, after review of the relevant information, may lead 

producers to recommend either term insurance, permanent insurance, or a combination of 

both. 

When conducting a needs-based analysis for life insurance products, information could 

include: 

-- relevant information to determine cash or income needs; 


-- premium commitment; 


-- related financial needs. 

If the customer refuses to provide some or all of the information requested by the insurance 

producer, or the insurer where no producer was involved, the file should be documented to 

reflect that the customer refused to provide the information requested. 

The company is also required to have policies and procedures in place to reasonably assure 

that product recommendations by producers to customers at the time of purchase are based 

upon relevant information and assist customers in meeting their insurable needs and financial 

objectives. Techniques to provide reasonable assurance could include: 







ELEMENTS OF COMPLIANCE. 

P1 The company has policies and procedures for this purpose. 

P2 There are individuals or teams responsible for establishing, maintaining, 

communicating, using, and monitoring these policies and procedures, and acting upon 

the results, where appropriate. The company holds these individuals or teams 

accountable for fulfilling these responsibilities. 




Evidence of assignment of such responsibilities and accountability may be found in 

such things as: 

-- job descriptions; 

-- titles; 

-- organization charts; 

-- communication about responsibilities; 

-- internal audits or reports; 

-- responsibility matrix; and 

-- performance evaluation criteria. 

C1 The company can provide evidence that these policies and procedures have been 

communicated to captive producers and appropriate company employees and made 

available to independent producers, as appropriate. 

C2 The company uses the design of its products to meet the insurable needs and financial 

objectives of its customers. 

C3 The company’s covered product applications or supporting materials include questions 

about whether the independent or captive producer, with the customer’s assistance, 

determined the customer’s insurable needs and financial objectives prior to taking the 

application. 

C4 The company’s covered product applications or supporting materials include questions 

about reasons for buying the product. 

C5 The company uses disclosure forms that require customer acknowledgment of 

important features and benefits related to the customer’s insurable needs and financial 

objectives. 

C6 The company considers customers’ insurable needs and financial objectives as part of 

its general underwriting process. 

C7 The company communicates the availability of fact-finding tools to their captive 

producers, appropriate company employees and independent producers. 

M1 The company monitors, on an individual or trend basis, that independent and captive 

producers make determinations of customers’ insurable needs and financial objectives, 

and takes corrective action, where appropriate. Examples of such monitoring 

techniques include: customer surveys, internal audits, tracking complaints, etc. 

M2 If the company has applications or supporting materials that include the questions listed 

in C3 or C4 above, it monitors the answers provided to the questions, and takes 

corrective action, where appropriate. 




M3 The company monitors free look, lapse, early surrender and/or persistency trends as an 

indicator of whether customers’ insurable needs may not have been addressed and 

takes corrective action, where appropriate. 

M4 The company monitors exceptions to its general underwriting guidelines and practices 

pertaining to customers’ insurable needs and financial objectives, and takes corrective 

action, where appropriate. 

M5 The company has defined customer profiles for its products and has conducted 

analyses to determine if the sales patterns of its products are consistent with those 

policies, and takes corrective action, where appropriate. 

M6 The company monitors access to fact-finding tools by captive and independent 

producers and appropriate company employees, and takes corrective action, where 

appropriate. For example, through monitoring inventory stock, or tracking requests for 

forms through an Intranet site. 

M7 The company monitors, through a sampling of policy files, that needs assessment tools 

were used, and takes corrective action, where appropriate. 

M8 The company monitors customer satisfaction survey data to determine whether the life 

insurance transaction is designed to assist the customer in meeting his or her insurable 

needs and financial objectives and takes corrective action, as appropriate. 

Subtopic: Suitability (Annuities/Long-Term Care Insurance). 

Principle 1 - Code B. 


based upon relevant information obtained from customers and the company has 

policies and procedures designed to reasonably assure that recommendations to 

purchase annuities and/or long-term care (LTC) insurance are suitable based upon the 

relevant information obtained from the customer. 

Comment: IMSA has a needs-based selling standard and suitability standard. For purposes 

of compliance with IMSA standards, IMSA’s needs-based selling standard applies to life 

insurance whereas its suitability standard applies to sales of annuities and long-term care 

(LTC) insurance products. 7 Companies should review the covered products offered through 

their distribution systems to determine the appropriate applicability of each of the standards. 


needs-based selling standard. Companies selling only annuities and/or long-term care 

insurance must provide evidence of compliance with IMSA’s suitability standard. Companies 

7 






selling all covered products must provide evidence of compliance with both IMSA’s needsbased 

selling and suitability standards. 

The company may demonstrate compliance with IMSA’s suitability standard through a variety 

of different means. The company may have sales promotion materials that consider relevant 

suitability information or may provide, directly or indirectly, a source for obtaining relevant 

suitability information. These tools could include: questionnaires, software packages, capital 

needs analyses, financial needs analyses, and customer profiles. The company also may 

provide producers with fact-finding tools to use with customers in annuity and/or LTC 

insurance transactions. The company can demonstrate the use of these tools by such means 

as contractual provisions or other agreements requiring the use of such tools, developing 

criteria that must be used in producer-developed tools, providing a comprehensive list of 

resources, making available formal or informal training programs or materials regarding the 

use of such tools, and audit questions regarding fact-finding tools used. 

Customers may look to companies and their producers to provide products to help them 

accumulate funds for long-term financial objectives, such as retirement or college funding, or 

products designed to provide benefits to meet long-term income or long-term care planning 

objectives. 

There are also instances where customers’ special circumstances (e.g., one or more family 

member in military service, customers with special needs due to disabilities) require additional 

care in making product recommendations. 

Relevant suitability information may be more extensive than that required to address insurable 

needs. For example, long-term accumulation objectives require that financial status, tax status 

and financial objectives of customers be taken into consideration to determine if fixed-rate 

products, or investment products, such as those offered through registered representatives of 

NASD member firms, may be appropriate. In addition, if investment products are 

considerations, then customers’ risk profiles need to be assessed to determine an appropriate 

asset allocation recommendation. 

Also, there may be a wider array of product choices available to address customers’ broader 

financial objectives, particularly if the product designs also offer features and benefits that 

meet insurable needs. For example, annuities may offer guaranteed death and/or income 

benefits in addition to accumulation features. LTC insurance products may offer other 

features, such as lump-sum payments at death, or guaranteed cost-of-living adjustments, that 

require additional information to identify the appropriate product features and benefits that may 

address customer needs. 

In these instances, reasonable inquiry to obtain relevant information as the basis of 

appropriate product recommendations to meet customers’ stated objectives is required. In 

securities sales, and increasingly in the sale of annuities and LTC insurance products, 

suitability is a regulatory requirement. 




Relevant information must include financial status, tax status and financial objectives. 

Depending on the type of product, additional types of information could include: 


-- net worth, including percentage of net worth the product represents; 






-- time horizon; 

-- financial experience; and 

-- potential impact of product purchase on eligibility for other benefit programs. 

If the customer refuses to provide some or all of the information requested by the insurance 

producer, or the insurer where no producer was involved, the file should be documented to 

reflect that the customer refused to provide the information requested. 

The company is also required to have policies and procedures in place to reasonably assure 

that producers obtain relevant information in order to have reasonable grounds for believing 

product recommendations to customers are suitable at the time of purchase of annuities or 

LTC insurance products to customers. Techniques to provide reasonable assurance could 

include: 

















-- titles; 









(Indicators P3 and P4 are mandatory for indexed annuity insurers) 

P3 The company has polices and procedures that require producers, or the insurer where 

no producer is involved, to gather information about the customer when conducting a 

suitability analysis for indexed annuities. The types of information must include financial 

status, tax status and financial objectives. Additional types of information could include: 


-- net worth, including percentage of net worth product represents; 







-- financial experience. 




P4 The company has policies and procedures in place to reasonably assure that the 

product recommendation of an indexed annuity to the customer is based upon the 

suitability analysis. Techniques to provide reasonable assurance could include: 











C2 The company’s annuity and/or LTC insurance applications or supporting materials 

include questions about whether the producer, with the customer’s assistance, gathered 

relevant suitability information prior to taking the application. 




C3 The company’s annuity and/or LTC insurance applications or supporting materials 

include questions about reasons for buying the product. 

C4 The company uses disclosure forms that require customer acknowledgement of 

important features and benefits related to the suitability of the annuity and/or LTC 

insurance product. 

C5 For LTC insurance products, the company considers relevant suitability information as 

part of its general underwriting process. 

C6 Where applicable for annuity products, the company considers relevant suitability 

information as part of its application review and/or issue process. 

C7 The company communicates the availability of fact-finding tools to their captive 

producers, appropriate company employees and independent producers. 

M1 The company monitors, on an individual or trend basis, that producers make 

recommendations based upon relevant suitability information, and takes corrective 

action, where appropriate. Examples of such monitoring techniques include: customer 

surveys, internal audits, tracking complaints, etc. 

M2 If the company has applications or supporting materials that include the questions listed 

in C2 above, it monitors the answers provided to the questions, and takes corrective 


M3 The company monitors free look, lapse, early surrender and/or persistency trends as an 

indicator of whether the product recommendation was suitable and takes corrective 


M4 For LTC insurance products, the company monitors exceptions to its general 

underwriting guidelines and practices pertaining to the suitability of the 

recommendation, and takes corrective action, where appropriate. 

M5 Where applicable for annuity products, the company monitors exceptions to its 

application review and/or issue process related to consideration of relevant suitability 

information, and takes corrective action, where appropriate. 

M6 The company has defined customer profiles for its annuity and/or LTC insurance 

products and has conducted analyses to determine if the sales patterns of its products 

are consistent with those policies, and takes corrective action, where appropriate. 

M7 The company monitors access to fact-finding tools by captive and independent 


appropriate. For example, the company monitors inventory stock, or tracks requests for 

forms through an Intranet site. 




M8 The company monitors, through a sampling of policy files, that relevant suitability 

information was used as the basis for recommendations of products by producers, and 




TOPIC – COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS 

TOPIC 2: COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS. 

Subtopic: General. 

Principle 1 - Code C. 


Comment: Code C of this Principle is intended to focus on a company’s overall system or 

process for complying with laws and regulations which apply to the products within the scope 

of the Principles and Code of Ethical Market Conduct. In this regard, Code C is designed to 

determine that the company has an infrastructure in place to identify changes to existing laws 

and regulations and introductions of new laws and regulations and this information is used to 

update policies and procedures, as appropriate. It is not intended to determine the company’s 

actual compliance with such laws and regulations. 




communicating, using, and monitoring these policies and procedures and acting upon 






-- titles; 







communicated to captive producers and to appropriate company employees and made 

available to independent producers involved in the marketing and sales process, as 

appropriate. 

C2 The company has a procedure to reasonably assure that laws and regulations 

pertaining to the marketing and sale of covered products, or summaries thereof, are 


available to independent producers on a timely basis. 




C3 The company obtains and distributes information regarding changes in laws and 

regulations pertaining to the marketing and sale of covered products. Sources of 

information regarding changes in the laws and regulations include: 

-- hard copy or electronic services; 

-- Insurance Affiliated Broker-Dealer Forum (IABDF); 

-- Life & Health Compliance Association (LHCA); 

-- American Council of Life Insurers (ACLI); 

-- National Association of Insurance and Financial Advisors (NAIFA); 

-- U.S. Securities and Exchange Commission (SEC); 

-- North American Securities Administrators Association (NASAA); 

-- NASD; and 

-- State insurance departments. 

C4 Information regarding changes in laws and regulations pertaining to the marketing and 

sale of covered products is used to update policies and procedures. 

M1 The company monitors whether information regarding changes in laws and regulations 

pertaining to the marketing and sale of covered products is used to update policies and 

procedures and takes corrective action, where appropriate. 

M2 The company monitors compliance with laws and regulations applicable to the 

marketing and sale of covered products, and takes corrective action, where appropriate. 

Examples of such monitoring techniques include: customer surveys, producer surveys, 

internal audits, tracking complaints, etc. 

M3 The company analyzes complaints to monitor its compliance with laws and regulations 

pertaining to the marketing and sale of covered products, and takes corrective action, 

where appropriate. 

M4 The company monitors whether procedures pertaining to the marketing and sale of 

covered products are implemented by the effective date required by law or regulation, 

and takes corrective action, where appropriate. 

M5 The company obtains feedback from appropriate company employees, customers, or 

independent and captive producers to determine if policies and procedures designed to 

reasonably assure compliance with laws and regulations applicable to the marketing 

and sale of covered products are used, and takes corrective action, where appropriate. 

Such feedback might be obtained from surveys, focus groups, etc. 




Subtopic: Compliance with Advertising, Unfair Trade Practices, and Sales Illustrations Laws 

and Regulations. 


It maintains compliance with applicable laws and regulations related to advertising, 

unfair trade practices, sales illustrations, and other similar provisions. 

Comment: The company’s policies and procedures for registered products must be designed 

to provide reasonable assurance that sales materials comply with NASD, state and federal 

requirements, if applicable. The company also must maintain policies and procedures for 

defining, reviewing, approving, filing (where required), and maintaining files of advertising and 

sales material (regardless of the source) used in the solicitation and sale of covered products. 

Advertising and sales material include such items as: sales presentations; prepared sales 

talks; communications with policyholders or potential policyholders urging them to purchase, 

increase, modify, reinstate or retain a policy; direct mail solicitations; telemarketing scripts 

(both inbound and outbound); web sites; radio, television, and print advertisements and 

illustrations. 










-- titles; 









C2 The company can demonstrate that it reviews the content of its advertising and sales 

material with respect to: 




-- statutory requirements; 

-- factual accuracy; 

-- completeness of disclosure; 

-- clarity of advertisement; 

-- clarity of sales and illustration documents; 

-- requirements as established through laws or regulations; and 

-- requirements as established by the NASD, if applicable. 

C3 Contracts or agreements between the company and its captive and independent 

producers either prohibit the independent creation of advertising and sales materials or 

require that any such independently-created advertising and sales materials be 

approved by the company prior to use. 

C4 The company tracks applicable laws and regulations related to advertising and sales 

material and communicates up-to-date information about these laws, regulations and 

the company’s policies and procedures to independent and captive producers and 

appropriate company employees. 

C5 The company has procedures in place to update its advertising and sales material to 

reflect changes in applicable laws and regulations. 

C6 The company files advertising and sales material with and obtains approval from the 

NASD and state insurance departments, as required. 

M1 The company monitors compliance with its advertising and sales material review, 

content, record-keeping, filing, approval and distribution policies and procedures and 


M2 The company takes corrective action or disciplines, where appropriate, captive and 

independent producers and appropriate company employees who violate the company’s 

advertising policies and procedures. 

M3 The company monitors complaints relating to advertising and sales materials and uses 

this feedback to improve its advertising and sales materials, and takes corrective action, 


M4 The company obtains feedback from captive and independent producers, customers, 

and company employees related to advertising and sales materials and uses this 

feedback to improve its compliance with laws and regulations, as appropriate. Such 

feedback may be obtained from surveys, focus groups, complaints received, etc. 




Subtopic: Compliance with Complaint Laws and Regulations. 


Complaints are identified, evaluated, and handled in compliance with applicable laws 

and regulations related to customer complaint handling. 

Comment: The appropriate handling of customer complaints and disputes related to sales and 

marketing of covered products is an important element of ethical market conduct. State laws 

and regulations require certain processes. Companies are also encouraged, but not required, 

by IMSA’s Principles and Code of Ethical Market Conduct to consider additional methods of 

resolving complaints and disputes related to sales and marketing practices such as Alternative 

Dispute Resolution (ADR) or other alternatives designed to deal with disputes without requiring 

civil litigation. The American Arbitration Association or alternate organizations might be 

sources available to assist companies in establishing ADR processes. 

The company’s policies and procedures must define a complaint in a manner consistent with 

IMSA definitions and applicable laws and regulations. These policies and procedures must 

include methods for routinely recording and responding to complaints in compliance with 

applicable laws and regulations. 







Evidence of assignment of such responsibilities and accountability could include such 

things as: 


-- titles; 






C1 The company can provide evidence that these policies and procedures are 

communicated to captive producers, appropriate company employees and third party 

administrators and are made available to independent producers, as appropriate. 

C2 The company files reports required by laws and regulations. 




C3 The company updates its complaint handling policies and procedures to reflect changes 

in applicable laws and regulations. 

C4 The company communicates up-to-date information about changes in the laws and 

regulations regarding complaints to management, captive producers and appropriate 

company employees and makes such information available to independent producers. 

C5 Contracts or agreements between the company, its independent and captive producers 

and third party administrators indicate that complaints must be forwarded to the 

company. 

C6 The company responds to complaints in a manner consistent with applicable laws and 

regulations. 

M1 The company monitors the recording of and responding to complaints, including those 

complaints sent directly to captive producers, independent producers, appropriate 

company employees and third party administrators for compliance with applicable laws 

and regulations and takes corrective action, where appropriate. Examples of applicable 

legal requirements are: 

-- processing time; 

-- record retention; and 

-- maintenance of complaint logs. 

M2 The company monitors whether its policies and procedures reflect changes in complaint 

handling laws and regulations and takes corrective action, where appropriate. 

M3 The company responds to complaints in a timely manner as provided by laws or, in its 

absence, applicable NAIC Model Regulations. 


TOPIC 3: POLICYMAKING. 


TOPIC – POLICYMAKING 

Subtopic: Support for Enhancement of the Life Insurance Industry’s Ethical Market Conduct 

Practices. 

Principle 1 - Code D. 

In cooperation with consumers, regulators and others, it affirmatively seeks to improve 

the life insurance industry’s practices for marketing and sales of covered products. 

Comment: The company must demonstrate that it participates, in a way appropriate to its size, 

in external activities that support the enhancement of the life insurance industry’s ethical 

market conduct practices. 




communicating, using, monitoring these policies and procedures and acting upon the 

results, where appropriate. The company holds these individuals or teams accountable 

for fulfilling these responsibilities. 




-- titles; 






C1 The company can provide evidence that its policies and procedures have been 



C2 Independent and captive producers or appropriate company employees are members, 

serve on committees or otherwise participate in industry trade group activities related to 

enhancing the insurance industry’s ethical market conduct practices. 

C3 Captive and independent producers or appropriate company employees have published 

articles or made presentations on compliance topics related to enhancing the insurance 

industry’s ethical market conduct practices. 




C4 The captive and independent producers or appropriate company employees provide 

feedback to NAIC, NASD or state regulators on issues related to enhancing the 

insurance industry’s ethical market conduct practices, directly or indirectly through such 

organizations as the ACLI, NAIFA, and state trade associations. 

C5 The company makes public service announcements on radio, television or the print 

media (or supports groups who make such announcements) or provides information 

directly to customers to promote ethical market conduct practices. 

M1 The company monitors that the policies and procedures were communicated to the 

captive producers and appropriate company employees and that they were made 

available to independent producers and takes corrective action, where appropriate. 

M2 The company monitors participation in activities that support the enhancement of the 

insurance industry’s ethical market practices and takes corrective action, where 

appropriate. 

M3 The company obtains feedback about customer perceptions of the company’s or 

industry’s ethical market conduct practices and takes corrective action, where 

appropriate. Examples of such feedback include: customer surveys, internal audits, 

etc. 

M4 The company rewards and recognizes participation in external organizations that 

promote ethical market conduct standards (e.g. NAIFA, The American College). 

M5 The company analyzes complaints pertaining to unethical market conduct issues and 


Subtopic: Support for IMSA’s Principles and Code of Ethical Market Conduct. 

Principle 1 - Code E. 



Comment: The company can demonstrate its adoption of IMSA’s Principles and Code by 

different means including, among others, a formal adoption by the company’s Board of 

Directors or a directive by senior management noting support for IMSA’s Principles and Code. 

The company must provide to captive producers and appropriate company employees and 

make available to independent producers a written statement which includes full support for 

the concepts in IMSA’s Principles and Code of Ethical Market Conduct. Companies are 

encouraged to outline consequences specifically associated with non-compliance with the 

concepts of ethical market conduct in the company’s statement. 





P1 The company has adopted a written statement that supports the concepts in IMSA’s 

Principles and Code of Ethical Market Conduct. 


communicating, using, and monitoring the written statement and acting upon the results, 

where appropriate. The company holds these individuals or teams accountable for 

fulfilling these responsibilities. 




-- titles; 






C1 The company can provide evidence that the written statement is communicated to 

captive producers and appropriate company employees and made available to 

independent producers, as appropriate. 

C2 The company communicates to appropriate company employees and captive producers 

and makes available to independent producers a procedure that enables them to seek 

assistance on questions of ethical market conduct. 

C3 The company periodically reconfirms its commitment to IMSA’s Principles and Code of 

Ethical Market Conduct to its employees and producers. Demonstration of this ongoing 

commitment by company management may be found in items such as: 

-- reference to IMSA in speeches to the company or the industry; 

-- reference to IMSA in press interviews; 

-- reference to IMSA in company’s annual report; 

-- service on the IMSA Board of Directors; 

-- inclusion of IMSA in business plan; 

-- use of IMSA membership to improve business plan; 

-- linking of management compensation to support for IMSA; 

-- linking of management compensation to support for learning; 

-- management participation in teaching courses regarding IMSA, internally or to the 

industry; 

-- inclusion of IMSA as part of security analysis; 

-- inclusion of IMSA material as part of Market Conduct Exams; 




-- inclusion of IMSA as part of a new employee orientation program; and 

-- management presentations on IMSA in company training courses. 

C4 The company uses various means to reinforce the company’s commitment to IMSA’s 

Principles and Code of Ethical Market Conduct, such as: 

-- paychecks or commission statements; 

-- company logos; 

-- software packages or other electronic means; 

-- IMSA logo on advertising materials; 

-- IMSA logo and material on website; 

-- link to IMSA on website; and 

-- annual or more frequent IMSA communication. 

C5 Contracts or agreements between the company and its independent and captive 

producers reference an agreement to comply with the written statement. 

C6 The company communicates the consequences of non-compliance with the concept of 

ethical market conduct in the company’s written statement. 

M1 The company monitors whether independent and captive producers and appropriate 

company employees are adhering to the concepts of ethical market conduct as 

expressed in the company’s written statement by such means as surveys, internal 

audits, tracking complaints, and takes corrective action, where appropriate. 

M2 In its reward and recognition systems for independent and captive producers, the 

company takes into account the compliance record of the individual. 

M3 There are consequences specifically associated with non-compliance with the concepts 

of ethical market conduct in the company’s statement and takes corrective action, 


Subtopic: Fair Competition. 


The company maintains compliance with applicable state and federal laws and 

regulations fostering fair competition and requires its captive and independent 

producers and appropriate company employees to refrain from disparaging 

competitors. 


certain negative practices that can be targeted for attention, such as inappropriate replacement 

and competitor “bashing.” A company’s undertaking to engage in active and fair competition 

does not necessarily mean that such member is expected to compete in all covered product 

market segments or with all possible products. A company must be free to compete in limited 




segments or with limited products according to its own ability to serve its targeted customers 

and according to its own marketing plans and goals, both financially and in the marketplace. 

The company is encouraged to establish guidelines for fair competition, communicate these 

guidelines to captive producers and appropriate company employees and make such 

guidelines available to independent producers. The company’s policies and procedures to 

support compliance with state and federal laws and regulations related to fair competition may 

address such issues as: free dating, disparaging remarks, churning/twisting, unreasonable 

restraint of trade, price-fixing, gathering competitive information, conduct of meetings with 

competitors, joint ventures with competitors, tying or bundling, exclusive dealing, discriminatory 

pricing, and inaccurate comparisons with competitors. “Disparaging remarks” do not include 

relevant, factually accurate information. 










-- titles; 






C1 The company can provide evidence that guidelines are periodically communicated to 



C2 The company encourages and provides a means for captive and independent 

producers and appropriate company employees to report violations of the company’s 

fair competition guidelines. 

C3 Contracts or agreements with captive and independent producers, and company 

employee handbooks contain or make reference to guidelines pertaining to fair or unfair 

competition. 




M1 The company monitors captive and independent producers and appropriate company 

employees to identify those who violate the company’s unfair competition guidelines 

and takes corrective action, where appropriate. 

M2 The company obtains feedback from captive or independent producers, customers or 

employees regarding compliance with fair competition guidelines and takes corrective 

action, where appropriate. Such feedback might be obtained through interviews, 

questionnaires, surveys, focus groups etc. 

M3 The company monitors complaints regarding unfair competition and takes corrective 


M4 The company reports violations to the NASD, state regulators or other appropriate 

regulatory body, as required. 


TOPIC 4: LICENSING AND APPOINTMENT. 

Subtopic: Company’s Selection Criteria for its Producers. 



TOPIC – LICENSING AND APPOINTMENT 

Its captive and independent producers and appropriate company employees are of 

good character and business repute, and have appropriate qualifications. 

Comment: Companies must have policies and procedures concerning the manner in which 

the company selects producers to distribute the company’s products. There are several 

sources of information that can assist companies in developing selection criteria for their 

producers. Companies are encouraged to use and rely upon, to the extent applicable, central 

sources of information on producers including the NAIC Producer Database (“PDB”) or the 

NASD Central Registration Depository System (“CRD”). Whether through these systems or 

others, companies should utilize some independent source for checking on the history of 

producers before entering into a relationship with them. Such sources of information also can 

be helpful in making decisions about continuing existing relationships. 

The company must have, use and monitor its selection criteria or guidelines concerning the 

qualifications of its captive and independent producers and appropriate company employees 

with a view toward determining whether they are of good character and business repute. The 

company’s selection criteria or guidelines may take into account such things as: state 

licensing; production and/or persistency; financial standing (e.g., bankruptcy, bondability, debt 

owed to an insurance company or government regulatory body, outstanding judgments, etc.); 

litigation (e.g., arrests or convictions, lawsuits, pending or current litigation, etc.); regulatory 

action or sanction (e.g., license suspension, revocation, etc.); customer complaint history; due 

diligence check through NAIC Producer Database; complaints filed with the SEC or the NASD; 

professional designations; membership in industry organizations; and issues of character 

through use of a standardized selection test. The company also may want to consider having 

a documented process for its selection criteria or guidelines to review possible exceptions as 

they occur, and make recommendations to management, as appropriate. 


P1 The company has selection criteria for this purpose. 


communicating, using, and monitoring the selection criteria and acting upon the results, 







things as: 


-- titles; 






C1 The company can provide evidence that the selection criteria are communicated to 


independent producers involved in the selection process, as appropriate. 

C2 The company consistently uses its selection criteria in the licensing and appointment 

process. 

C3 The company investigates the qualifications (e.g., criminal background, financial 

standing, etc.) of appropriate company employees, captive and independent producers 

in accordance with its selection criteria or guidelines. 

C4 The contract or agreement between the company and its captive and independent 

producers articulates the company’s appointment standards. 

C5 The company consistently applies its hiring guidelines in the contracting and 

appointment of its captive and independent producers and appropriate company 

employees. 

M1 The company monitors the consistent use of its selection criteria or guidelines with 

respect to appropriate company employees and captive and independent producers and 


M2 The company reviews possible exceptions to its selection criteria or guidelines as they 

occur and makes recommendations to management, as appropriate. 

M3 The company monitors that its captive and independent producers and appropriate 

company employees have access to the company’s selection criteria/guidelines 

regarding good character and business repute and takes corrective action, where 

appropriate. 

M4 The company routinely reviews notices of administrative and legal action taken against 

producers and cross references them against its list of captive and independent 


appropriate. Sources of information could include: Insurance Department Newsletters, 

NASD Notices to Members, financial publications, etc. 


Subtopic: Licensing and Appointment of the Company’s Producers. 






Comment: Principle 2, Code B is designed to address a company’s use of persons who have 

complied with state-mandated licensing requirements in selling its products. Companies must 

have a process to provide reasonable assurance that captive and independent producers and 

appropriate company employees are licensed or meet other applicable requirements and, 

where required, are appointed for writing business on behalf of the company. The company’s 

process may include controls with respect to licensing and appointment processes, such as: 

systematic cross-reference between new business systems, licensing systems or databases 

and commission systems; satisfaction of requirements prior to policy issue; satisfaction of 

requirements prior to payment of initial or renewal commission; systematic production of 

control listings that detail exception processing (for example receipt of new business 

application for an unlicensed producer); recent audit or check of licenses; identification of 

person responsible for proper licensing and appointment; and verification of NASD registration, 

where applicable. 

This Code provision focuses upon having companies substantiate whether their producers are 

authorized by state law to sell the company’s products, as appropriate. Some states permit 

producers to engage in sales activities of insurance products prior to issuance of a license, 

and, in those instances, it is appropriate for the company to substantiate whether such 

producers are qualified under state law to write insurance. 








things as: 


-- titles; 









C1 The company can provide evidence that its process has been communicated to captive 

producers and to appropriate company employees and made available to independent 

producers, as appropriate. 

C2 The company can demonstrate consistent use of the process. For example, policy or 

contract issue dates, when compared to the corresponding producer’s license and 

appointment dates, comply with the laws of the applicable jurisdiction where the 

application was taken or the policy or contract issued. 

C3 The company utilizes purchased or company-developed software programs to aid in the 

control and tracking of licensing and appointments. 

M1 The company monitors that captive and independent producers and appropriate 

company employees are properly licensed and appointed (if required) for the jurisdiction 

where applications are taken and takes corrective action, where appropriate. 

M2 The company has disciplined captive and independent producers and appropriate 

company employees for non-compliance with applicable licensing and appointment 

criteria. 

M3 The company monitors new legislation or changes to state and federal laws addressing 

licensing and appointment and amends policies and procedures consistent with these 

changes where appropriate. 

M4 The company routinely reviews notices of administrative and legal actions taken against 

producers, cross references them against its database of producers, and takes 

appropriate action, if necessary. Sources of information may include: the Producer 

Database (IRIN) and the Central Registration Depository (CRD) system of the NASD. 


TOPIC 5: TRAINING. 

Subtopic: Market Conduct Training of Producers. 



TOPIC – TRAINING 


adequately trained regarding compliance with laws and regulations, company policies 

and procedures and IMSA’s Principles and Code of Ethical Market Conduct in the 

marketing and sale of covered products, as appropriate to the company’s distribution 

system. 

Comment: It is an aim of these Principles and Code of Ethical Market Conduct that companies 

utilize duly qualified, not merely licensed, producers as a key to providing quality sales 

practices in the marketplace. Principle 2, Code C attempts to incorporate that concept by 

requiring that a company’s producers and appropriate company employees are trained in the 

company policies and procedures, applicable laws and regulations and IMSA’s Principles and 

Code of Ethical Market Conduct. To comply with these requirements, training shall include: 

-- how to analyze customer insurable needs and financial objectives to assist them with 

making buying decisions about what is appropriate for them; 

-- the use of fact-finding tools for determining customer needs and financial objective; 


-- use and approval of marketing and sales material; 




appropriate; 

-- licensing and appointment requirements; 

-- qualifications for potential producers; 

-- company product features: benefits, limitations, costs, values, charges and operations; 

-- preparation and use of sales illustrations; 

-- updates on changes in the laws and regulations and related changes to company policies 

and procedures; and 


It is recognized that training will reflect a company’s distribution systems. In this regard, 

training must be provided to captive producers and appropriate company employees and made 

available to independent producers. The company’s training activities should take into 

consideration the educational needs of captive and independent producers and appropriate 

company employees. Company distribution systems may include producers with varying 

levels of experience. Most company distribution systems will include experienced producers 

who have been licensed and working in the life insurance industry for many years. The 

training needs for experienced producers may be substantively different than the training 

needs for new producers. For example, training for experienced producers may focus upon 

updating information whereas training for new producers may focus upon providing specific 




product information. Where training is required, the company also should identify 

consequences for failing to meet compliance training requirements, and take corrective action, 

as appropriate. 








things as: 


-- titles; 






(P3 is mandatory for indexed annuity insurers) 

P3 The company has policies and procedures to provide product specific training for its 

producers on the features of the company’s indexed annuity products. The training 

could include: 

-- product benefits; 

-- product limitations; 

-- product guarantees; 

-- product costs; 

-- product values; 

-- product charges; and 

-- company policies and procedures. 

C1 The company can provide evidence that its policies and procedures are communicated 

to captive producers and appropriate company employees and made available to 

independent producers, as appropriate. Examples of communication vehicles include: 

-- memoranda; 

-- payroll notices; 

-- electronic notification; 


-- prominent postings throughout the company; and 

-- contractual agreements. 



C2 The company consistently provides training for captive producers and appropriate 

company employees. Examples of such training may include: 

-- company-sponsored self-study programs; 

-- company-sponsored training programs; 

-- presentations given by outside organizations; and 

-- distribution of compliance manuals, memoranda, newsletters, electronic media or 

other communications. 

C3 The company consistently makes training programs available to independent producers. 

Examples of how such training programs may be “made available” include: 

-- invitations to participate in company training; 

-- inclusion of company compliance requirements in regular communications to 

producers; and 

-- distribution of company compliance manuals, memoranda, newsletters, electronic 

media or other communications. 

C4 The company compares the education or communication materials provided with 

identified educational needs. 

C5 The company considers training as a factor in its performance evaluation and reward 

and recognition system for captive and independent producers and appropriate 

company employees. 

C6 Compliance education needs are identified and training programs and materials to 

address these needs are provided to captive producers and appropriate company 

employees and made available to independent producers. The identification process 

may include: 

-- analysis of customer complaints; 

-- internal auditing and monitoring of information related to sales practices; 

-- identification of market conduct concerns through print, television or other media; 

and 

-- analysis of results achieved in the self-assessment process. 

M1 The company monitors that its captive producers and appropriate company employees 

complete compliance training and monitors the content of the training. Evidence of this 

might include: 

-- attendance logs from training sessions; 

-- certification of completion of self-study programs; 

-- certification of completion coincident with a periodic performance evaluation process; 




-- certification of fulfillment coincident with renewal of a written agreement to distribute 

the company’s products; 

-- agendas and materials from the meeting; 

-- documentation of delivery or distribution of financial needs analysis tools; 

-- customer surveys; and 

-- delivery schedule. 

M2 The company consistently acts upon the failure to fulfill training requirements and takes 


M3 The company monitors its training programs for captive and independent producers and 

appropriate company employees to determine that these programs address compliance 

with company policies and procedures, IMSA’s Principles and Code of Ethical Market 

Conduct and laws and regulations, and takes corrective action where appropriate. 

M4 The company reviews communications and publications provided to its captive and 

independent producers and appropriate company employees for educational content 

about compliance with insurance laws and regulations and concepts in IMSA’s 

Principles and Code of Ethical Market Conduct and takes corrective action, where 

appropriate. 

M5 The company uses program and trainer evaluation feedback to improve the education 

programs. 

M6 The company can provide documentation that its independent producers have 

completed compliance training. Evidence of this might include: 



-- certification of completion coincident with a periodic performance evaluation 

process; 

-- certification of fulfillment coincident with renewal of a written agreement to distribute 

the company’s products; and 

-- delivery schedule. 

Subtopic: Product Training. 


Its captive and independent producers and appropriate company employees have 


Comment: For purposes of Principle 2, Code D, companies are encouraged to inform 

producers about a company’s products and their operation by providing items such as: 

descriptive materials, face-to-face training, telemarketing scripts, computer software, 

underwriting manuals or other materials that explain the product features. 













-- titles; 






C1 The company can provide evidence that descriptive materials have been provided to 



C2 The materials are routinely made available through a catalog or centralized ordering 

system, electronically or in hard copy. 

C3 The company has procedures designed to restrict sales activities of captive and 

independent producers and appropriate company employees until they demonstrate an 

understanding of the company’s covered products’ features and operations. 

C4 The company routinely provides updated materials to its captive producers and 

appropriate company employees and makes these materials available to its 

independent producers. 

M1 The company monitors whether its captive and independent producers and appropriate 

company employees are receiving materials describing its covered products and 

operations, and takes corrective action, where appropriate. 

M2 The company uses feedback from captive and independent producers and appropriate 

company employees to monitor and enhance the descriptive materials of the company’s 

covered products’ features and operations and takes corrective action, where 

appropriate. 


Subtopic: Continuing Education. 

Principle 2 - Code E. 



Its captive and independent producers and appropriate company employees participate 

in continuing education. 

Comment: Continuing education is part of the National Association of Insurance and Financial 

Advisors (NAIFA) Code of Ethics and is incorporated here. Participation by a company’s 

producers in continuing education is part of providing “competent” sales and service to its 

customers. The provisions of Code E are part of, not in addition to, otherwise applicable 

continuing education requirements of state law or imposed by other authorities. Continuing 

education should be provided as appropriate to the company’s distribution systems. 








things as: 


-- titles; 






C1 The company can provide evidence that it conducts periodic continuing education 

programs for captive producers and appropriate company employees and makes such 

programs available to independent producers, as appropriate. 

C2 Directly, or through third parties, and with consideration for accessibility to the potential 

user, the company consistently makes available conferences or programs that provide 

continuing education of its captive and independent producers and appropriate 


C3 The company communicates to captive producers, independent producers and 

appropriate company employees its guidelines for continuing education content. 

C4 The company consistently encourages its independent producers to participate in 


periodic continuing education programs. 



C5 The company communicates programs and materials that provide continuing education 

to captive producers and appropriate company employees and makes available 

information of continuing education to independent producers. 

M1 The company monitors that captive producers and appropriate company employees 

attend continuing education programs and that such programs are made available to 

independent producers and takes corrective action, where appropriate. 

M2 The company reviews customer surveys and complaints for indicators of inadequate 

education of its captive and independent producers and appropriate company 

employees, and takes corrective action, where appropriate. 

M3 The company monitors that captive producers and appropriate company employees are 

advised of the availability of continuing education programs and are encouraged to 

attend and independent producers are advised of the availability of continuing education 

programs and are encouraged to attend, and the company takes corrective action, 


Subtopic: General Compliance Training. 


Compliance training sessions are conducted for appropriate company employees on 

the company’s policies and procedures and its commitment to and compliance with 


Comment: It is an aim of Principle 6, Code C provision that the company conducts general 

compliance training sessions for appropriate company employees on the company’s policies 

and procedures and IMSA’s Principles and Code of Ethical Market Conduct. Principle 6, Code 

C is designed to address training that is more general in nature than the training requirements 

presented under Principle 2, Code C. Principle 6, Code C is focused upon providing general 

training concerning the company’s commitment to and compliance with IMSA’s Principles and 

Code. 

Company training sessions may include the following topics: 

-- IMSA’s Principles and Code of Ethical Market Conduct; 

-- policies and procedures developed by the company to implement IMSA’s Principles and 

Code of Ethical Market Conduct; 

-- the company’s commitment to IMSA’s Principles and Code of Ethical Market Conduct 

requires appropriate company employees to ensure that the company designs, sells and 

issues products that meet customer insurable needs and financial objectives; 








appropriate; 

-- company product features: benefits, limitations, costs, values, charges and operations; 

-- updates on changes in the laws and regulations and related changes to company policies 

and procedures; and 









things as: 


-- titles; 






C1 The company can provide evidence that it communicates its policies and procedures to 

appropriate company employees. Examples of communication vehicles include: 

-- employee handbooks; 

-- company bulletins; 

-- company newsletters; 

-- memoranda; 

-- payroll notices; 

-- electronic notification; 

-- prominent postings throughout the company; and 

-- contractual agreements. 

C2 The company consistently provides training on the company’s policies and procedures 

and its commitment to and compliance with IMSA’s Principles and Code of Ethical 

Market Conduct to appropriate company employees. 




C3 The company consistently provides compliance training programs or materials to 

appropriate company employees. Examples of such training programs or materials 

include: 

-- company-sponsored training programs; 

-- company-sponsored self-study programs; 

-- presentations given by outside organizations; 

-- distribution of compliance manuals, memoranda, newsletters or other 

communication; 

-- industry compliance conferences such as those sponsored by: NASD, ACLI, 

LIMRA and LOMA; and 

-- LOMA Courses. 

C4 The company communicates the availability of various compliance programs to 

appropriate company employees. Examples of such communication may include: 

-- invitations to participate in training for employees; and 

-- inclusion of upcoming compliance programs in regular communications to 

employees. 

M1 The company monitors that appropriate company employees were trained on the 

company’s policies and procedures and its commitment to and compliance with IMSA’s 

Principles and Code of Ethical Market Conduct and takes corrective action, where 

appropriate. 

M2 The company monitors that its appropriate company employees complete compliance 

training and monitors the content of the training. Evidence of this might include: 



-- certification of fulfillment coincident with renewal of a written agreement to 

distribute the company’s products; and 

-- agendas and materials from the meeting. 

M3 The company uses program or trainer evaluation feedback to improve the education 

programs. 

M4 The company monitors the following to identify compliance training needs for 

appropriate company employees and takes corrective action, where appropriate. 

Examples include: 

-- customer complaints; 

-- internal auditing reports; 

-- market conduct concerns through print, television or other media; 

-- results of self-assessment process; and 

-- changes in laws and regulations. 


TOPIC 6: REPLACEMENT. 

Subtopic: Information to Customers. 



TOPIC – REPLACEMENT 


employees provide information to customers in a manner consistent with Principle 4 

prior to replacing covered products. 

Comment: Companies must provide customers in all states in which the company is doing 

business with information they need in order to ascertain whether replacements of covered 

products are appropriate. Such communication on replacement policies or contracts should 

include providing the customer with reasons why replacement might not be appropriate. 

The company’s replacement policies and procedures must apply to internal and external 

replacements and include definitions of both. The company also may develop descriptive 

materials or disclosure forms to assist the customer in determining whether a replacement is 

appropriate. 










-- titles; 






C1 The company can provide evidence it distributes or makes available to customers 

descriptive materials, forms or other means for communicating information customers 

need in order to ascertain whether a replacement is appropriate. 




C2 The company has procedures for obtaining up-to-date information about state and 

federal laws and regulations concerning replacement disclosure requirements and uses 

the information to update appropriate forms and procedures. 

C3 Where a company replacement disclosure form is used, the form: 

-- is provided to the customer in a timely manner; 

-- includes a definition of a replacement; 

-- describes both positive and negative implications of replacement; 

-- contains room for the customer’s signature; 

-- is left with the customer; and 

-- is maintained in the company files. 

C4 The company communicates its guidelines regarding appropriate and inappropriate 

replacements to captive and independent producers and appropriate company 

employees. 

C5 The company’s policies and procedures require its captive producers and appropriate 

company employees and encourage its independent producers to provide customers 

with information consistent with making decisions about whether a replacement is 

appropriate. 


communicated to captive producers and appropriate company employees and are made 

available to independent producers. 

M1 The company monitors on an individual or trend basis whether descriptive materials, 

replacement disclosure forms or other materials designed to assist the customer in 

ascertaining whether replacements are appropriate are provided to customers. 

Methods of monitoring may include: 

-- periodic internal audits; 

-- periodic reviews by underwriting; 

-- analyzing customer surveys; and 

-- analyzing complaints. 

M2 The company identifies complaints regarding disclosure information pertaining to 

replacements and takes corrective action, where appropriate. 

M3 The company obtains feedback from captive and independent producers and 

appropriate company employees and/or customers and uses the feedback to improve 

the replacement disclosure information provided in the sales process. Such feedback 

may be obtained from surveys, focus groups, etc. 

M4 The company monitors on an individual or trend basis whether customers receive 

information they need in order to ascertain whether replacements are appropriate. 




Examples could include: comparative illustrations or factors to be considered by 

customers in evaluating the appropriateness of replacements. 

Subtopic: Replacement Review. 

Principle 3 - Code C: 



certain negative practices that can be targeted for attention, such as inappropriate replacement 

and competitor “bashing.” 

The company must be able to demonstrate they have policies and procedures in place for 

reviewing replacement activity. Such policies and procedures should include a system for 

tracking, identifying and addressing deviations from the company’s replacement policies and 

procedures. Companies also may want to consider how the company’s commission policy 

regarding replacements complements the company’s replacement policies and procedures. 

The company’s policies and procedures may include a procedure for conserving policies and 

contracts targeted for replacement, as warranted. 










-- titles; 












C2 The company has a system to identify potential undisclosed replacements of covered 

products through various means such as replacement reports and/or extracts which 

may include categories of replacement for: 

-- lapses; 

-- surrenders; 

-- reduced paid up/extended term; 

-- internal rewrites; 

-- rollovers; 

-- loan purchases; 

-- dividends; and 

-- post-issue replacements. 

C3 The company generates replacement reports that identify as appropriate: 

-- competitive carrier replaced; 

-- independent and captive producers; 

-- internal and external replacements; 

-- products replaced; 

-- specific distribution channels; 

-- sources of funds; 

-- geographical areas; and 

-- any other information designed to assist the company in monitoring replacements. 

C4 The company maintains reports that identify which competitive carriers are replacing the 

company’s current in-force contracts. 

C5 The company has a system to conserve policies and contracts which it has been 

notified are to be replaced. 

C6 Management reviews and takes appropriate action with respect to trends discerned 

from replacement and persistency reports. 

C7 The company communicates its policies and procedures regarding appropriate and 

inappropriate replacements to captive and independent producers and appropriate 


M1 The company monitors replacement reports generated in response to C2 above for 

trends and patterns and takes corrective action, where appropriate. 

M2 The company monitors replacement reports generated in response to C3 above for 

trends and patterns and takes corrective action, where appropriate. 

M3 The company monitors compliance with its guidelines and takes corrective action where 

there are deviations from those guidelines. 




M4 The company monitors new business and other types of information to identify 

undisclosed replacements and takes corrective action, where appropriate. 

M5 As part of its conservation program, the company gathers information about why the 

customer is replacing the policy, and takes appropriate action. 

M6 The company identifies complaints pertaining to replacements, and takes corrective 


M7 The company obtains feedback concerning replacement activity from captive and 

independent producers, appropriate company employees, and customers and uses the 

feedback to improve its replacement monitoring and tracking policies and procedures. 

Such feedback may be obtained from surveys, focus groups, etc. 


TOPIC 7: ADVERTISING. 

Subtopic: Information to Customers. 



TOPIC – ADVERTISING 

Presentation of any advertising and sales material designed to lead to sales or 

solicitation of covered products is done in a manner consistent with the needs of the 

customer. All such sales or solicitation communications should be based upon the 

principles of fair dealing and good faith, and will have a sound basis in fact. 

Comment: One of the important areas identified for improvement of market conduct is fair 

disclosure of the product sold to a customer. Code A, among other things, seeks to 

emphasize accurate disclosure about the product sold. The intent of Code A is to promote 

upgrading, and making meaningful use of tools, such as a “buyer’s guide” and the “cost 

disclosure” at the point of sale. Other examples of such information may include: 

-- financial needs fact finders; 

-- customer profiles; 

-- capital needs/financial objectives; and 

-- other analytical needs-analysis tools. 

Advertising and sales material includes such items as sales presentations, prepared sales 

talks, letters of solicitation, email, faxes, direct mail solicitations, direct phone solicitations (both 

inbound and outbound), web sites, radio, television, and print advertisements and illustrations. 










-- titles; 







(P3 is mandatory for indexed annuity insurers) 



P3 The company has policies and procedures that require producers to provide product 

specific disclosures designed to provide customers with information they need in order 

to ascertain whether the product recommendation is suitable. The disclosure could 

include the following types of information: 

-- surrender charges (full or partial surrenders); 

-- how the cash surrender value is calculated; 

-- how the market value adjustment, if any, is calculated; 

-- how interest is calculated and credited including: 

index used to calculate interest 

indexing method 

index cap, if applicable 

index participation rate, if applicable 

indexing period; 

-- bonus interest / premium bonus; 

-- withdrawal provisions; 

-- minimum guaranteed surrender values; 

-- annuitization payout options; 

-- riders; and 

-- how the death benefit is calculated. 

The company has policies and procedures that require the producer, or the insurer where no 

producer is involved, to obtain an acknowledgment form signed by the customer to 

demonstrate that product specific disclosures have been provided to the customer and the 

product recommendation is suitable based upon the customer’s stated financial needs or 

objectives. 




C2 The company can provide evidence that it communicated to customers information 

consistent with making buying decisions about what is appropriate for them. 

C3 The company communicates to captive producers and appropriate company employees 

and makes available to independent producers its guidelines for determining when he or 

she may present him or herself as an expert. Such guidelines may include: 

-- minimum experience requirements; 

-- minimum training requirements; 

-- holding professional designations such as CLU and ChFC; and 

-- prior written approval from the company. 




C4 The company’s advertising and sales material for Tax-Sheltered Annuities (TSA), 

Individual Retirement Annuities (IRA), Keogh Plans, and other retirement plans describe 

any special qualification requirements or limitations related to such plans. 

C5 The company makes available sales material that describes conditions that may affect 

policy values, benefits or limitations for each covered product. For example, 

identification of guaranteed and non-guaranteed product elements. 

C6 Prior to or at the time of policy delivery, the company provides to the customer any 

state-required buyer’s guide and may provide other guides such as NAIC’s or ACLI’s life 

insurance or IMSA’s annuities consumer brochures. 

C7 The company has procedures in place to update out-of-date advertising and sales 

materials and eliminate the use of obsolete advertising and sales materials. 

M1 The company monitors compliance with the policies and procedures designed to 

reasonably assure customers receive information consistent with making buying 

decisions about what is appropriate for them and take corrective action as appropriate. 

Examples of such monitoring methods may include: customer surveys, producer 

surveys, internal audits, complaint reviews, etc. 

M2 The company monitors complaints related to its advertising and sales materials, and 

uses the feedback to improve them. 

M3 The company obtains feedback from captive and independent producers and customers 

and uses the feedback to improve the disclosure information provided in the sales 

process and takes corrective action, as appropriate. Such feedback may be obtained 

from complaints, surveys, focus groups, etc. 

M4 The company monitors on an individual or trend basis whether captive and independent 

agents and appropriate company employees provide customers with advertising and 

sales materials designed to assist customers with making buying decisions about what 

is appropriate for them. 

Subtopic: Clear and Understandable Sales Materials. 


Materials presented as part of a sale are comprehensible in light of the complexity of 

the product being sold. 

Comment: Companies must have policies and procedures in place to reasonably assure that 

advertising and sales materials used in the sales process are clear and understandable in light 

of the complexity of the product and the sophistication of the buyer. For example, the 

company may require enhanced disclosure for products that encompass newer concepts such 




as indexed products and/or enhanced disclosure for products that will be marketed directly. 










-- titles; 









C2 The company uses Flesch or other test results to determine whether reading-level 

comprehension in advertising and sales materials conforms to buyer sophistication and 

product complexity. 

C3 The company uses customer, producer or other focus groups to analyze the 

understandability of advertising and sales materials. 

C4 The company uses its own target market information or other consumer research 

information to develop advertising and sales materials that are clear and 

understandable in light of the complexity of the product and the sophistication of the 

buyer. 

M1 The company monitors compliance with policies and procedures designed to 

reasonably assure that advertising and sales material are clear and understandable in 

light of the complexity of the product and sophistication of the buyer and takes 

corrective action, where appropriate. Examples of such monitoring methods may 

include surveys, internal audits, complaints, focus groups, producer groups, etc. 

M2 The company obtains feedback from independent and captive producers, customers 

and appropriate company employees related to the clarity and understandability of its 




advertising and sales materials and uses such feedback to improve its advertising and 

sales materials. Such feedback may be obtained from surveys, focus groups, etc. 

M3 The company periodically reviews its advertising and sales materials to determine 

whether they are clear and understandable in light of the complexity of the product and 

the sophistication of the buyer, and takes corrective action, where appropriate. 

Subtopic: Illustrations. 


Illustrations or other representations of premiums and considerations, costs, values, 

and benefits are accurate, fair, and complete and contain appropriate disclosures. 

Comment: Companies are required to implement policies and procedures designed to control 

the use of sales illustrations and other representations of premiums and considerations, costs, 

values and benefits including procedures to prevent unauthorized modifications. 










-- titles; 








available to independent producers, as appropriate, who provide such representations 

to the customer. 




C2 Policies and procedures for the use and modification of sales illustrations and other 

representations of premiums, considerations, costs, values, and benefits are 



C3 The company can demonstrate that it reviews sales illustrations to determine that 

guaranteed and non-guaranteed elements are clearly identified and distinguished and 

that non-guaranteed elements are clearly described as projections that are not 

guaranteed. 

C4 The company uses the concepts contained in the NAIC Life Insurance Sales 

Illustrations Model Regulation to foster accurate and complete disclosure of product 

benefits and other appropriate disclosures. 

M1 The company monitors complaints relating to sales illustrations and other 

representations of premiums, considerations, costs, values, and benefits and uses this 

feedback to improve its sales illustrations. 

M2 The company obtains feedback from captive and independent producers, customers, 

and appropriate company employees related to use of illustrations and other 

representations of premiums and considerations, costs, values and benefits, and uses 

such feedback to improve its advertising and sales materials. Such feedback may be 

obtained from surveys, focus groups, etc. 

M3 The company monitors the use and control of illustrations and other representations of 

premiums and considerations, costs, values and benefits, and takes corrective action, 

where appropriate. These monitoring procedures may require a review of home office 

software as well as software available to independent and captive producers. 

M4 The company disciplines and/or takes corrective action against captive and independent 

producers and appropriate company employees who violate the company’s policies and 

procedures regarding sales illustrations and other representations of premiums and 

considerations, costs, values and benefits. 

M5 The company monitors compliance with the concepts contained in the NAIC Life 

Insurance Sales Illustration Model Regulation and takes corrective action, where 

appropriate. 

M6 The company monitors its new business to reasonably assure that the illustration 

matches the appropriate covered product applied for and the illustration is generated 

using company approved software systems and interest rates. 


TOPIC 8: COMPLAINTS. 

Subtopic: Customer Communication of Complaints. 

Principle 5 - Code B: 


TOPIC – COMPLAINTS 

The company provides an easily accessible way for customers to communicate 

complaints. 

Comment: The company must provide a means for customers to communicate complaints in a 

manner appropriate to the company’s target market. Means of communication may include: 

-- toll-free or call-collect phone number(s); 

-- mailings that include pre-addressed return envelopes; 

-- customer response cards; 

-- accessibility beyond normal business hours; 

-- voice response capability; 

-- fax capability; and 

-- Internet. 


P1 There are policies and procedures for this purpose. 






things as: 


-- titles; 









C2 The company’s policies and procedures are communicated to home office employees 

who may have contact with customers. 




C3 The company routinely provides customers with information on how they may 

communicate with the company. 

C4 The company assists “special-needs” (e.g., disabled, elderly, or non-English-speaking) 

customers in communicating with the company regarding complaints. 

M1 The company monitors that the policies and procedures were communicated to home 

office employees who may have contact with customers and takes corrective action, 


M2 The company monitors that customers are provided with information on how they may 

communicate with the company and takes corrective action, where appropriate. 

M3 The company monitors compliance with its policies and procedures regarding providing 

easy access for customers to complain and takes corrective action, where appropriate. 

Examples of monitoring techniques may include: 

-- review by a complaint management team; 

-- periodic internal audits; 

-- customer surveys; 

-- focus groups; and 

-- telephone call center abandon rates. 

M4 The company monitors correspondence and other customer communications to 

determine whether there are ways to improve customer access. 

Subtopic: Root Cause Analysis of Complaints. 


The company has policies and procedures designed to reasonably assure that the 

complaint information gathered is analyzed and efforts are made to eliminate their root 

causes. 

Comment: The company must analyze complaints with a view toward eliminating the root 

cause of complaints. The complaint analysis policies and procedures must require the 

identification and recommendation of solutions to eliminate root causes of complaints. 

Companies are encouraged to provide management with complaint trends analysis reports. 

The company complaint trend analysis may identify patterns or trends of complaints: 

-- by producer; 

-- by product type; 

-- by target market; and 

-- by category of complaint. 











things as: 


-- titles; 









C2 The results of complaint trend analyses are communicated to captive producers and to 

appropriate company employees and made available to independent producers, along 

with recommendations of corrective action, where appropriate. For example, it may be 

appropriate to advise producers that the company has received a number of complaints 

pertaining to the failure to deliver policy forms and that company policy requires the 

delivery of policy forms within a certain number of days of receipt. 

C3 Complaint data received at all producer locations, company offices and company 

departments is logged, aggregated and included in any complaint trend analysis. 

C4 The results of complaint trend analysis and recommended solutions are consistently 

communicated to management. 

C5 The company has a process that selects, approves, and communicates solutions based 

upon complaint trend analysis which may include the following: 

-- a cross-functional team (e.g., producers, legal counsel, sales and marketing areas, 

product actuaries, compliance, operations); 

-- periodic customer focus groups; and 

-- participation in an industry organization (e.g., NAIFA, ACLI, LIMRA, LOMA) to 

address market conduct concerns. 




M1 The company monitors whether complaint trend analysis is performed and takes 


M2 The company monitors whether reports of complaint trends and patterns are provided to 

management and takes corrective action, where appropriate. 

M3 The company monitors the results of complaint trend analysis and recommended 

solutions and takes corrective action, where appropriate. 

M4 Where complaint trend analysis has resulted in corrective action, the company monitors 

whether the corrective action has resulted in improvement. Measures of improvement 

might include: 

-- reduction in the number of formal or informal complaints registered with respect to 

the identified problem area; 

-- results of market conduct or NASD examinations; 

-- persistency trends; 

-- complaint to in-force ratio trends; 

-- disciplinary proceedings; 

-- implementation of education programs; and 

-- customer outreach programs. 

Subtopic: Complaint Resolution. 


The company has policies and procedures to reasonably assure that it makes good 

faith efforts to resolve complaints and disputes without resorting to civil litigation. 

Comment: Good faith efforts to resolve complaints and disputes may include: 



-- prompt investigation and communication with producer or other operating unit involved in 

the complaint; and 

-- analysis of unresolved complaints. 

The company may consider complaint appeal policies and procedures and alternative dispute 

resolution mechanisms, in appropriate situations, to attempt to resolve complaints through 

means other than litigation. 











things as: 


-- titles; 







communicated to captive producers, appropriate company employees and customers 

and made available to independent producers, as appropriate. 

C2 The company communicates with the customer complainant or the regulator, as 

appropriate, throughout the complaint and dispute resolution process. 

C3 The company solicits feedback from complainants regarding how they would assess the 

company’s handling of the complaint. 

M1 The company monitors its efforts to resolve complaints and disputes in good faith and in 

a timely manner and takes corrective action, where appropriate. Examples may 

include: 



-- periodic quality or other reviews (e.g., internal audit); 

-- prompt investigation and communication with producer or other operating unit 

involved in the complaint; and 

-- analysis of resolved and unresolved complaints. 

M2 The company monitors correspondence and other customer communications to address 

customer concerns and issues before they result in complaints. 



TOPIC 9 – COMMITMENT TO AND COMPLIANCE WITH IMSA’s PRINCIPLES AND CODE 

TOPIC: COMMITMENT TO AND COMPLIANCE WITH IMSA’s PRINCIPLES AND CODE. 

Subtopic: Commitment to and Compliance with IMSA’s Principles and Code. 





Comment: Management may designate individuals or established cross-functional teams 

and/or committees who are responsible for reviewing such things as: 

-- the company’s commitment to and compliance with IMSA’s Principles and Code of Ethical 

Market Conduct; 

-- the company’s system of supervision and monitoring; and 

-- trends and patterns relating to the company’s sales and marketing processes addressed 

by IMSA’s Principles and Code of Ethical Market Conduct. 








things as: 


-- titles; 






These individuals or teams have high-level oversight or policy-setting responsibility with 

respect to IMSA’s Principles and Code of Ethical Market Conduct and might be such 

individuals as the chief compliance officer, general counsel or person(s) who report to 

executive management or the Board of Directors. 



TOPIC – COMMITMENT TO AND COMPLIANCE WITH IMSA’s PRINCIPLES AND CODE 


communicated to captive producers and appropriate company employees and makes 

them available to independent producers, as appropriate. 

C2 The company can provide evidence that the company communicates its commitment to 

IMSA (e.g., use of the IMSA logo or statements of their commitment to IMSA on all their 

press releases and other communications). 

C3 Management demonstrates the company’s commitment to IMSA’s Principles and Code 

of Ethical Market Conduct. Evidence of this might include: 

-- memoranda, letters or policy statements; 

-- attendance at meetings (within and outside the company), during which 

commitment is communicated; 

-- participation in industry group(s) which address market conduct issues; 

-- appointment of and meetings with person(s) charged with the responsibility of 

monitoring compliance with IMSA’s Principles and Code of Ethical Market Conduct; 

-- review of complaint trend analysis; 

-- participation in the self-assessment process; 

-- inclusion of concepts contained in Principles and Code of Ethical Market Conduct 

in evaluation and disciplinary procedures; 

-- board resolutions; 

-- establishment of a Compliance Committee; and 

-- memorandum/letter from the Chief Executive Officer. 

C4 Designated individuals or established cross-functional teams or committees regularly 

meet and provide reports to management regarding: 

-- the company’s compliance with IMSA’s Principles and Code of Ethical Market 

Conduct; 

-- the company’s system of supervision; and 

-- trends and patterns relating to the company’s sales and marketing processes 

addressed by IMSA’s Principles and Code of Ethical Market Conduct. 

M1 The company monitors that the individuals or cross-functional teams or committees 

regularly meet and provide reports to management. Management takes corrective 


M2 The company’s reward and recognition systems take into account compliance with 


M3 The company monitors whether policies and procedures designed to reasonably assure 

compliance with IMSA’s Principles and Code of Ethical Market Conduct are established 

and enforced by management. 


TOPIC 10: SUPERVISION AND MONITORING. 

Subtopic: Supervision. 



TOPIC – SUPERVISION AND MONITORING 



procedures in order to reasonably assure the company’s commitment to and 

compliance with IMSA’s Principles and Code of Ethical Market Conduct. 

Comment: Companies are required to have a system of supervision to reasonably assure that 

the sales and marketing practices of its captive and independent producers and appropriate 

company employees comply with IMSA’s Principles and Code of Ethical Market Conduct and 

applicable laws and regulations. Responsibility for supervising sales and marketing activities 

and the company’s policies and procedures may be assigned to a variety of individuals within 

the company or may be delegated to independent intermediaries. However, ultimate 

responsibility to reasonably assure whether supervision has taken place must be borne by the 

company. Accordingly, in those instances in which the obligations under Principle 6, Codes B, 

C and D are delegated to independent intermediaries, the company must continue to supervise 

the performance of those obligations and bears ultimate responsibility for compliance with all 

other provisions of IMSA’s Principles and Code of Ethical Market Conduct in the sales and 

marketing of its covered products. The company must review its system of supervision to 

reasonably assure it is operating properly and providing relevant, accurate data. 

If a company delegates any supervisory responsibility to an independent intermediary, the 

company shall enter into a written agreement with such intermediary which specifies the 

responsibilities delegated. Examples of such responsibilities might include: 

-- Responsibility for ascertaining the good character, business repute, and qualifications of 

the Independent Producer in accordance with Principle 2, Code A; 

-- Adherence to the company’s and the independent intermediary’s compliance 

requirements; 

-- Restrictions or directions on the use of sales materials related to the company’s products; 

-- A requirement for prompt reporting to the company of customer or regulatory complaints 

or inquiries; 

-- Maintenance of licenses and books and records according to company standards or 

required by applicable laws and regulations; 

-- Training in accordance with Principle 2, Codes C, D, and E, and Principle 6, Code C; and 

-- Penalties for the breach of the agreement. 

A company must monitor whether the independent intermediary is performing according to the 

terms of the written agreement. 




Company policies and procedures may assign to independent intermediaries, responsibility for 

supervising compliance with company policies and procedures and applicable laws and 

regulations in the following areas: 

-- needs-based selling and suitability; 

-- the use and approval of advertising and sales materials and fact-finding tools related to 

the company’s product(s); 

-- prompt reporting to the company of customer or regulatory complaints or inquiries; 

-- maintenance of licenses; 

-- maintenance of books and records; 

-- penalties for breach of the agreement; and 

-- compliance with the company’s statement of values and applicable laws and regulations. 

Companies must have a system of supervision in place prior to conducting the independent 

assessment. The system of supervision must be operational before, during and after the 

independent assessment and should provide routine information on a periodic basis to allow 

the company to conduct ongoing supervision. The company must monitor its system of 

supervision to provide reasonable assurance that it complies with IMSA’s Principles and Code 

of Ethical Market Conduct and applicable laws and regulations through testing methods 

consistent with Principle 6, Code D. 

The company's system of supervision of its sales and marketing activities should reflect the 

structure, functions and risks of the company and its distribution systems and must include, at 

a minimum: 

-- assignment of responsibility and accountability for reasonably assuring supervision of all 

distribution systems for covered products; 

-- procedures for routinely and systematically supervising compliance and identifying 

instances of non-compliance with company policies and procedures, IMSA’s Principles 


-- procedures for responding to identified instances of non-compliance with policies and 

procedures, IMSA’s Principles and Code of Ethical Market Conduct, where appropriate; 

and 

-- means of reasonably assuring that corrective action has been taken, where appropriate. 

The company’s policies and procedures may be designed to reasonably assure that the 

system of supervision complies with NASD requirements, where applicable. The company 

policies and procedures also may include consequences of non-compliance with supervisory 

procedures. 




communicating, and using these policies and procedures and acting upon the results, 







things as: 


-- titles; 






The company may assign responsibility directly through one of the methods listed 

above or may delegate such supervisory responsibility to an intermediary (e.g., financial 

institutions, broker dealers, managing General Agents, Specialty Marketing 

Organizations (SMO’s), Independent Marketing Organizations (IMO’s), etc.), for 

example, by contractual provisions or other documented methods. 

C1 The company communicates its policies and procedures for supervision of sales and 

marketing practices to its captive producers and appropriate company employees and 

makes them available to independent producers, as appropriate. 

C2 The company consistently uses its supervision policies and procedures across all 

distribution systems for all covered products. 

C3 The company communicates its policies concerning the consequences of noncompliance 

to captive and independent producers, independent intermediaries and 

appropriate company employees. 

M1 The company monitors its system of supervision of the sales and marketing activities of 

its producers and appropriate company employees and the company’s policies and 

procedures in order to reasonably assure the company’s commitment to and 

compliance with IMSA’s Principles and Code of Ethical Market Conduct and takes 


M2 The company evaluates and modifies, as necessary, its supervisory procedures based 

on analysis of information from various sources to continuously improve its system of 

supervision such as: complaints; surveys; inquiries; internal audits; producer, employee 

or customer feedback; reports of non-compliance; disciplinary actions; and selfassessments 

and solicits feedback and takes corrective action, where appropriate. 




M3 Reports of possible non-compliance with the responsibilities of and restrictions on the 

company’s captive and independent producers, appropriate company employees and 

independent intermediaries are acted upon, where appropriate, to continuously improve 

its system of supervision. 

M4 The company monitors whether supervisory responsibilities are fulfilled in accordance 

with company policies and procedures, the Principles and Code and applicable laws 

and regulations and takes corrective action, where appropriate. 

Subtopic: Monitoring. 



compliance with IMSA’s Principles and Code of Ethical Market Conduct and applicable 

laws and regulations. 

Companies are required to have a monitoring system to reasonably assure that the sales and 

marketing practices of its captive and independent distributors and appropriate company 

employees comply with IMSA’s Principles and Code of Ethical Market Conduct and applicable 

laws and regulations. Similar to the supervision requirements under Principle 6, Code B, 

responsibility for monitoring sales and marketing activities may be assigned to a variety of 

individuals within the company or may be delegated to independent intermediaries. Ultimate 

responsibility to verify whether monitoring has taken place must be borne by the company. 

The company should review its monitoring system to reasonably assure it is operating properly 

and providing relevant, accurate data. Accordingly, in those instances in which the obligations 

are delegated to independent intermediaries, the company must continue to monitor the 

performance of those obligations. 

Company policies and procedures may assign to independent intermediaries, responsibility for 

monitoring compliance with company policies and procedures and applicable laws and 

regulations in the following areas: 

-- lapse rates; 


-- replacement reports; 

-- complaint analysis; 

-- production reports; 


-- “ride-alongs” or observation of performance; 


-- on-site visits; 

-- customer file review (surrenders, withdrawals, not-takens); 

-- secret or mystery shopper; 

-- customer focus groups; 

-- producer focus groups; 


-- instances of the use of unapproved advertising; and 

-- disciplinary history or compliance record. 



Companies must have a monitoring system as a minimum standard that reasonably assures 

compliance with Principle 6, Code D. The monitoring system should include elements that will 

permit the company to review its home office and field sales and marketing practices to 

determine whether they are consistent with the company's policies and procedures, IMSA’s 

Principles and Code of Ethical Market Conduct and applicable laws and regulations. 

Companies and Qualified Independent Assessors may employ a variety of testing methods to 

provide reasonable assurance that compliance monitoring activities provide meaningful 

information regarding the company’s sales practices that is used to take corrective action, if 

warranted, at the home office and field distribution levels. 

Companies may fulfill monitoring requirements through various means, including, but not 

limited to, internal auditing, telephonic or written surveys of captive or independent producers 

or appropriate company employees, LIMRA CAP surveys or other customer surveys, 

complaint analysis and information, lapse trends, replacement activity reports, customer 

transaction histories (surrenders, withdrawals, not-takens), underwriting exception reports, lists 

or numbers of rejected field advertising pieces submitted for home office review and approval, 

disciplinary records, etc. 

A company must also reasonably assure that corrective action has been taken, where 

appropriate. Methods may include: performing on-site office inspections, interviewing 

customers or captive or independent producers or appropriate company employees, surveying 

customers or captive and independent producers or appropriate company employees, using 

"mystery shoppers," or other means. On-site office inspections may be appropriate for 

distribution systems where trends are identified through exception reports or other monitoring 

tools. The company should conduct any field validation at the appropriate level of the 

distribution system. For example, as part of a routine audit or field visitation program, the 

company may interview the head of the distribution channel and then select a sample of 

supervisors; however, issues may arise through the monitoring procedures that will require 

field validation at the writing agent level. 




communicating, and using these policies and procedures and acting upon the results, 







things as: 


-- titles; 






C1 The company communicates its policies and procedures for monitoring of sales and 

marketing practices to its captive producers and appropriate company employees and 

makes them available to independent producers, as appropriate. 

C2 The company consistently uses its monitoring policies and procedures across all 

distribution systems for all covered products. 

C3 The company has a program for periodic, routine visits to field offices to assist in its 

monitoring of its sales process. Field validation methods may include: 

-- on-site office inspections; 

-- interviews; 

-- surveys; and 

-- mystery shoppers, etc. 

C4 The company has established guidelines and thresholds that indicate the point at which 

field validation and, as applicable, corrective action are needed regarding its compliance 

monitoring measurements (i.e., complaint ratios, replacement levels). 

M1 The company monitors reports and oversight activities and takes corrective action, 

where appropriate, to continuously improve its monitoring system. Such corrective 

action may include: 

-- discipline; 

-- training or continuing education; 

-- enhanced monitoring procedures; 

-- field office visits; 


-- special supervision; 

-- sanctions or fines; 

-- modification of measures of appropriate activity; and 

-- modification of compliance practices and procedures. 




M2 The company solicits feedback regarding sales practices by such means as: 

-- post-sales recorded telephone calls; 

-- post-sales survey (e.g., LIMRA CAP or similarly-designed program) 

-- customer interviews; 

-- contact coincident with policy event; 

-- surveys of producers; 

-- sales and licensing files; 

-- focus groups; and 

-- compliance tracking system. 

And takes corrective action, as appropriate, to continuously improve its monitoring 

system. 

M3 The company has a process for evaluating its internal auditing and information 

gathering process related to its sales practices, and takes corrective action, where 

appropriate, to continuously improve its monitoring system. 

M4 Reports of possible non-compliance with the responsibilities of and restrictions on the 

company’s captive and independent distributors, appropriate company employees and 

independent intermediaries are acted upon, where appropriate, to continuously improve 

its monitoring system. 

Examples of reports that may indicate non-compliance include: 


-- complaint statistics; 

-- lapse trends; 

-- replacement activity; 


-- production activity; 

-- customer transaction activity (surrenders, withdrawals, not-takens); 


-- number of rejections of field advertising pieces submitted for home office review 

and approval; and; 

-- disciplinary records, etc. 


PRINCIPLES OF ETHICAL MARKET CONDUCT 

APPENDIX A – HELPFUL TOOLS 

Principles of Ethical Market Conduct 

1. To conduct business according to high standards of honesty and fairness and to render 

that service to its customers which, in the same circumstances, it would apply to or demand for 

itself. 

2. To provide competent and customer-focused sales and service. 

3. To engage in active and fair competition. 

4. To provide advertising and sales materials that are clear as to purpose and honest and fair 

as to content. 

5. To provide for fair and expeditious handling of customer complaints and disputes. 

6. To maintain a system of supervision and monitoring that is reasonably designed to 

demonstrate the company’s commitment to and compliance with IMSA’s Principles and Code 

of Ethical Market Conduct. 


Principle 1: 



PRINCIPLES AND CODE OF ETHICAL MARKET CONDUCT 

To conduct business according to high standards of honesty and fairness and to render 

that service to its customers, which, in the same circumstances, it would apply to or 

demand for itself. 

Code A. 

The insurable needs and financial objectives of its customers are determined based upon 

relevant information obtained from the customer and, at the time of the transaction, the 

company enters into life insurance transactions which assist the customer in meeting his or 

her insurable needs and financial objectives. 

Code B. 


based upon relevant information obtained from customers and the company has policies 

and procedures designed to reasonably assure that recommendations to purchase 

annuities and/or long-term care (LTC) insurance are suitable based upon the relevant 

information obtained from the customer. 

Code C. 


Code D. 

In cooperation with consumers, regulators and others, it affirmatively seeks to improve the 

life insurance industry’s practices for marketing and sales of covered products. 

Code E. 



Principle 2: 

To provide competent and customer-focused sales and service. 

Code A. 

Its captive and independent producers and appropriate company employees are of good 

character and business repute, and have appropriate qualifications. 


Code B. 





Code C. 


adequately trained regarding compliance with laws and regulations, company policies and 

procedures and IMSA’s Principles and Code of Ethical Market Conduct in the marketing 

and sale of covered products, as appropriate to the company’s distribution system. 

Code D. 

Its captive and independent distributors and appropriate company employees have 


Code E. 

Its captive and independent producers and appropriate company employees participate in 

continuing education. 

Principle 3: 

To engage in active and fair competition. 

Code A. 

The company maintains compliance with applicable state and federal laws and regulations 

fostering fair competition and requires its captive and independent producers and 

appropriate company employees to refrain from disparaging competitors. 

Code B. 


employees provide information to customers in a manner consistent with Principle 4 prior to 

replacing covered products. 

Code C. 



Principle 4: 



To provide advertising and sales materials that are clear as to purpose and honest and 

fair as to content. 

Code A. 

Presentation of any advertising and sales material designed to lead to sales or solicitation 

of covered products is done in a manner consistent with the needs of the customer. All 

such sales or solicitation communications should be based upon the principles of fair 

dealing and good faith, and will have a sound basis in fact. 

Code B. 

Materials presented as part of a sale are comprehensible in light of the complexity of the 

product being sold. 

Code C. 

It maintains compliance with applicable laws and regulations related to advertising, unfair 

trade practices, sales illustrations, and other similar provisions. 

Code D. 

Illustrations or other representations of premiums and considerations, costs, values, and 

benefits are accurate, fair, and complete and contain appropriate disclosures. 

Principle 5: 

To provide for fair and expeditious handling of customer complaints and disputes. 

Code A. Complaints are identified, evaluated, and handled in compliance with applicable 

laws and regulations related to consumer complaint handling. 

Code B. The company provides an easily accessible way for customers to communicate 

complaints. 

Code C. The company has policies and procedures designed to reasonably assure that 

the complaint information gathered is analyzed and efforts are made to eliminate their root 

causes. 

Code D. The company has policies and procedures to reasonably assure that it makes 

good faith efforts to resolve complaints and disputes without resorting to civil litigation. 


Principle 6: 



To maintain a system of supervision and monitoring that is reasonably designed to 



Code A. 




Code B. 



procedures in order to reasonably assure the company’s commitment to and compliance 

with IMSA’s Principles and Code of Ethical Market Conduct. 

Code C. 

Compliance training sessions are conducted for appropriate company employees on the 

company’s policies and procedures, the Principles and Code of Ethical Market Conduct and 


Code D. 


compliance with the Principles and Code of Ethical Market Conduct and applicable laws 

and regulations. 


LABELING SYSTEM FOR INDICATORS 

APPENDIX A –HELPFUL TOOLS 

Labeling System For Indicators 

Some companies and Qualified Independent Assessors have expressed a desire to institute a 

labeling system for indicators to allow them to be identified according to their specific 

topic/subtopic. 

A possible strategy to achieve this objective might include numbering the topics and subtopics 

sequentially and using the existing indicator labels in the following manner: 

To identify the P1 indicator applicable to the Topic: Needs-Based Selling/Suitability and the 

Subtopic: Suitability, one could use the following notation: 

T1, S2, P1 

This notation would identify that Topic 1 is Needs-Based Selling/Suitability, Subtopic 2 is 

Suitability and P1 is the P1 indicator related to this Topic and Subtopic. 


TEMPLATES 


Templates 

The following “templates” have been designed as “helpful tools” to assist companies to comply 

with IMSA’s Principles and Code under a Topic Based Approach to Assessment. In several 

instances, the language found within the Templates provides an alternative way to state key 

elements of the IMSA qualification process. 

In this regard, the Templates should not be viewed as a checklist for compliance as 

companies will continue to be required to comply with IMSA’s Principles and Code as outlined 

within the Elements of Compliance chapter of this Handbook. 


Policies and 

Procedures 

Needs-Based Selling/Suitability 

Needs-Based Selling (Life Insurance) 

Principle 1 – Code A 


Templates 

The company must have written policies and procedures or documented 

company practices that are designed to reasonably assure the 

determination of customers’ insurable needs and financial objectives in 

the marketing and sales of life insurance products. 

In the summary under this topic, a company must provide evidence of 

written policies and procedures or documented company practices, as 

appropriate. 

Responsibility The company must be able to demonstrate that responsibility is assigned 

for each element of compliance. Documentation could include, but may 

not be limited to, job descriptions, titles, organization charts, and 

performance evaluation criteria. 

Communication The company must demonstrate that these policies and procedures have 

been communicated to captive producers and to appropriate company 

employees and made available to independent producers involved in the 

marketing and sales process. 

Consistent Use The company must provide evidence that these policies and procedures 

are consistently used. Evidence of this could include, but may not be 

limited to: 

• Showing that products are designed to meet specific customer 

needs. 

• Application forms that demonstrate the producer completed a 

needs analysis. 

• Application forms that can be used to obtain information to identify 

a customer’s needs. 

• Disclosure forms related to customer needs and objectives. 


Monitoring 

• Fact-finding tools. 

The company must demonstrate that it monitors this on an individual or 

trend basis. Evidence could include, but may not be limited to: 

• Documentation that shows the company monitors, on an 

individual or trend basis, that producers determine customer 

needs prior to making recommendations. 

• Feedback to determine if these policies and procedures are used. 

• Documentation showing that complaints are monitored on this 

topic. 

• Documentation showing that the company monitors free look 

trends, lapse trends or persistency trends as an indicator of 

whether customers’ insurable needs may not have been 

addressed. 

• Documentation showing the company monitors, through 

sampling, that needs assessment tools are used. 

• Documentation about survey data related to customer needs. 

Corrective Action The company must demonstrate that it takes corrective action when 

problems are identified through its monitoring processes. 


Policies and 

Procedures 

Needs-Based Selling/Suitability 

Suitability (Annuities/Long-Term Care Insurance) 



Templates 

The company must have documented policies and procedures that are 

designed to reasonably assure that producers, or the company if no 

producer is involved in a sale, make recommendations based upon 

relevant information obtained from customers and the company enters 

into annuity and/or long-term care (LTC) insurance transactions that are 

suitable. 



appropriate. 











limited to: 

• Showing that product recommendations are designed to meet 

specific customer needs. 

• Application forms that demonstrate the producer completed a 

suitability analysis. 

• Application forms that can be used to obtain information for 

reasonable grounds to believe the product is suitable. 

• Disclosure forms related to relevant information for determining 

suitability. 


Monitoring 

• Fact-finding tools. 

The company must demonstrate that it monitors this on an individual or 

trend basis. Evidence could include, but may not be limited to: 

• Documentation that shows the company monitors, on an 

individual or trend basis, that producers obtain relevant suitability 

information. 

• Feedback to determine if these policies and procedures are used. 

• Documentation showing that complaints are monitored on this 

topic. 

• Documentation showing that the company monitors free look 

trends, lapse trends or persistency trends as an indicator of 

whether customers’ objectives may not have been addressed. 

• Documentation showing the company monitors, through 

sampling, that suitability tools are used. 

• Documentation about survey data related to suitability. 




Policies and 

Procedures 

Compliance with Applicable Laws and Regulations 

General 

Principle 1 – Code B 


Templates 


company practices that are designed to reasonably assure that it 

maintains compliance with applicable laws and regulations. 



appropriate. 











limited to: 

• Documentation showing the that company routinely obtains and 

distributes information regarding applicable changes in laws and 

regulations 

• Documentation showing that the company obtains and distributes 

information regarding changes in laws and regulations pertaining 

to the marketing and sales of covered products. 

• Demonstrating that information regarding changes in laws and 

regulations is used to update policies and procedures. 


Monitoring 

The company must demonstrate that it monitors these policies and 

procedures. Evidence could include, but may not be limited to: 

• Documentation related to the monitoring of new laws and 

regulations and actions taken by the company to comply 

• Demonstrating that the company monitors marketing and sales 

activities to assure it’s producers and employees are complying 

• Complaint analysis related to compliance with laws and 

regulations 

• Feedback received from producers, employees or customers 

related to compliance with laws and regulations 




Policies and 

Procedures 


Templates 


Compliance with Advertising, Unfair Trade Practices and Sales Illustrations 

Laws and Regulations 

Principle 4 – Code C 


company practices that are designed to reasonably assure it maintains 

compliance with applicable laws and regulations related to advertising, 

unfair trade practices, sales illustrations and other similar provisions. 



appropriate. 







employees and made available to independent producers. 



limited to: 

• A system to facilitate compliance with legal requirements that may 

include the collections of advertising and sales material, a review 

process, maintenance of advertising files, training programs. 

• Documentation associated with company reviews of advertising 

material. 

• Producer contracts and agreements. 

• The tracking of applicable laws and regulations. 

• Procedures to update advertising and sales materials. 

• Documentation related to the state submissions of advertising that 

requires filing. 

• Periodic reinforcement of company rules. 


Monitoring 



• Documentation related to the monitoring of applicable laws and 

regulations. 

• Instances of corrective action associated with advertising that was 

not compliant or advertising that was not approved for use. 

• Complaint monitoring related to advertising material. 

• Feedback from producers and customers. 




Policies and 

Procedures 


Compliance with Complaint Laws and Regulations 



Templates 


company practices that are designed to reasonably assure it maintains 

compliance with applicable laws and regulations related to the 

identification, evaluation and handling of customer complaints. 



appropriate. 










limited to: 

• Documentation related to reports that must be filed. 

• Evidence that the company handles complaints in a manner 

consistent with laws and regulations. 

• Changes in procedures in response to changing laws and 

regulations. 

• Periodic communications about complaint handling processes. 

• Contracts or communications regarding the reporting of customer 

complaints. 


Monitoring 



• Monitoring of complaints to assure compliance with laws and 

regulations. 

• Monitoring of related laws and regulations. 

• Assuring policies and procedures are changed in response to 

changes in laws and regulations. 

• Responsiveness to issues raised by regulatory authorities. 




Policies and 

Procedures 

Policy Making 

Support for Enhancement of Market Conduct Practices 

Principle 1 - Code D 


Templates 


company practices that are designed to reasonably assure it participates, 

in a way appropriate to its size, in external activities that support the 

enhancement of the life insurance industry’s ethical market practices. 



appropriate. 










limited to: 

• Demonstration that the company, and/or employees and 

producers are members, serve on committees or otherwise 

participate in related industry trade group activities. 

• Employees and/or producers have published articles or made 

presentations on related topics. 

• Documentation associated to feedback about enhancing the 

industry’s ethical market conduct practices that is provided on 

behalf of the company to regulators and/or industry organizations. 

• Public service announcements either directly or through support 

of appropriate organizations, such as LIFE. 


Monitoring 



• Documentation that demonstrate consistent communication of 

company support 

• Documentation that demonstrates appropriate levels of industry 

involvement 

• Feedback from customers regarding the company or industry and 

ethical market practices 

• Documentation about how the company promotes membership in 

organizations that promote ethical business practices 

• Documentations regarding complaint monitoring activity 

associates with potential unethical conduct 




Policies and 

Procedures 

Policy Making 

Support for IMSA’s Principles and Code of Ethical Market Conduct 

Principle 1 - Code E 


Templates 

The company must document that it maintains a written statement that 

demonstrates support for the concepts in IMSA’s Principles and Code of 




appropriate. 





Communication The company must demonstrate that the written statement is consistently 

communicated to captive producers and to appropriate company 




limited to: 

• Demonstration that employees and producers can seek 

assistance on questions of ethical market conduct. 

• Periodic confirmation of the company’s commitment to IMSA’s 

Principles and Code. 

• The use of a variety of means to communicate such commitment. 

• Producer contracts and agreements that confirm producers and 

employees are expected to comply with company rules on ethical 

market conduct. 

• Communications related to the consequences of non-compliance. 


Monitoring 



• Monitoring that producers and employees are adhering to the 

company’s ethical conduct standards. 

• Potential rewards for ethical conduct. 

• Documented consequences for non-compliance with company 

ethical standards. 




Policies and 

Procedures 

Policy Making 

Fair Competition 

Principle 3 - Code A 


Templates 


company practices designed to maintain compliance with applicable state 

and federal laws fostering fair competition and that require producers to 

refrain from disparaging competitors. 



appropriate. 





Communication The company must demonstrate that these policies and procedures are 

consistently communicated to captive producers and to appropriate 

company employees and made available to independent producers. 



limited to: 

• Documentation showing that the company encourages and 

provides a means for captive and independent producers and 

appropriate company employees to report violations of the 

company’s fair competition guidelines 

• Documentation showing that contracts and agreements with 

producers, and employee handbooks make reference to 

guidelines pertaining to fair or unfair competition. 


Monitoring 



• Documentation showing the company monitors producer activity 

so that unfair competition can be identified. 

• Feedback from producers, employees and customers regarding 

compliance with fair competition rules 

• Documentation related to complaint monitoring 

• If applicable, the company reports violation to the NASD, state 

regulators or other appropriate regulatory body. 




Policies and 

Procedures 

Licensing and Appointment 

Company’s Selection Criteria for its Producers 



Templates 


company practices to demonstrate that it has selection criteria designed 

to assure its producers and appropriate company employees are of good 

character and business repute. 



appropriate. 





Communication The company must demonstrate that these policies and procedures are 

consistently communicated to captive producers and to appropriate 

company employees and made available to independent producers. 

Consistent Use The company must provide evidence these policies and procedures are 

consistently used. Evidence of this could include, but may not be limited 

to: 

• Evidence that the company consistently used these criteria during 

the licensing and appointment process. 

• Evidence that the company investigates the qualifications and 

background (criminal background, financial standing, etc.) of 

appropriate company employees and producers. 

• The company articulates its appointment standards through 

producer contracts or other appropriate method. 

• The company guidelines are consistently applied. 


Monitoring 



• Documentation showing that the company monitors the consistent 

use of this policy and procedure. 

• Documentation showing that the company reviews possible 

exceptions and resolved them appropriately. 

• Demonstrating that producers and appropriate company 

employees have access to the company’s selection criteria. 

• Demonstrating that the company is responsive to administrative 

and legal action taken against a producer of the company. 




Policies and 

Procedures 

Licensing and Appointment 

Licensing and Appointment of the Company’s Producers 

Principle 2 - Code B 


Templates 


company practices that are designed to reasonably assure its producers 

and appropriate company employees are duly licensed, appointed or 

otherwise qualified under state law. 



appropriate. 










limited to: 

• Demonstration that policy issue dates, when compared to 

corresponding producer license and appointment dates, are in 

compliance. 

• The company software programs or administrative systems aid in 

the control and tracking of licensing and appointments. 


Monitoring 



• Documentation showing that the company monitors that 

producers and appropriate company employees are properly 

licensed and appointed (if required) for the jurisdiction where 

applications are taken. 

• Documentation showing that the company has responded 

appropriately if a producer or employee was not compliant with 

licensing requirements. 

• Monitoring of applicable laws and regulations and associated 

process changes to maintain compliance. 

• Demonstrating that the company is responsive to administrative 

and legal notices associated with a producer’s license. 




Policies and 

Procedures 

Training 

Market Conduct Training of Producers 

Principle 2 - Code C 


Templates 


company practices that are designed to reasonably assure that its producers 

and appropriate company employees are adequately trained regarding 

compliance with laws and regulations, company policies and procedures and 

IMSA Principles and Code of Ethical Market Conduct. 

In the summary under this topic, a company must provide evidence of written 

policies and procedures or documented company practices, as appropriate. 

Responsibility The company must be able to demonstrate that responsibility is assigned for 

each element of compliance. Documentation could include, but may not be 

limited to, job descriptions, titles, organization charts, and performance 

evaluation criteria. 




Consistent Use The company must provide evidence that these policies and procedures are 

consistently used. Evidence of this could include, but may not be limited to: 

• Documentation showing the company consistently provides training 

for captive producers and appropriate employees. 

• Demonstrating that the company consistently makes training 

programs available to independent producers. 

• Demonstrating that training provided is consistent with identified 

educational needs. 

• Training is used as a factor in performance evaluation or in some 

reward or recognition criteria. 

• Demonstrating that, when compliance education needs are identified, 

appropriate training is provided to captive producers and appropriate 



Monitoring 



• Documentation that captive producers and appropriate employees 

have received training. 

• Demonstrating that action is taken when required training is not 

completed. 

• Showing that the company monitors its training programs to assure 

they address compliance with company policy and procedure, IMSA 

and laws and regulations. 

• Communications are reviewed for educational content. 

• Demonstrating that feedback is used to improve training. 

• Evidence that independent producers receive training. 




Policies and 

Procedures 

Training 

Product Training 



Templates 


company practices that are designed to reasonably assure its producers 

and appropriate company employees have adequate knowledge of 

company products and their operation. 



appropriate. 










limited to: 

• Documentation showing descriptive materials have been provided 

to captive producers and appropriate employees and made 


• Showing that product materials are routinely made available. 

• Showing that sales consistently are restricted until a producer is 

knowledgeable about company products and operations. 

• Demonstrating that updated materials are provided to captive 

producers and appropriate employees and make available to 

independent producers. 


Monitoring 



• Documentation showing that producers and appropriate 

employees are receiving materials describing covered products 

and company operations. 

• Documentation showing that feedback is received from producers 

and appropriate employees in order to monitor and enhance 

descriptive materials related to covered products and company 

operations. 




Policies and 

Procedures 

Training 

Continuing Education 

Principle 2 - Code E 


Templates 


company practices that are designed to reasonably assure that its 

producers and appropriate company employees receive continuing 

education. 



appropriate. 


for each element of compliance. Documentation could include, but may not 

be limited to, job descriptions, titles, organization charts, and performance 







limited to: 

• Documentation showing that the company conducts periodic 

continuing education for captive producers and appropriate 

employees and makes such programs available to independent 

producers. 

• Demonstrating that the company makes available conferences or 

programs that provide continuing education. 

• Continuing education requirements are consistently communicated. 

• Active encouragement that independent producers participate in 

periodic continuing education programs. 

• Demonstrating that the company communicates programs and 

materials that provide continuing education to all producers and 

appropriate employees. 


Monitoring 



• Documentation related to monitoring that required continuing 

education is completed by captive producers and appropriate 


• Evidence that the company uses its monitoring processes, such as 

customer surveys and complaints, to identify and correct areas of 

inadequate education. 

• Monitoring that captive producers and appropriate employees are 

advised of the availability of continuing education programs and 

encouraged to attend and that independent producers are 

encouraged to attend such programs. 




Policies and 

Procedures 

Training 

General Compliance Training 



Templates 


company practices that are designed to reasonably assure that 

compliance training sessions are conducted for appropriate company 

employees on the company’s policies and procedures and its 

commitment to and compliance with IMSA’s Principles and Code 



appropriate. 










limited to: 

• Documentation showing that training related to company policies 

and procedures and company commitment to ethical practices is 

consistently provided to appropriate company employees. 

• Documentation showing that the company consistently provides 

compliance training to appropriate employees. 

• Communications showing that appropriate employees have 

access to various compliance programs. 


Monitoring 



• Documentation showing that appropriate company employees 

were trained on the company’s policies and procedures and the 

company’s commitment to IMSA. 

• Documentation showing that the company monitors the 

completion of compliance training for appropriate company 

employees. 

• Program and trainer evaluation material. 

• Demonstration that monitoring sources are used to identify 

training needs. 




Policies and 

Procedures 

Replacement 

Information to Customers 



Templates 


company practices that are designed to reasonably assure customers 

receive appropriate information designed to make an informed decision 

prior to replacing covered products. 



appropriate. 










limited to: 

• Documentation that shows the company distributes or makes 

available to customers, information that is needed to ascertain 

whether a replacement is appropriate. 

• The company obtains up-to-date information about state and 

federal regulations concerning replacement disclosure 

requirements and updates appropriate forms and procedures. 

• Demonstrating that disclosures are provided in a timely manner. 

• Documentation showing that company policies and procedures 

require captive producers and appropriate employees to provide 

customers with information needed for informed decisions and 

that independent producers are encouraged to do the same. 


Monitoring 



• Documentation showing the company monitors whether 

descriptive materials and replacement disclosures designed to 

assist the customer are appropriate and are provided to 

customers. 

• Demonstrating that the company monitors complaints for 

violations of replacement rules. 

• Showing that feedback is obtained and used to improve related 

processes. 


customers are receiving information they need be for replacing 

covered products. 




Policies and 

Procedures 

Replacement 

Replacement Review 

Principle 3 – Code C 


Templates 

The company must have written policies and procedures to provide 

reasonable assurance that it is reviewing replacement activity including 

tracking, identifying non-disclosed activity and addressing deviations from 

company guidelines. 



appropriate. 


for each element of compliance. Documentation may include, but is not 








limited to: 

• A system to identify potential non-disclosed replacement activity. 

• Replacement reports. 

• Logs that show which companies are replacing company 

business. 

• Systems to conserve policies when existing company policies are 

being replaced. 

• Documentation showing that management receives reports 

showing replacement activity and trends. 

Supervisions and 

Monitoring 



• Documentation showing that the company generates replacement 

reports to identify patterns and trends of replacement activity, 

including non-disclosed replacements. 

• Demonstrating that company guidelines are monitored and 

enforced. 

• Demonstrating that processes are in place to identify nondisclosed 

replacement activity. 

• Documentation that shows the company, through conservation 

efforts, gathers information about why a customer is replacing 

their business. 

• Feedback obtained from producers, appropriate employees and 

customers related to replacement activity. 

• Active communication of company replacement guidelines to 

producers and appropriate company employees. 




Policies and 

Procedures 

Advertising 

Information to Customers 



Templates 


company practices that are designed to reasonably assure that any 

advertising and sales material designed to lead to sales or solicitation of a 

covered product is done in a manner consistent with the needs of the 

customer and based upon the principles of fair dealing, good faith and 

factual disclosure. 



appropriate. 


for each element of compliance. Documentation could include, but may not 

be limited to, job descriptions, titles, organization charts, and performance 







limited to: 

• Material showing that the company communicated to customers 

information consistent with making appropriate buying decisions. 

• Company guidelines, which have been communicated to producers 

and appropriate employees, regarding when a producer can present 

him or herself as an expert. 

• Demonstrating that advertising related to TSAs, IRAs and other 

qualified plans describe any special qualification requirements or 

limitations. 

• Showing advertising clearly identifies any conditions or limitations of 

the product. 

• Demonstrating that any state required buyer’s guides is provided as 

required. 

• Documentation showing procedures are in place to update out-of- 


Monitoring 

date advertising and eliminate the use of obsolete material. 



• Documentation showing that the company monitors compliance with 

policies and procedures designed to reasonably assure customers 

receive information consistent with making buying decisions. 

• Demonstrating that complaints related to advertising and sales 

material are monitored. 

• Feedback from producers, appropriate employees and customers 

designed to improve the disclosure of information. 

• Documentation showing the company monitors, on an individual or 

trend basis, that customers are provided with advertising and sales 

material designed to assist them with making buying decisions. 




Policies and 

Procedures 

Advertising 

Clear and Understandable Sales Materials 



Templates 


company practices that are designed to reasonably assure that materials 

presented as a part of the sales process are comprehensible in light of 

the complexity of the product being sold. 



appropriate. 










limited to: 

• Documentation showing that the company uses Flesch scores, or 

other tests or processes to determine whether reading-level 

comprehension in advertising and sales materials conforms to the 

intended customer and the product complexity. 

• Demonstration that the company uses focus groups, or other 

feedback, to analyze the understandability of advertising. 

• Demonstration that the company uses information about the 

intended market or other consumer research to develop clear and 

understandable adverting and sales materials. 


Monitoring 



• Documentation showing that the company monitors compliance 

with these policies and procedures to assure that advertising and 

sales materials are appropriately clear and understandable. 

• Feedback from producers and appropriate company employees 

related to the clarity and understandability of advertising and 

sales materials and uses this feedback to improve, as needed. 

• Demonstrating that advertising and sales materials are 

periodically reviewed to determine whether they are clear and 

understandable in light of the product and the customer. 




Policies and 

Procedures 

Advertising 

Illustrations 



Templates 


company practices that are designed to reasonably assure that illustrations, 

or other representations of premium and considerations, costs, values, and 

benefits are accurate, fair, and complete and contain appropriate 

disclosures. 

In the summary under this topic, a company must provide evidence of written 

policies and procedures or documented company practices, as appropriate. 

Responsibility The company must be able to demonstrate that responsibility is assigned for 

each element of compliance. Documentation could include, but may not be 






Consistent Use The company must provide evidence that these policies and procedures are 

consistently used. Evidence of this could include, but may not be limited to: 

• Documentation showing that the company uses policies and 

procedures for the use of illustrations and other representations of 

premiums, considerations, costs, values and benefits. 

• Company reviews of sales illustrations designed to determine that 

guaranteed and non-guaranteed elements are clearly identified and 

distinguished and that non-guaranteed elements are clearly 

described as projections that are not guaranteed. 

• Demonstration that the company uses the concepts contained in the 

NAIC Life Insurance Sales Illustrations Model Regulation to foster 

accurate and complete disclosure of product benefits and other 

appropriate disclosures. 


Monitoring 



• Documentation showing that the company monitors related 

complaints and uses this information to improve illustrations. 

• Feedback from producers, appropriate employees and customers 

that is used to improve illustrations and other related disclosures. 

• Demonstration that the company monitors the use and control of 

illustrations and other representations of premiums and 

considerations, costs, values and benefits. 

• Demonstration that appropriate disciplinary action is taken when 

violations of these policies and procedures occur. 

• Ongoing monitoring of compliance with the concepts of the NAIC Life 

Insurance Sales Illustrations Model Regulation. 

• Documentation showing that the company monitors new business for 

compliance with these policies and procedures. 




Policies and 

Procedures 

Complaints 

Customer Communication of Complaints 



Templates 


company practices that are designed to reasonably assure that the 

company provides an easily accessible way for customers to 

communicate complaints. 



appropriate. 










limited to: 

• Documentation showing the company routinely provides 

information to customers showing how they may communicate 

with the company. 

• Showing that the company assists “special needs” customers in 

communicating with the company. 

• Showing the company makes good faith efforts to resolve 

complaints. 

• Documentation showing that the company communicates with the 

customers, complainant or the regulators, as appropriate, 

throughout the complaint and dispute process. 

• Feedback obtained from complainant regarding how they would 


Monitoring 

assess the company’s handling of the complaint. 



• Documentation showing the company monitors its efforts to 

resolve complaints and disputes in good faith and in a timely 

manner. 

• Demonstrating that the company monitors correspondence and 

other customer communications to determine whether there are 

ways to improve customer access. 




Policies and 

Procedures 

Complaints 

Root Cause Analysis of Complaints 



Templates 


company practices that are designed to reasonably assure that complaint 

information is gathered and analyzed and efforts are made to eliminate 

their root causes. 



appropriate. 










limited to: 

• Documentation showing that the results of complaint trend 

analysis is communicated to captive producers, appropriate 

company employees and made available to independent 

producers. 

• Demonstrating that all complaints, from all producer locations, 

company offices and departments, are logged, aggregated and 

included in complaint trend analysis. 

• Communications to management about complaint trends. 

• Processes to select, approve and communicate solutions or 

corrective actions based upon complaint trend analysis. 


Monitoring 



• Documentation showing that the company monitors whether 

complaint trend analysis is performed. 

• Monitoring that complaint trend analysis is provided to 

management. 

• Demonstrating that the company monitors the results of complaint 

trend analysis and takes appropriate corrective action. 

• Demonstrating the corrective action is monitored to determine that 

it has resulted in improvement. 




Policies and 

Procedures 

Complaints 

Complaint Resolution 



Templates 


company practices that are designed to reasonably assure that good faith 

efforts are made to resolve complaints and disputes without resorting to 

civil litigation. 



appropriate. 










limited to: 

• Documentation showing that the company makes good faith 

efforts to resolve complaints and disputes including ready access 

to customer information, prompt written acknowledgement to the 

customer, and prompt investigation, analysis and resolution. 

• Demonstrating that the company communicates with the 

customer or the regulator throughout the complaint process. 

• Documentation associated with feedback that customers provide 

about the complaint process. 


Monitoring 



• Documentation showing that the company monitors its efforts to 

resolve complaints. 

• Documentation showing that the company is responsive to 

customer feedback prior to a complaint being filed. 




Policies and 

Procedures 

Commitment to and Compliance with IMSA’s Principles and Code 

Commitment to and Compliance with IMSA’s Principles and Code 



Templates 


company practices that are designed to reasonably assure that 

management establishes and enforces policies and procedures 

reasonably designed to demonstrate the company’s commitment to and 

compliance with IMSA’s Principles and Code. 



appropriate. 




Communication 

and Consistent 

Use 


The company must demonstrate that these policies and procedures have 





limited to: 

• Documentation that shows that management routinely 

demonstrates the company’s commitment to IMSA’s Principles 

and Code. 

• Documentation showing that teams or committees regularly meet 

and provide reports to management regarding IMSA compliance, 

the company’s systems of supervision and trends and patterns 

relating to the company’s IMSA related sales and marketing 

processes. 


Monitoring 




individuals, teams or committees meet and provide reports to 

management. 

• The company’s recognition and reward systems take into account 

compliance with ethical market conduct. 

• Demonstrating that the company monitors whether polices and 

procedures designed to reasonably assure IMSA compliance are 

established and enforced by management. 




Policies and 

Procedures 

Supervision and Monitoring 

Supervision 



Templates 


company practices that are designed to reasonably assure that there is 

an adequate system of supervision of the sales and marketing activities 

of its producers and appropriate employees and the company’s policies 

and procedures in order to reasonably assure the company’s 

commitment to and compliance with IMSA’s Principles and Code. 



appropriate. 










limited to: 

• Documentation showing that the company consistently uses its 

supervision policies and procedures across all distribution 

systems for all covered products. 

• Communications concerning consequences of non-compliance. 


Monitoring 



• Documentation showing that the company monitors its system of 

supervision of sales and marketing activities and its policies and 

procedures. 

• Demonstrating that the company evaluates and modifies, as 

necessary, its supervisory procedures based on analysis of 

information from various sources and solicits feedback and takes 

corrective action, as appropriate. 

• Showing reports of possible non-compliance along with 

associated evidence of corrective action. 

• Documentation showing that the company monitors whether 

supervisory responsibilities are fulfilled in accordance with 

company policies and procedures, the Principles and Code and 





Policies and 

Procedures 

Supervision and Monitoring 

Monitoring 



Templates 


company practices that are designed to reasonably assure it monitors 

compliance with IMSA’s Principles and Code. 



appropriate. 










limited to: 

• Documentation showing that the company communicates it 

policies and procedures for monitoring sales and marketing 

practices. 

• Documentation showing that the company consistently uses its 

monitoring policies and procedures across all distribution systems 

for all covered products. 

• Showing that the company has a program for periodic, routine 

visits to field offices to assist in its supervision and monitoring. 

• Showing the company has thresholds that indicate the point at 

which field validation and, as applicable, corrective action is 

needed. 


Monitoring 



• Demonstrating that the company monitors reports and oversight 

activities, and takes corrective action as needed, to continuously 

improve its monitoring system. 

• Showing reports of possible non-compliance along with 

associated evidence of corrective action. 

• Documentation showing that the company evaluates its auditing 

and information gathering process related to its sales practices, 

and takes corrective action, as needed, to continuously improve 

its monitoring system. 




MERGERS AND ACQUISITIONS POLICY 

APPENDIX B –POLICIES AND GUIDELINES 

Mergers and Acquisitions Policy 

There has been increased activity involving life insurance company mergers and acquisitions 

including the purchase of blocks of business in the past few years. Therefore, it is important to 

review and understand the implications that these activities may have for IMSA member 

companies. 

To address several scenarios that involve merger and acquisition activity, IMSA has created 

the following chart to outline what actions a company should take with respect to these 

scenarios, the timeline associated with these actions, whether an independent assessment 

may be required and rules regarding use of the IMSA logo under these scenarios. A 

discussion of the impact of the acquisition of blocks of business follows thereafter. 

Company 

A 

IMSA 

company 


company 

Company 

B 


company 

Non- 


company 

Result Action Timeframe Independent 

Assessment 

Two 

separate 

entities 

Company B 

merged into 

Company A 

No Action N/A 

Required 

No Can be used 

Company A must 

apply IMSA 

policies and 

procedures across 

the organization. 

New entity IMSA policies and 

procedures are in 

place at new 

entity. 

Company A 

merged into 

Company B 

Two 

separate 

entities 

Company B 

merged into 

Company A 

Company B must 


policies and 



Within 180 

days from 

the 

effective 

date of the 

transaction. 

Within 180 

days from 

the 

effective 

date of the 

transaction 

Within 180 

days from 

the 

effective 

date of the 

transaction. 


Use of Logo 

No Co. A can continue 

to use logo provided 

IMSA policies and 

procedures have 

been applied within 

180 days from the 

effective date of the 

transaction. If not, 

Co. A must cease 

logo use. 


provided IMSA 

policies and 


been in place at new 

entity. 

No Co. B can continue 








Co. B must cease 

logo use. 

No Action. N/A No Can be used by Co. 

A only 

Company A must 


policies and 



Within 180 

days from 

the 

effective 

date of the 

transaction. 

No Co. A can continue 





180 days from the

Company 

A 

Non- 


company 

Company 

B 


company 



Result Action Timeframe Independent 

Assessment 

Required 

New entity IMSA policies and 


place at new 

entity. 

Company A 

merged into 

Company B 

Two 

separate 

entities 

Company B 

merged into 

Company A 



policies and 



Within 180 

days from 

the 

effective 

date of the 

transaction. 

Within 180 

days from 

the 

effective 

date of the 

transaction. 


Use of Logo 



Co. A must cease 

logo use. 



policies and 



entity. 

No Co. B can use logo 


policies and 





transaction. 

No Action. N/A No Can be used by Co. 

B only 

No Action. N/A No Cannot use logo. 

New entity If new entity uses 

IMSA polices and 

procedures of 

Company B, 

consider applying 

for IMSA 

membership. 

New entity If new entity uses 

Company A 

policies and 


the organization 

then new entity is 

not an IMSA 

Company A 

merged into 

Company B 

member. 



policies and 


place across the 

organization. 

Within 180 

days from 

the 

effective 

date of the 

transaction. 

Yes Can be used 


policies and 



entity. 

N/A No Cannot use logo. 

Within 180 

days from 

the 

effective 

date of the 

transaction. 

No Co. B can continue 








Co. B must cease 

logo use.

ACQUISITIONS OF BLOCKS OF BUSINESS 



When an IMSA member acquires a block of business or business unit (as distinguished from a 

separate legal entity operating as a non-member affiliate or subsidiary) which will operate 

outside of the IMSA member company’s policies and procedures; the IMSA member can 

continue to use the IMSA logo in connection with covered products sold and administered 

under the original infrastructure. However, the IMSA logo or identity cannot be used with 

respect to covered products sold through the acquired business unit. The IMSA member 

company will be given 180 days from the effective date of the transaction to integrate the 

acquired unit into its current IMSA program or may establish a separate compliance program 

designed to meet IMSA standards for the acquired unit. If compliance cannot be completed 

within the 180 day period, the member can apply to the President & CEO of IMSA in writing to 

request a reasonable extension of time. The request should include an explanation of the 

reasonable grounds underlying the requested extension and the estimated completion date. If 

compliance is not achieved within the 180 day period or any extension thereof, the member 

must discontinue all use of the logo until compliance is achieved. If the IMSA member 

company establishes a separate compliance program for the acquired unit, it can apply for 

IMSA membership for that unit when it has all of the required IMSA policies and procedures in 

place. 

If an IMSA member acquires an eligible covered product line of business from a non-member 

and that line of business continues to be sold by the member, the member must fully integrate 

that line of business into the member’s IMSA qualifying policies and procedures in order to be 

able to use the IMSA logo. If the new line of business is not integrated into the IMSA member 

company’s policies and procedures but is sold and administered using policies and procedures 

of another organization that has not successfully qualified for IMSA membership, then the 

IMSA member company must notify IMSA and discontinue its use of the IMSA logo including 

the promotion and/or advertising of IMSA membership until both the self assessment and 

independent assessment processes have been completed for the new line of business sold 

and administered by the other organization and reports indicating successful completion of the 

IMSA qualification process have been filed with IMSA. 


MARKET CONDUCT REPORTING POLICY 

APPENDIX B – POLICIES AND GUIDELINES 

Market Conduct Reporting Policy 


General: The following policy, as approved by the IMSA Board of Directors, outlines the 

obligations of IMSA member companies pertaining to the member company’s reporting of 

market conduct problems during a company’s IMSA qualification period. All required 

communications should be sent by certified mail, return receipt requested. Communications 

from IMSA to the member company will be directed to the CEO of the member company. 

Communications from the member company to IMSA should be directed to IMSA’s President & 

CEO. 

I. An IMSA member company must notify IMSA promptly, or in any event within forty-five 

(45) calendar days, following any final action of a federal or state regulatory authority or of a 

self-regulatory organization that: 

A. Is set forth or described in any document that the regulatory authority or self-regulatory 

organization publishes or makes available to the public; 

B. Relates to the company’s IMSA market conduct policies and procedures that pertain to 

covered products; and 

C. Is based on any finding of a material weakness in the company’s IMSA related market 

conduct policies or procedures, requires any corrective action by the company concerning 

its IMSA related market conduct policies or procedures, or involves the imposition of an 

administrative, civil or other sanction or penalty against the company pertaining to its IMSA 

related market conduct policies and procedures that occurred during the company’s IMSA 

qualification period. 

Technical violations incurring fines or penalties of $10,000 or less would not be subject to this 

reporting requirement. A “final” action includes any action or determination that (a) marks the 

conclusion of the regulatory authorities or self-regulatory organization’s decision-making 

process and (b) has legal consequences for the member or affects its legal obligations. 

Companies should contact IMSA if they have questions concerning the application of the 

$10,000 threshold. 

II. The IMSA member company must submit to IMSA’s President and CEO, a copy of the 

document that the regulatory authority or self-regulatory organization has published or made 

available to the public setting forth or describing its final action. In addition, the IMSA member 

company, through its Chief Compliance Officer or corporate officer responsible for the 

company’s self-assessment, shall submit a copy of the company’s response to the final action 

to confirm that corrective action has been taken. Where the circumstances, including the 

serious nature and scope of the underlying violations, indicate a possible systemic problem or 

failure, IMSA’s President & CEO may conduct further inquiry and may require the member to 

engage a Qualified Independent Assessor, including one not previously engaged by the 

company, to verify that corrective action has been implemented. Upon receipt of a notice to 

engage a Qualified Independent Assessor to verify that corrective action has been 

implemented, the company may, within 10 business days of its receipt, request an opportunity 



Market Conduct Reporting Policy 


to be heard before the Executive Committee of the IMSA Board of Directors and shall be given 

no less than 10 business days notice of the time and place of such hearing. 

If IMSA determines that a member has failed to notify it as required by this paragraph, IMSA’s 

President & CEO shall so advise the IMSA member company’s Chief Executive Officer. If the 

company fails to respond within thirty (30) calendar days thereafter, IMSA’s President & CEO 

shall so advise the IMSA member company’s Chief Executive Officer and inform him or her 

that, absent a response received by IMSA within a further fifteen (15) calendar day period, 

IMSA’s President & CEO may recommend that the Executive Committee of the IMSA Board of 

Directors suspend or expel the member from IMSA. 

All documents submitted by a member in connection with any notification made to IMSA under 

this Paragraph and all other records of IMSA relating to any notification shall be managed, 

retained and disposed of in accordance with IMSA’s established records retention and 

management policies and procedures. 

III. Whenever IMSA’s President & CEO recommends that the Executive Committee suspend a 

company’s IMSA qualification or expel the company from IMSA, IMSA’s President & CEO shall 

notify the member of such recommendation in writing. Upon receipt of such notice or upon 

receipt of notice of the denial of any requested extension of time under any provision 

hereunder or upon receipt of a notice to provide a Qualified Independent Assessor 

confirmation, the member may, within 10 business days of its receipt, request an opportunity to 

be heard before the Executive Committee and shall be given no less than 10 business days 

notice of the time and place of such hearing. As soon as practical following such hearing and 

after giving due consideration to all information presented the Executive Committee of the 

IMSA Board of Directors shall decide, whether to: 

A. Expel the member from the organization; 

B. Suspend the member from the organization and, if so, determine the terms of any such 

suspension including the time period for the cessation of use of the IMSA logo on 

existing sales material; 

C. Call for a full or partial independent assessment, including a Qualified Independent 

Assessor confirmation, as a condition to continued membership; 

D. Allow further time for corrective action; or 

E. To deny, in whole or in part, the recommendation of IMSA’s President & CEO. 

A company’s expulsion from IMSA would generally apply only to serious breaches of a 

company’s obligations to comply with IMSA standards and where no acceptable plan for 

rectifying any injury to consumers is in place; repeated failure to comply with the requirements 

hereunder; or in circumstances where essential corrective action cannot or will not be 

corrected prior to expiration of a company’s three year qualification period. 



Qualified Independent Assessor Engagement Reporting Guidelines 


QUALIFIED INDEPENDENT ASSESSOR ENGAGEMENT REPORTING GUIDELINES 

Whenever a Qualified Independent Assessor is engaged by a company or IMSA member for 

the purpose of commencing an independent assessment, IMSA must be promptly informed of 

such engagement by the Qualified Independent Assessor. 

The company shall also allow its Qualified Independent Assessor to review all reports of final 

actions as described in IMSA’s Market Conduct Reporting Requirements that were received 

during the three-year period preceding the Qualified Independent Assessors’ engagement. If 

there has been a final action of a federal or state regulatory authority or of a self-regulatory 

organization as described in the IMSA’s Market Conduct Reporting Requirements, the 

Qualified Independent Assessor will review during the independent assessment process the 

corrective action(s) agreed to be undertaken by the company in the report of the final action to 

assure that there is not a systemic problem related to the company’s IMSA-related policies and 

procedures. 


General: 

COMPLAINT HANDLING GUIDELINES 


Complaint Handling Guidelines 


The following guidelines, as approved by the IMSA Board of Directors, outlines the obligations 

of IMSA member companies pertaining to IMSA’s handling of complaints during a company’s 

IMSA qualification period. All required communications should be sent by certified mail, return 

receipt requested. Communications from IMSA to the member company will be directed to the 

CEO of the member company. Communications from the member company to IMSA should 

be directed to IMSA’s President & CEO. 

Complaints: 

IMSA will take no immediate action with respect to rumors, news stories, oral or anonymous 

complaints but will encourage consumers or producers to reduce oral complaints to writing so 

IMSA can take further action, as indicated below, with respect to these complaints. 

I. Written complaints via letters or emails from identified consumers, producers, or non-IMSA 

members. 

A. If regarding a non-IMSA member, an email response or a letter and IMSA brochure will 

be sent indicating non-IMSA status and that the complainant should communicate directly 

with the company or their state insurance department. 

B. If regarding an IMSA member, an email response or a letter and IMSA brochure will be 

sent to the complainant indicating that the complaint, along with IMSA’s letter to the 

complainant, has been forwarded to the member for review and response consistent with 

their IMSA membership. (See samples attached.) The company is required to inform 

IMSA that a response (including the date of the response) has been provided to the 

complainant after the complaint response has been issued to the complainant. 

C. If the volume and repeated nature of the complaints persist, IMSA’s President & CEO 

may determine that there is a need for the modification or strengthening of the member’s 

policies and procedures and may elect to treat the complaints under the procedure set 

forth in section 2 below. 

II. Written complaints via letters and email from IMSA members or regulators concerning 

market conduct activity occurring during a company’s IMSA membership period. 

A. The complaint will be forwarded to the IMSA member company for review and 

response. The company should respond to IMSA as soon as possible but, in any event, 

not later than 45 calendar days of receipt. If the member responds that the complaint has 

been received and 


1. is without merit; 




2. has been or is being handled under existing policies and procedures that 

appropriately address the nature of the complaint; or 

3. has been or will be handled and that any appropriate modifications or 

strengthening of existing policies and procedures will be completed within 60 calendar 

days from the date of the response, then no further action will be taken. 

B. If an IMSA member company fails to respond within the 45 calendar days as required 

under 2a) above, a second notice will be sent to the member company indicating that, 

unless a response is received within 10 business days from the receipt of such second 

notice, IMSA’s President & CEO may recommend that the Executive Committee of the 

IMSA Board of Directors suspend the company’s IMSA membership or expel the company 

from IMSA. 

C. If an IMSA member company determines that the appropriate modifications or 

strengthening of existing policies and procedures cannot be implemented within 60 

calendar days, the member must submit a plan to IMSA indicating when such 

modifications or strengthening will be completed along with the reasons why a sooner 

completion is not feasible and what actions the member is taking to protect consumers in 

the meantime. If IMSA determines that the plan is acceptable, the member shall be given 

the necessary extension of time. If IMSA determines that the plan is unacceptable, the 

member shall be notified that IMSA’s President & CEO may recommend that the Executive 

Committee of the IMSA Board of Directors suspend the company’s IMSA membership until 

the appropriate modifications or strengthening of the company’s policies and procedures 

have been implemented. 

D. If the volume and repeated nature of the complaints persist, giving due consideration to 

the size and complexity of the IMSA member company’s business (regardless of whether a 

previous determination had been made under 2a) that no further action would be taken), 

IMSA’s President & CEO may require the IMSA member company to have a Qualified 

Independent Assessor confirm, at the company’s expense, that the basis for no further 

action was supportable. The report of the Qualified Independent Assessor shall be 

submitted within 60 calendar days from the receipt of the notification. Any failure to 

provide the confirmation of a Qualified Independent Assessor within 60 calendar days from 

the date the notice was received shall be treated as a failure to respond under 2b). 

Whenever IMSA’s President & CEO requires the IMSA member company to have a 

Qualified Independent Assessor confirm, at the company’s expense, that the basis for no 

further action was supportable, IMSA’s President & CEO shall notify the member of such 

requirement in writing. Upon receipt of such notice, the member may, within 10 business 

days of its receipt, request an opportunity to be heard before the Executive Committee and 

shall be given no less than 10 business days notice of the time and place of such hearing. 

E. IMSA’s President & CEO may extend any time period within which any response is due 

or action is to be taken under this section or any other section of this proposal based upon 

reasonable grounds submitted in writing by any IMSA member company. 


[name] 

[title] 

[company] 

[address] 

[address] 

Re: (complainant’s name) 

Dear [Compliance Officer]: 

SAMPLE LETTER TO MEMBER COMPANY 

Date 




Enclosed is a copy of our response to one of your policyholders along with their original 

letter to IMSA. 

We hope that you will review the letter with a view toward resolving any outstanding 

issues consistent with your IMSA membership. Please inform IMSA that a response (including 

the date of the response) has been provided to the complainant after the complaint response 

has been issued to the complainant. If we do not receive your response within a reasonable 

time, we will be contacting you. 

Enclosure 

Sincerely, 


[name] 

[address] 

[address] 

Dear (complainant’s name): 

SAMPLE LETTER TO COMPLAINANT 

Date 




Thank you for your recent letter to IMSA requesting assistance in dealing with your 

insurance company, (company name). 

IMSA is a voluntary membership organization leading the insurance industry in 

promoting high ethical standards in the marketing, sale and service of individually sold life 

insurance, long-term care insurance and annuity products. IMSA is a standard setting 

organization and not one that plays a regulatory role in policing the activities of its members or 

in handling of individual complaints. Enclosed is an IMSA brochure and you may visit our 

website at www.IMSAethics.org for more information about our organization. 

Our eligibility requirements do, however, require members to not only subscribe to our 

high standards of honesty and fairness but to establish an infrastructure of policies and 

procedures that is designed to provide reasonable assurance of compliance. We believe that 

in fostering such high standards with the accompanying infrastructure, IMSA will make a 

substantial contribution towards significantly improved marketplace behavior. 

As we receive letters like yours, it is our policy to forward them to the compliance office 

of the insurer in question with the expectation that the company will review your case with 

IMSA’s objectives in mind. We certainly hope that any outstanding issues can be resolved. If 

you do not hear from (company name) in a reasonable amount of time, please feel free to 

contact me at (240) 744-3023, and I will try to assist. 

Enclosure 

Sincerely, 


I. COVERED DOCUMENTS. 

RECORDS RETENTION POLICY 


Records Retention Policy 

March 2003 

Pertaining to Member Reports Submitted Under 

Post-Membership Market Conduct Guidelines 

Irrespective of the form in which they are created, maintained or accessed, records covered by 

this Policy (each a “Covered Document”) include all of the following: (i) any report, certification 

or other document (collectively, a “Report”) submitted by a member company to the Insurance 

Marketplace Standards Association (“IMSA”) pursuant to Paragraph 4 of the Post-Membership 

Market Conduct Guidelines (“Guidelines”); (ii) internal memoranda, work papers, and records 

of other communications made or received by IMSA in connection with or regarding any 

Report, and (iii) correspondence and records of other communications by or between IMSA 

and a member company in connection with or regarding a Report. 

II. RECORD CREATION AND RETENTION. 

A. Creation of Files. 

Upon receipt of any Report from a member company, IMSA will open, and assign and log 

a unique identifying number to, a file (“File”). The File and identifying number will be used 

to maintain and track all Covered Documents received or generated by IMSA in connection 

with or regarding that Report. 

B. Maintenance of and Access to Files. 

To the fullest extent practicable, IMSA will maintain in the File all Covered Documents in 

connection with or regarding the Report. The File will be stored in a designated, secure 

cabinet or storeroom, which shall be accessible only to designated IMSA personnel. 

Similar care will be taken to identify and limit access to any Covered Documents not 

maintained in the File (e.g., records of communications and other documents maintained in 

electronic form). 


III. THIRD-PARTY REQUESTS FOR COVERED DOCUMENTS. 


Records Retention Policy 

March 2003 

IMSA promptly will notify the member company concerned if it receives or is subject to legal 

process to produce or make available to any third party any Covered Document to allow the 

member company to determine whether reasonable grounds may be available to resist or seek 

to limit or condition the production of any Covered Document. Further, insofar as appropriate 

and there are reasonable legal grounds available to do so, IMSA will resist or seek to limit or 

condition the production of any Covered Document, in order to protect the confidentiality and 

effectiveness of the reporting requirements envisioned in the Guidelines. 

IV. DISPOSITION OF COVERED DOCUMENTS. 

Unless otherwise prohibited by law (including any legal process or discovery proceedings), 

IMSA will dispose of all Covered Documents within one hundred and eighty (180) days 

following the conclusion of IMSA’s review of a Report (including the conclusion of any 

additional inquiry conducted by the Executive Director, as contemplated by the Guidelines). 

IMSA may, however, compile generic statistical information concerning Reports submitted 

under the Guidelines and may retain such information as part of its permanent records. 


APPENDIX C – REPORT FORMS 

INSURANCE MARKETPLACE STANDARDS ASSOCIATION 

QUALIFIED INDEPENDENT ASSESSOR’S FINAL REPORT FORM 

To the Company’s Board of Directors and the Insurance Marketplace Standards Association. 

We have examined management’s assertion of the affirmative responses to the Assessment 

Questionnaire relating to the Principles and Code of Ethical Market Conduct for covered 

products, adopted by the Insurance Marketplace Standards Association (“IMSA”), that the 

Company complied with the standards set forth in the IMSA Principles, Code and Questions as 

of the Report Date below. Management is responsible for the Company’s compliance with 

those requirements. Our responsibility is to express an opinion on management’s assertion 

about the Company’s compliance based on our examination. 

Our examination was conducted in accordance with the criteria set forth in the IMSA 

Independent Assessment Manual and IMSA Assessment Handbook with the standards, if 

applicable, established by any professional organization to which we belong and, accordingly, 

included examining, on a test basis, evidence about the Company’s compliance with those 

requirements and performing such other procedures as considered necessary in the 

circumstances. We believe that our examination provides a reasonable basis for our opinion. 

Our examination does not provide a legal determination on the Company’s compliance policies 

and procedures. 

In our opinion, management’s assertion that the Company complied with the Principles and 

Code of Ethical Market Conduct, is fairly stated in all material respects, as of the Report Date. 

This report is intended solely for the information and use of the Board of Directors and 

Management of the Company and the Insurance Marketplace Standards Association and 

should not be used for any other purpose. 

Report Date 

Company 

Print Name of Qualified Independent Assessor 

Signature of Qualified Independent Assessor 

Date of Signature 

© IMSA 2006 All rights reserved 167 September 2006

QUALIFIED INDEPENDENT ASSESSOR 

INDEPENDENCE AFFIRMATION 


I, _____________________________, performed the independent assessment of 

_________________________________ and have read and understand IMSA’s 

Independence Standard and hereby attest that I and any member of my firm have no prior or 

existing relationships with the company that in any way affects my independence of judgment 

with regard to the independent assessment. 

______________________________________ 

Print Name 

_______________________________________ 

Signature of Qualified Independent Assessor 


ASSOCIATE ASSESSOR 

INDEPENDENCE AFFIRMATION 


I, _____________________________, providing assistance with the independent 

assessment of _________________________________ and have read and understand 

IMSA’s Independence Standard and hereby attest that I and any member of my firm have no 

prior or existing relationships with the company that in any way affects my independence of 

judgment with regard to the independent assessment. 

______________________________________ 

Print Name 

_______________________________________ 

Signature of Associate Assessor 



INSURANCE MARKETPLACE STANDARDS ASSOCIATION 

MEMBERSHIP APPLICATION AND SELF-ASSESSMENT REPORT 

The undersigned insurer hereby applies for membership in the Insurance Marketplace 

Standards Association. In support hereof, the applicant insurer confirms that it has adopted the 

Association’s Principles and Code of Ethical Market Conduct (“IMSA Standards”), and, in conformity 

with the Association’s Assessment Handbook, has conducted a self-assessment of its policies and 

procedures and has determined that they have successfully demonstrated compliance with IMSA 

Standards. 

The applicant acknowledges that membership based upon this application is only valid for a 

three year period and that use of the IMSA logo or other advertising or promotion of IMSA membership 

is authorized only in accordance with the policies of the Association. 

On / / , was engaged to conduct the required 

independent assessment that supports this application. If any other Qualified Independent Assessor(s) 

had been previously engaged to support this application, the names and reasons for their 

disengagement are attached hereto. 

Any existing or prior relationship (within the last two years) between the applicant and the 

applicant’s Qualified Independent Assessor(s) or Associate Assessor(s), such as auditor, lawyer or 

consultant, etc., is set forth below: (if none, so state) 

_________________________________ 

Name of Company (Insurer) 

_________________________________ ___________________________________ 

Signature of Chief Executive Officer Print/Type Name of Chief Executive Officer 

_________________________________ ___________________________________ 

Signature of Person Responsible for Print/Type Name of Person Responsible for the 

Self-assessment Self-assessment or Chief Compliance Officer 

or Chief Compliance Officer 

_________________________________ 

Date

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