Your 'Generic' Agent Advertising Questions - Answered!


Do you ever wonder if your company will be held responsible for a contracted agent’s “generic” ad? Of course a carrier who is the underwriting insurer is clearly responsible for any marketing and advertising which references its own company or its own products.

The question an industry friend recently posed, though, is about where responsibility falls for ‘generic’ ads created by an agent who is likely appointed by her company and a number of others.

She says, “We know that this ad promotes our lines of insurance in general and could result in the sale of a product underwritten by my company.”

In today’s regulatory climate, as insurance compliance and risk officers increase their awareness of exposure and escalate their risk management efforts, this situation certainly should be addressed.

As a consultant, I have a number of agency clients who use our advertising compliance review service. The ads we see are all non-company specific, and the agent or agency is appointed with at least a handful of carriers. The answers below reflect my experiences in advertising compliance training, interchanges with regulators, and hands-on review for over 15 years.

If an ad piece mentions a company or its product, the referenced company must review for compliance. However, any insurance regulator would likely tell us that along with insurers’ responsibility for branded advertising, it is equally clear that there is also a responsibility for compliance of generic advertising. If the agent creates it, s/he is responsible for the compliance of the piece, and should be informed (hopefully by every contracted company) of that responsibility. The agent/agency needs to have a process firmly in place by which a reasonable assurance of regulatory compliance is achieved.

“Do insurers require a compliance review of such generic ads by their internal staff prior to use?”

While it would be easy enough for the agent to submit a piece to one company, submitting it to all companies s/he is contracted with could be burdensome. Even more challenging would be a situation in which the agent receives conflicting opinions as to what constitutes compliant language. Enough regulatory grey areas, as well as an ample variety of company interpretations and branding standards, exist to potentially create an untenable situation for the agent.

Additionally, many insurers I work with have limited resources with which to ensure advertising compliance for company- and product-specific pieces. They simply have too few resources to devote to also review generic pieces that may sell their products.

On the other hand, as one regulator stated (and other regulators have agreed), if the ad can reasonably be assumed to be selling your product, then you are responsible for the compliance of the piece. For instance, if the agent is contracted with five companies that sell the same type of products that you sell, but they sell your policies 90% of the time, then s/he needs to understand that you do become responsible for the ad.

"In that instance, would the company require its company's name on the ad?”

This is a company decision, and one that can be negotiated with your best agencies (those with larger blocks of your business and with an ethical commitment). Whichever way your company decides to go – require review but no company name, or require review and some level of company branding – the same standard should be applied consistently to all agents/agencies in the same position. Consider the amount of business the agent does with your company as a percentage of his/her book of business, and set a threshold that provides some degree of confidence for your company.

“What about agent-created generic advertising of products where states require advertising to be filed (Long Term Care for instance)? Is the agent responsible to file them or is my company?”

The requirement to file advertising primarily applies to some life and health products, although an insurance commissioner can require any given company to file any of their advertising. A commissioner would generally require advertising filing as a response to systemic problems in that area of the company.

The answer to this filing question is a little complicated. Another one of our staff was asked by his agency client to file their generic television advertisement in all states. The ad was a lead piece for the agency and mentioned the names of four insurers with which the agency was contracted without specifying policy forms. States all require that insurers’ advertising for that particular product be filed, but we were not sure what a state’s stance on this agent piece, especially noting company names, might be.

Because we felt that this ad was actually the responsibility of the companies, we sent requests to the four carriers to file the advertising with the states at the agency’s expense. Two of the four agreed to do so in their admitted states. The other two did not agree that they were responsible for the compliance or the filing of the ad.

We filed the TV ad in the admitted states on behalf of the two companies. A few regulators stated that the other two companies should file it as well, but the majority reviewed and commented on it without such a requirement. In some cases, the state statutes/laws or the regulatory interpretation of same, did not agree across state lines so we received conflicting objections. While the agency was quite willing to make changes as required by a state, it became impossible to comply with every change for a TV ad that would be broadcast across state lines. The agency finally determined they would withdraw their request in some cases, adding a disclaimer for states’ residents where the ad was not approved and foregoing selling products from that advertisement in those states.

We filed the TV ad in the remaining states on behalf of the agency. The majority of those states responded that they did not want to see the agent piece at all, it was not required, or they did not have authority to review it. We know that state resources, like company compliance departments, may be limited, and states want to apply the workload to larger potential risks. Those regulators did specify, however, that the agency is responsible for ensuring that the piece is compliant.

After months of struggling – just because they wanted to do the right thing – the agency was able to make sufficient use of the TV ad to make the cost worthwhile.

Another question I am beginning to hear more often is this.

“We have independent agents who purchase leads from a third-party lead-generation vendor. Are we responsible for compliance of the direct mailers sent out by the vendor for this purpose?”

Agents are responsible for advertising they create. Companies are responsible for in-house or agent-originated advertising of their company or products. This scenario wherein the vendor creates these mailers may typically result in the agent never even seeing the actual postcard.

Kansas reissued a 1991 Bulletin early last year (Bulletin 2012-1) on this very topic. One paragraph states:

Despite what appears to be an assumption held by a number of advertising firms and the insurance producers subscribing to their services, the fact that these advertisements originate with third party, non-insurance entities does not create a “regulatory buffer” between the Department and insurance companies and/or their agents. Insurance companies and/or their agents are responsible for the content of advertisements distributed directly and on their behalf and are subject to potential regulatory action for the failure of any advertisements to comply with Kansas law.

As indicated, the independent agents contracted with your company need to know that they are being held responsible, definitely in Kansas and likely in many other states, as well.

Additionally, I have worked with third party lead-generating companies who have run into trouble with regulators for non-compliant lead-generation mailers. One firm that was creating and distributing postcards to procure leads for their agent clients was held responsible by the state, along with the agents and companies. One of the stipulations by that Department of Insurance to the firm was that advertising which targets citizens of their state always be reviewed by a compliance partner before mailings could resume.

Which brings me to the last question we will want to address on the topic.

“What resources would an agent have to help ensure advertising is compliant?”

  1. Some larger agencies have their own compliance person who can review advertising as part of their responsibilities. The agency is responsible to ensure that their person is trained and/or experienced in such a way that might carry credibility with a regulator.
  2. If they are tied to a national marketing organization, it may have a compliance professional trained in advertising review.
  3. They can find compliance partners, typically consulting companies who perform advertising compliance reviews as one of their services.

Regulatory requirements differ between advertising of property/casualty and title insurance and advertising of life, annuity and health/accident insurance. However, all lines of insurance advertising require (a) review for compliance, (b) a tracking and identification system, and (c) a compliant retention schedule.

When utilizing any of the three resources above, agents are still responsible to establish a procedure that ensures consistent handling of marketing materials, including making the required changes and having a system which double-checks those changes. Agents/agencies are also required to maintain documentation of those compliance reviews on file a certain number of years in case of regulatory inquiries because of complaints. The number of years may vary from state to state, and if the agency is regional or national, it will need to typically maintain files for five years.

Companies who are mindful of advertising risk will do well to communicate the expectations and requirements discussed above to their independent agents. They need to clearly understand not only what your company’s responsibility is for making their branded materials compliant, but also the extent of their responsibilities when they create advertising that the company will not be reviewing.

C. J. Rathbun, CCEP, FLMI, HIA, AIRC, ACS A Senior Consultant with First Consulting & Administration, Inc. in Kansas City, MO, she specializes in advertising compliance and operational risk compliance.

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