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Do you take the application when you know the client is lying?

2020 MDRT Ethics Committee

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Ethical dilemmas aren't always big events; sometimes they come from just one small request.
ILLUSTRATION: BRUCE MACPHERSON

SHERRY LEE ONG was so close to qualifying for MDRT membership for the first time in 2011. All she needed was $4,000 more in first-year premiums. She was on her way to meet with a potential client who could close this gap, but it turned out taking the application wasn’t as easy as she expected.

Ong went to the home of the prospect, who was eager to get a policy for his spouse. “I asked him when I could see his wife, but he told me to just leave the application form with him and he’d have her sign the documents,” said Ong, a nine-year MDRT member from Manila, Philippines.

Something didn’t feel right to Ong, so she gently pressed the matter. She told the prospect that part of her job as an insurance agent was to see the proposed insured to make sure she understood what she was signing.

Finally, the husband called his wife to come out of the bedroom. When she walked toward Ong, it was clear she was weak from an illness.

As they began filling out the application, Ong asked the wife about her health. “If you’re taking any medications or have an existing illness, you have to be honest with me, because this has an effect on your application.”

The husband responded. “My wife has a kidney problem. She was diagnosed a week ago, and she doesn’t have any coverage. That’s why we want a $200,000 policy for her.” He went on to ask Ong to not write this information on the application, because he didn’t want the insurance company to find out about it.

“There is a contestability period, and I know she’ll survive that,” the husband said. “I was an insurance agent, and I know you guys don’t declare everything.”

Ong set her pen down and began mentally deliberating her choices. She could take the application and earn her MDRT qualification — something she’d been working hard toward all year long.

Or she could set aside her goals and decline the application, based on the client asking her to agree to his deceit.

Keeping her composure, Ong told the couple no. “I can easily say yes to your request now, but I know when the time comes, you won’t be able to get the claim, and I won’t be able to face you and your kids.”

Looking back on it now, Ong is happy with the choice she made. “I could have easily accepted the application of the client and qualified for MDRT,” she said, “but to me it was more important to put ethics ahead of profit.”

Unfortunately, being asked to lie or provide incomplete information is something many advisors have encountered. Cheng Huann Yeoh, ChFC, CLU, an eight-year MDRT member from Singapore, witnessed a friend who received the request to bend the rules from a potential business partner, not a client.

“He was asked to be part of a seminar that presents financial products to foreigners,” Yeoh explained. “All he had to do was provide the product illustrations and be there to close the case if there were any interested parties.”

But there was one problem with this arrangement — all the presentations would be given by the third party in the native language of the guests, which the advisor didn’t speak. Any interpretations would also be given by the third party.

It isn’t worth crossing ethical boundaries and potentially jeopardizing your career just to close cases.

The advisor realized there were some potential infringements in this situation. In Singapore, the presentation of a financial product has to be done by a licensed agent, not by a third party. Also, a proper fact-find has to be part of the process, and all materials presented in the seminar have to be cleared by compliance.

Unfortunately, the event was in three days, and compliance would likely need two to three weeks to clear the necessary arrangements.

“He knew he could decline the offer and walk away, but he also knew someone else would likely take the chance and earn the commission,” Yeoh said. “That’s a tough choice.”

The advisor also considered the possibility of doing business only with guests who had a good command of English and who agreed to do a fact-find before purchasing the product. However, if there were a high number of interested parties, he might not have time for everyone to go through the process the same day. The guests were returning back to their home country the next day.

“Ultimately, given the short timeline and the many uncertainties surrounding this scenario, he decided the right thing to do was to decline the offer, and I have to agree,” Yeoh said. “It isn’t worth crossing ethical boundaries and potentially jeopardizing your career just to close cases.”

MDRT Code of Ethics

  1. I will place the best interests of my clients above my own direct or indirect interests.
  2. I will strive to provide the highest standards of professional competence and give my best possible advice to clients by maintaining and improving my professional knowledge, skills and competence.
  3. Clients’ affairs will be held in strictest confidence, and considered as privileged, including all business and personal information pertaining to their matters.
  4. I will endeavor to provide all facts necessary so clients can make the best informed decisions pertaining to their financial plans.
  5. I will maintain personal conduct which will reflect favorably on me, the insurance and financial services profession, and my association with the Million Dollar Round Table.
  6. I will stay current on offerings to be able to determine if any replacement of an insurance or financial product will be beneficial for clients.
  7. I will abide by and conform to all provisions of the laws and regulations in the jurisdictions in which I do business.

The MDRT Ethics Committee comprises John R. Benton Jr., ChFC, CLTC; Meagan S. Balaneski, CFP, RFP; John P. Enright; Bryon A. Holz, CLU, ChFC; Jennifer P. Mann, MBA, CFP; Jamie McIntyre, CFP; Sherry Lee Ong; Kirk Wilkerson; and Cheng Huann Yeoh, ChFC, CLU.

 

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