PACIFIC LIFE SETS EXAMPLE FOR COMPLIANCE "We are convinced we cannot have trips based on qualifications." Those are words that could turn traditional incentive travel on its head in the insurance industry. They were spoken by John Jarboe, executive vice president,/life division, Pacific Life Insurance Company in Newport Beach, Calif., during a session at the recent Insurance Conference Planners Association Annual Meeting.
ICP first reported on amendments to National Association of Securities Dealers (NASD) Rules 2820 and 2830 in the January/February 1999 issue. The main points:
Qualification for incentive trips cannot be based on the sale of variable products unless the products of all companies in a particular variable product line are included.
Even incentive programs that comply with the above rule cannot be planned and sponsored by an insurance company but must be approved and controlled by the broker/dealer with whom producers are affiliated.
Insurance companies are allowed to plan and sponsor "educational" meetings; however, these must be held at "reasonable" locations and producer attendance cannot be based on reaching a sales goal.
"The thrust of the new rules is to ensure objectivity" in sales, said John Dixon, president and CEO of Mutual Service Corp., a broker/dealer in West Palm Beach, Fla., whose sales force sells Pacific Life's variable products. Dixon's is among the broker/dealers working with Jarboe and Jaimee Niles, assistant vice president, meetings and professional relations, to comply with the occasionally vague rules.
The "educational" meeting allowance is the grayest area. One question: How much education is required? "It's not precisely defined," Dixon said. "I think it's common sense, but some people will try to stretch it to the limit." In fact, Dixon predicts, "What's going to happen is the NASD will find some broker/dealer they don't think is doing it right and nail them on it." Until then, no one is really sure where the limits are.
Niles said the next Pacific Life producer event will be an invitation-only Educational Conference for the top 500 producers; but it will not be treated as an incentive contest. "It'll be a cooperation between the broker/dealers and the company as far as who attends," Dixon explained.
"It's not going to be business as usual," Jarboe summed up.
Contact Niles, who arranged the ICPA seminar, at firstname.lastname@example.org. You can also search www.nasdr.com, NASD's Web site, for Member Notice 98-75, which lays out the rules, and 99-55, a subsequent Q&A. --Alison Hall
* You hold incentive conferences with qualification that is partially or wholly based on the sales of variable products and
* These products are sold by independent producers