Managing compliance throughout the producer licensing process is complex, especially when it’s done by hand and even more so when it involves managing variable lines brokers. Due to the securities aspect of variable lines, compliance management for individuals who sell these products involves an additional level of oversight on top of the already complex state-based regulatory framework the insurance industry operates in.
Just like typical producers, when it comes to onboarding newly recruited variable lines brokers, compliance is a high priority for any organization trying to avoid regulatory mistakes and their associated penalties. But, because these brokers have to meet additional requirements with the Financial Industry Regulatory Authority (FINRA), the onboarding process involves a few more steps. Whether it’s done manually or using an automated solution, the onboarding process for variable lines brokers goes a little something like this:
- Step 1: Collect general information including proof that the broker maintains an E&O policy, background check information, and a W-9.
- Step 2: Get working contracts and approvals between brokers and the entities they work with signed and saved.
- Step 3: Verify state insurance licenses in each line of business and state the broker will sell business.
- Step 4: Verify the broker’s Central Registration Depository number and ensure they have a FINRA registration, have passed a Series 6 or Series 7 exam, and have established a relationship with a broker-dealer firm.
- Step 5: Make appointments in a manner compliant with each state’s specific regulations.
- Step 6: Verify annuity training for states that require it.
To obtain the licensing data and securities information needed for onboarding, variable lines brokers are often subjected to near-tortuous levels of repeat data entry. Not only is the practice of filling out the same information over and over and over again mindless and time consuming for new recruits, but it also doesn’t make a very good first impression of your carrier or MGA.
3 pitfalls of manual compliance
It’s important to remember, broker compliance management doesn’t end after onboarding. Compliance checks should exist throughout the entire variable lines broker lifecycle from hiring to termination and every step along the way. Because of its ongoing nature, managing compliance by hand can be particularly frustrating. We’ve discussed the downfalls of manual compliance management on a few separate occasions, but in case you’re new to our blog, here’s a refresher on some of the major setbacks.
1. Lack of data visibility
As we’ve already established, onboarding new variable lines brokers requires collecting data from numerous sources. From background checks to E&O policies to verifying state insurance licenses and FINRA registration, manually ensuring the information you receive is accurate and up-to-date can be quite the challenge.
Of course, you could always just ask the broker to list all the states they’ve ever been licensed in, but, the reality is, sometimes they don’t even know what’s up-to-date when it comes to their licensing.
2. Poor use of time and talent
A lack of data visibility in the onboarding process means someone on your team is going to be spending a lot of time buried in heaps of paperwork just to validate existing licenses or secure appointments for a new distribution partner. While some organizations rely on compliance teams to manage this, others seek the information directly from the horse’s mouth – their new recruits.
It’s safe to say that variable annuities brokers have enough on their plate without the back and forth of trying to track down the most accurate and up-to-date information. Not only is this frustrating and time consuming, but it’s also a pretty poor use of your new recruits’ talent. These individuals should focus on building relationships and selling products, not going on a wild goose chase just to onboard.
3. Increased chance of human error
When locating accurate, up-to-date broker information involves navigating between multiple different spreadsheets, paper files, online databases, and more, the chance of human error increases significantly. Especially when the data is being transferred from one source to another by hand.
It’s vital that variable lines brokers maintain accurate records due to the additional level of oversight involved in selling variable life insurance and variable annuity products. But the reality is, the more human hands you have touching your data, the more likely information gets overlooked or entered incorrectly.
Increase data visibility with a single source of truth
If you’re having trouble tracking down accurate, up-to-date information throughout the onboarding process, don’t rely on your new recruits to do the heavy lifting. Instead, consider a modern solution that can provide real-time broker information from a single source of truth at the click of a button.
Through automated dually licensed communications, you can eliminate data silos for your internal team and ensure your brokers have access to real-time, accurate information the first time around.
Not only can an automated compliance management solution validate your data to ensure accuracy, it also takes the repeat data entry out of onboarding by allowing brokers to submit all necessary documentation in one central and easily accessible self-service portal. Your variable lines brokers will be much happier when they can spend less time on data collection and more time doing what they do best.
Plus, with less figurative and literal touches throughout onboarding, you can rest assured you’re not increasing your risk of human error or oversights. Talk about making the whole process a lot smoother and more efficient for everyone involved!
Prioritize actionable data throughout the entire broker lifecycle
Increasing data visibility in the variable lines broker onboarding process is just one of the benefits of investing in an automated compliance management solution for your carrier or MGA/MGU. To ensure you’re protected from risks, ongoing compliance maintenance should be a priority throughout the entire broker lifecycle – from onboarding to termination.
Having full visibility into your broker data is important as you work to verify licenses, track continuing education requirements, and renew carrier appointments. AgentSync Manage offers a consolidated view of broker eligibility that unifies Financial Industry Regulatory Authority (FINRA) and National Insurance Producer Registry (NIPR) data into a single profile.
If you’re ready to increase your data visibility and decrease your compliance risk with effective, efficient, and ongoing compliance support at every step of the broker lifecycle, book a demo and find out how AgentSync can help.