Update: Insurance Standards Association to Disband; Life Ethics Forum to Take Its Place

(Corrects information in the first sentence regarding when the Insurance Marketplace Standards Association intends to disband.) The Insurance Marketplace Standards Association has announced its intent to disband in the weeks or months after a vote by its members at IMSA's annual meeting on Oct. 19, and to form a new ethics and compliance organization designed to help compliance officers at life insurance companies with evolving challenges.

The new association, the Life Insurers' Forum for Ethics and Compliance, would work closely with professionals serving the life industry to identify and offer products and services designed to assist their efforts to promote sound ethics and compliance practices, according to IMSA.

IMSA had steadily lost both membership and independent assessors in recent years. Membership is now down to 64 companies, about a quarter of its peak membership, and the number of qualified assessors is down to 15 from a peak of more than 100. In May 2009, membership had been 90 companies. Under the original system, an assessor was an essential part of certification. Each company was allowed to create its own certification process, but it was up to the independent assessor to evaluate whether the process met IMSA standards (BestWire, Aug. 10, 2010).

"We're actually very energized," said Brian Atchinson, IMSA president and chief executive officer. "The reality is that compliance and ethics are more relevant and important now than ever before. The life insurance industry has great opportunities ahead, but tremendous challenges as well."

Atchinson said IMSA leaders are very proud of the accomplishments of IMSA and the life industry over the past 15 years and that, to a large extent, IMSA has fulfilled its original mission. Virtually all companies now have significant compliance teams and are meeting the regulatory requirements, he said.

"Yet there is still a need, a significant need, for both leadership and forums to address the evolving issues of ethics and compliance," Atchinson said. "And our board, our management team and those we talked to elsewhere, strongly believe that LIFEC is the next logical step in the evolution of compliance in the insurance marketplace. It's a new day in compliance. We're excited because this really focuses the energy on what the industry needs and deserves."

Donald J. Walters, IMSA senior vice president and spokesman for the proposed organization, said he anticipates that LIFEC will support IMSA members. "There will be a transition period to allow use of the IMSA logo until we transition to the LIFEC branding," he said. "LIFEC will certainly be supporting the certification process going forward."

Michael Masterson, chairman of the IMSA Board of Directors and chairman of Sammons Financial Group, said use of independent assessors will be up to the new organization.

Ken Kalis, an independent assessor from the beginning of IMSA in 1996, said he is glad to see there's some "forward movement" from a situation that produced a lot of uncertainty for the independent assessors. "We're glad to know there is a vision for the future and that we can be part of it," he said. However, he noted that one of the companies with which he had been working called him to say that due to the news about IMSA, it would not continue with its certification process.

IMSA did a tremendous job in establishing the infrastructure in place today, said Walters. "But as the issues became more complex, the needs of those professionals have grown as well," he said. "We're often seeing that chief compliance officers and ethics officers are looking outside the insurance industry to identify best practices. We want to be supportive of those efforts by also examining practices in other industries to consider whether they may be appropriate for importing into the life insurance marketplace.

"Today, virtually all companies have significant compliance teams and are meeting regulatory requirements," Walters said. "But there is still a need for leadership on the constantly evolving issues of ethics and compliance." Financial services reform will generate additional state-based and federally based regulations that will have a direct impact upon life insurers and their compliance operations, he added.

The IMSA Board of Directors began work on the significant strategic shift in late 2009, said Masterson. He said the initiative came from both the board and IMSA staff to focus more on compliance support and education rather than certification. He said that as with any board made up of bright people, there was lively debate. "Certainly a lot of the staff and the board had a long-term relationship and investment in IMSA," he said. "To some degree, it was difficult for some to see that organization wind down."

Masterson also said he expects the IMSA board to be disbanded at the IMSA annual meeting on Oct. 19, but there may still be some ongoing responsibilities on the part of the executive committee to make sure the transition goes as smoothly as possible.

The IMSA board has recommended establishing LIFEC via a vote of the IMSA membership at the Oct. 19 meeting to permit transfer of IMSA's intellectual property, compliance solution products and services, and staffing resources to LIFEC. The result of the membership vote will be announced at the IMSA annual meeting. IMSA will continue to add value for its members through webinars, summit meetings and other compliance solution activities in 2010. "It will be pedal to the metal between now and the end of the year," said Atchinson of the planned activities.

To hear the interview with Atchinson and Walters in its entirety, go to http://www.ambest.com/media/media.asp?RC=178088.

(By Ron Panko, senior associate editor, Best's Review: [email protected])