CAILBA delivers compliance toolboxBy Kate McCaffery | September 21 2011 07:58PM
Compliance for any managing general agency (MGA) is a huge,
multi-faceted task with so many distinct parts it can be difficult
to know where to start.The Canadian Association of Life Independent Brokerage Agencies (CAILBA) has made its mark in this area, and hopes to make an impression on member firms, with its recently introduced compliance toolbox.
The toolbox is the first part of a four-phase plan to give members access to compliance and due diligence policies, procedures and advisor agreements that are generic and in sync with those used at other firms across the industry. The toolbox itself was rolled out in late May at CAILBA’s annual general meeting.
The kit, the first version of it weighing in around 400 pages, contains six units, all delivered online via CAILBA’s website.
Chris Nicoll, president of regulatory compliance consulting firm, Chris Nicoll and Associates, developed the toolbox kit. In addition to active committee involvement with the Canadian Life and Health Insurance Association (CLHIA), LIMRA and others, Ms. Nicoll’s compliance experience spans 25 years, different business lines and two countries. She worked most recently as the chief compliance officer at John Hancock after working at TD Bank, Merrill Lynch Canada and others.
This experience largely contributed to the swift turnaround and delivery of the program after CAILBA put out its initial request for proposal. Where others could easily have been bogged down during the initial fact finding stages, Ms. Nicoll began work on the project in December and completed it for delivery by May.
She says the work will likely be edited for brevity going forward.
The six units include one on general compliance that comes with instructions on how to use the material and proceed in creating or reviewing a firm’s existing compliance practices, followed by units on anti-money laundering (AML), privacy, market conduct, outsourcing and a unit firms can use with their producers.
Pre-recorded webinars that walk users through each unit are also available, as are checklists, PowerPoint training documents for use with staff and producers, self-appraisal tools and checklists.
The subject order was set in place after conducting a risk-analysis of the regulatory requirements facing member firms, to determine which carried “the mother lode” of risk. “There are some things you can afford to focus less on and other things which could in fact land you in jail,” says Ms. Nicoll. Although companies were primarily focused on market conduct issues and privacy at the time she was tasked with the job, she says, “No MGA is going to jail at this moment for failing to have a written market conduct program. Any MGA who doesn’t have a good anti-money laundering program in place though, is taking some big chances.”
Although compliance staffers often prefer more prescriptive solutions, Ms. Nicoll says the material needs to be worked through and re-worked to suit each firm’s specific circumstances. In phase two of the project, CAILBA is making Ms. Nicoll’s services available to member firms to help them work through the details set out in the toolbox. If a firm requires more than a little help, they are able to contract her services separately as well.
She says working through the program should take the average company at least 18 months. The initial, general guidance unit encourages readers to act with urgency but not panic. The rules apply today and firms need to be serious but, she says, it is also important to be realistic about resources.
Service to members
Paul Brown, CAILBA president and chairman and CEO at IDC Worldsource Insurance Network says offering the compliance toolbox is a natural evolution of the services CAILBA provides to its members. “It’s one of our core responsibilities to our membership,” he says. “I see it as being a very important part of our value proposition. It’s important for MGAs to be united and to build standards that will satisfy the regulators so we are not burdened with an overly regulatory regime on top of us.”
Ms. Nicoll agrees, saying there has been no hint or sign that the association has any interest in taking on self-regulatory duties. “It’s never even been hinted at. The revenue generation would come by way of new membership, I assume.”
“It really is their intention to use this as a means for members to get into standard compliance. It’s also meant to be an incentive for those who aren’t members to strongly consider membership,” she adds. “The burden falls equally to producers, MGAs and insurers. The smallest broker you can think of has the same regulatory obligations as Manulife Financial. They all need to have an AML program, a privacy program. You just go down the whole list and the rules are the same. They apply equally.”
Application of the rules when it is less clear how those rules apply at all, is another aspect of regulation the toolbox is designed to help address. MGAs, for example, are particularly challenged when it comes to implementing AML programs since they rarely have direct contact with customers – the firms are set up to serve producers and insurance companies, not retail clients.
Compliance activities meanwhile, even the effort to simply understand the rules and regulations, can take up a great deal of time. Implementing policies, procedures and educational programs for those in a position of accountability takes even more time; the effort must be undertaken by someone senior enough to be accountable and none of this activity generates revenue or grows the business.
Personality can also be a problem. Those who are well-suited to sales and company growth are rarely the same people who excel at or appreciate working through compliance-related tasks. But in smaller firms with fewer people in executive positions, some will almost certainly need to wear the compliance hat, whether it fits properly or not.
Commenting on the value of the compliance toolbox, Heather Phillips, chief executive officer at Armstrong & Quaile Associates, said “This stuff is golden…I can tell you that when I was learning how to think through compliance it was like pushing me through the eye of a needle. That’s how it felt. It was awful.”
Ms. Phillips describes herself as a positive person who looks for sales people, not negative evidence or negative consequences. “For somebody to step in and say ‘Hey, I’m going to offer you some help’ – it’s awesome,” she says.
“They’re (CAILBA) is offering some absolutely important and valuable things for their members and they’re going to help regulators by being in the space they’re in, which is support, guidance, standardization, training and availability. If they stay in that place of support to the industry, they’ll do really well by their members.”