I have reviewed the letter to the editor of Ms. Konnelly advocating for orphan clients.My comments were not about orphan clients. Instead of clarifying my words or correcting artful misinterpretation for advocacy purposes, I add my comments about the issue that she raised — orphan clients.
I commend Ms. Konnelly for her advocacy focused on orphan clients. Orphan insurance policies and their owners are a known gap in practice in insurers’ fulfillment of their duty to their clients. The MGA owes no such duty morally or in law, in my opinion. We vehemently agree that orphan clients are victimized by insurers.
There is an urgent reality for so-called orphan clients. When their agent of record abandons them, there is often no incentive for another advisor to take on the risks and duties by becoming their agent of record. If a new agent takes on the risk and obligations of an orphan client for de minimis compensation, then they are doing a good deed, usually contrary to their own business interests.
From the perspective of the community of life insurance agents, these policyholders become “non-clients,” i.e. they are orphaned. The abandoning agent has a continuing duty to provide service, even if that agent is incapacitated, retired or unwilling to provide service. There is no mechanism other than litigation after a loss, and trivial in quantum trailing commissions, that recognizes this continuing obligation. From a practical perspective, the continuing obligation is theoretical, not practical — an unpalatable reality which rightly seems to offend Ms. Konnelly.
Undeniably, no other agent is obligated to serve an orphaned client. The insurers owe them duties, but that is a complex relationship that is better characterized from the trenches as oppositional rather than advisory. If no do-gooder agent steps in, then insurers win. Why? The orphaned clients are left without advice. As a result, these clients are more likely to lapse good policies and less likely to pursue anti-selection options that would benefit them.
My comment about compensation is just the facts, not a commentary on right or wrong, as Ms. Konnelly suggests. I wholeheartedly agree with her point that insurers remain obligated, as mentioned above. But my full-throated agreement does the orphan policy holder no good in practice. That’s the point.
Ms. Konnelly’s comments about ethical demands are well-intended but are general comment. She does not present actionable changes for discussion. We have to accept that insurers are massive companies that are agnostic to ethics while pursuing their goal of profits. As applied to an agent who is not an agent of record, her comments may be seen as misdirected and unfair.
I, as a lawyer, have duties to my clients and my profession and even to a limited extent to non-clients because lawyers have prescriptive ethical duties unlike insurance agents. Still even as a lawyer, I owe no duty to a non-client other than as set by these prescriptive ethical duties.
Life agents are not professionals. They are salespeople who claim to be like professionals without the education, ethical training or ethical rules that are hallmark characteristics of professions. They do not owe the ethical duties to non-clients as implied, but not specifically alleged, by Ms. Konnelly. Should they?
It is aspirational to assert that “tools, technologies and new partnership models” will bring change that helps orphan clients. I see these tools as likely to be used to focus on corporate profits not helping orphan policyholders. I hope that Ms. Konnelly is right and that I am wrong in this regard. Ms. Konnelly does not suggest how these changes give her hope or help the orphan client.
I cheer Ms. Konnelly’s aspirational call for action. While it gives no suggestion or guidance on how the MGA rules will or could help manifest these aspirations, we should all remain hopeful. Even those of us who deal with the frequent tragedies of orphan clients must still have faint hope. For these hopes to be fulfilled, insurers must be forced to ensure quality and non-conflicted advice is provided to their orphan clients. I see nothing in the Canadian Council of Insurance Regulators’ or the Financial Services Regulatory Authority of Ontario’s proposal that consider, address or potentially provide a path to fulfill these hopes.
As for Ms. Konnelly, I commend her for her advocacy and accept that my words can be used to make her separate point. I thank the editors for this opportunity to support Ms. Konnelly while keeping the record straight.
Harold Geller is a lawyer at Geller Law. He specializes in helping investors who have lost money from investments and insurance.