When I was managing the Manulife Independent Advisor Direct Channel in Quebec, I was contacted by a student who wanted to interview me. This student was enrolled into a college program called AEC Insurance and Financial Services that was supposed to prepare them in getting the knowledge and skills required to become a licensed representative. I accepted to be interviewed because I had questions of my own. I wanted to know what they were teaching at these colleges and whether they were really preparing these students.
Let’s just state that I was astonished by the level of ignorance of these students who could not even tell the two different types of representatives in Quebec. They knew nothing about distribution and could not explain what was an MGA.
So I contacted the college in question offering my time for free telling the college it would be my pleasure to give a presentation on the distribution of financial services.
The college refused my offer. The reason was simple. The college courses were sponsored by Desjardins and Industrial Alliance. These 2 companies were using the college as their recruiting ground for captive agents/attached representatives and it was in their best interest to keep the students ignorant about distribution.
Now the question that I asked myself is how many other areas of the curriculum of teaching financial services do we have the same problem? By keeping the future representative knowledge as low as possible, it is possible for the insurance companies to influence these representatives in selling products that are not suited to consumers?
I believe that the licensing exam is a crucial piece of evidence in determining the level of knowledge of licensed representatives and based on this exam we can state and prove that 30% of the knowledge of insurance representatives is simply wrong.
Let’s continue to review the questions of the life insurance exam that must be taken in Quebec to become licensed:
Question 3
Jacky is single and will be 24 years old this year. He has no one to support. He does not have group insurance. He drives his motorcycle to work every morning.
Which of the following additional endorsements or guarantees should he add to his individual insurance contract?
Exam Choices:
a) Dismemberment and accidental death
b) Accidental Dismemberment and Waiver of Premiums
c) Purchase of paid-up insurance and additional guarantee of guaranteed insurability
d) Term Life Insurance and Waiver of Premiums
Exam answer:
Answer a: Good answer. Jacky’s main risk is to sustain serious injuries or even death as a result of a motorcycle accident.
Answers b, c and d: False. The endorsements mentioned are not as important as the two mentioned in a.
The Right answer:
The right answer is B subject to some conditions. First this type of question is better answered though an essay. If it must be answered through choices, the question should provide more information. An advisor should never recommend and provide advice without having all of the facts. Why should future advisors pass an exam where they are asked to provide advice based on question where critical facts are missing?
First let’s establish a cardinal rule that is not thought but that all advisors should know. An insurance need does NOT usually vary based on the cause of death. If you have a need for insurance for $250,000, your need for insurance does not increase to $500,000 because you have an accidental death versus a natural death. In fact, cause of death is not one of the question contained on a life insurance need analysis. As a result, Accidental death insurance is not a product you need (must have). It is a product based on what you want (may have/may be nice to have).
If the question was to provide stats about the risk of driving a motorcycle, you would find that for every mile driven for motorcycles, there are 114 death and 1675 serious injuries versus 2 death and 19 serious injuries for cars.
The risk of death is insured through regular insurance whether you die in a motorcycle accident or at home in your bed, or in a car… Driving a motorcycle is a serious risk when considering the risk of injuries.
As a result Dismemberment and Disability (through the waiver of premium) are needed. Which one is the most needed? Is one more needed than the other? Based on the question this could not be ascertained. Does the client have disability insurance? Also there are no stats that we have seen that provide information on how many of the serious injuries involve dismemberment or loss of a limb/organ.
Also it should be noted that Dismemberment is usually offer through the Accidental death insurance rider. So while not needed you would have to purchase the Accidental death insurance even if it is not needed.
Still based on the information provide, the right answer is B. The risks of dismemberment and disability are equally important until individual factors are considered.
