the watch of time

When I was in the financial services industry, one of the client servicing issues I dealt with, on the insurance side, concerned what have been termed ‘orphan clients’.

Such clients came about from departed representatives, tending to fall into a category of not high priority allocation, or at least not priority follow-up. They might be awaiting a trigger for administrative staff to arrange a replacement agent. (These times were on the cusp of tighter compliance expectations.)

When I periodically received such allocations, it seemed there was bound to be some combination of unappealing characteristics to their accounts: distant location from the city, very limited current account value, limited apparent prospective sales, possibly PITA factor. Since time, from our perspective, was definitely worth something, handling hand-me-downs with little expectation of financial benefit could be a tough sell. Of course, sometimes the ability to establish a fresh relationship could open financially worthwhile servicing situations, which I found myself at times. Also, as we would be constantly reminded by management, good servicing could lead to referrals.

The current month issue of The Investment & Insurance Journal features an article focusing on the ‘orphan client issue’. It is estimated that a little over one-third of personal life policy holders currently could be facing this circumstance.

Both regulators and those in the industry are aware of the situation. The Canadian Life and Health Insurance Association has recently released a report advocating that efforts be made to ensure there is ongoing client service; the objective should be “developing an industry guideline that will reflect those commitments”.

Companies with their own sales forces are in position to more readily address the issue than those dealing with independent agents. Moreover, insurance carriers have different standards and practices affecting such clients. A further complication is that many insurance agents are close to retirement themselves, and may or may not be overly concerned about future relations involving certain clients.

Many on the industry side appreciate they need to be more active in the agent transition process, and some are now. Part of the challenge is in determining a fair valuation for a book of business – a growing, ongoing challenge throughout the financial services industry.

Factoring in the existence or likelihood of orphan clients can add a complication to such evaluations.

There is recognition of the mutual benefit in a ‘properly planned transition’, wherein the departing advisor advises the client about leaving, that a new advisor is taking over their account, and possibly arranging a meeting for them; of course, the client(s) may not take to the new advisor.

According to the Canadian Council of Insurance Regulators, “the responsibility for insuring ongoing service lies with the life insurance company that is servicing the policy”. Thus, that insurer should ensure an agent or some qualified staff member should be assigned.

To date, the only two provinces which have addressed this issue within their jurisdiction are Quebec and British Columbia.

In addition to efforts to have a more rigorous system of assigning agents, some companies are offering orphan clients the option of dealing directly with their customer service centres.

It is assumed clients do not want to be tagged as orphan, and that everyone who is a client deserves some level of service.