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Our efforts to respond to “Focal points in relation to further enhancement of Compliance and Risk Management Readiness in Captive Agency Channel” 

06 26, 2023

Manulife Life Insurance Corporation

1. Background

“Decision made easier, Lives made better” is the Manulife’s mission to help customers to have a great life. We have deployed various efforts for customers to make a decision in an easier and more clarifying way in this complex social environment.

We have advanced measures to improve Compliance and Risk Management Readiness in our PA Channel to deliver our commitment to “Customer-oriented business operation” by enhancing the effectiveness of the Board of Directors’ Meeting and fostering a “culture of compliance over sales”.

In February, 2023, the Life Insurance Association of Japan (LIAJ) issued “Focal points in relation to further enhancement of Compliance and Risk Management Readiness in Captive Agency Channel*1 (“the Focal points”) to support each life insurer to continue dealing with individual customers with sincerity and fulfilling its public mission.

 

Six points described in the Focal points (extracted from the material issued by LIAJ)

 

In addition to the above, the Focal points indicate the understanding of three factors to trigger the risk of inadequate activities (i.e. Fraud Triangle of motivation, opportunity and rationalization).

Manulife’ PlanRight Advisors (“PA”) engage in daily activities in a way to be considerate of the feelings of customers and serve customers’ best interests. We have promoted improvement of our readiness taking their effort into account. In what follows, we report the status of how and what we have achieved based on the six points and 16 principles to pay attention to:

*1”Focal points in relation to further enhancement of Compliance and Risk Management Readiness in Captive Agency Channel” issued by LIAJ
https://www.seiho.or.jp/info/news/2023/20230217_1.html

 

2. What & How we have achieved so far

(1) Compliance and Risk Management Readiness

“The Focal points” (extracted from the materials issued by LIAJ)

“Compliance and Risk Management Readiness” indicates how each company has created its organization and culture as the foundation of the business operation. Companies are required to build and maintain healthy Compliance and Risk Management Readiness including the philosophy and values to share, a solid organization to implement effective control measures, among others, to respond to customer confidence and deliver a feeling of assurance as the captive agency channel has a strong trust relationship with them.

Based on a principle of creating ”Compliance over Sales Culture”, we work together company-wide to transform our culture without fail. The management continue to deliver a message to its people to implement “Do the Right Thing” as one of the company values.

 

<Major actions taken>


 Principle ① The management stance and its leading roles
  • The management delivers a message titled “Taking the Right Course of Action” to all employees and speaks to them directly at Townhall and other meetings.
Principle ② Managers’ roles in the sales organizatio
  • Managers of territory, branch and sales offices take a key role in compliance education and PA training at each responsible office to penetrate the importance of compliance in the entire sales force. HO’s staff in charge of compliance is deployed to territory offices or other offices to oversee and work together as a liaison with HO (the management).
Principle ③ Efforts to foster better corporate culture
  • We describe “PA Principles” with the rules and standard that PA are expected to live up to in the “PlanRight Advisor Passport” they carry at all times. They present them to customers in solicitation and make our sales philosophy well understood.
  • We conduct the Pulse Survey regularly to check how “corporate culture transformation” spearheaded by the management has progressed. Then, we take necessary measures to address issues based on the results.
Principle ④ Build “a management structure with three line of defenses”*2
  • We urge the sales organization to enhance compliance efforts in a self-directive way as the risk owner. We have established Compliance & Risk Management Readiness composed of Compliance Dept. and Risk Management Dept. which are in charge of managing, monitoring and coaching sales organization, and Internal Audit Dept. which is responsible for making objective assessments and providing recommendations to them.
  • Manulife is a company with nominating committee, etc. The Board of Directors’ Meeting including external board members ensures to improve the internal control system. While Audit Committee monitors the internal control system to see if it works sufficiently or not, aiming to enhance corporate governance.

 

*2 Risk Management Readiness comprises operation departments such as the sales organization (the 1st line), Compliance Dept. and Risk Management Dept. (the 2nd line) which keep sales organization in check and support them, and Internal Audit Dept. (the 3rd line) which is in charge of auditing to see if the 1st and the 2nd line of defenses are functioning effectively or not. We also have the 1.5th line of defense in between the 1st line and the 2nd line of defenses.

 

(2) Compliance and Risk Assessment 

“The Focal points” (extracted from the materials issued by LIAJ)

“Compliance and Risk Assessment” makes an assessment of inherent risks to own business, the degree of impact and frequency of preventable inadequate cases. Each company is required to assess risks according to the company’s captive agency channel characteristics and attributes based on the understanding of Compliance and Risk Management to build appropriate readiness in responding to respective risks.

We have established the Compliance Committee with Chief Compliance Officer as the Chairman, comprised of Representative Director and President, and other directors. They discuss and report the status of the monitoring effort and analysis of company-wide quarterly. We have also developed the company-wide “Compliance Program” handled by Compliance Depts. It identifies inherent risks to PA Channel and conducts RCSA (Risk Control Self-Assessment), which are taken care of by Risk Management Dept. and Compliance Dept.

 

<Major actions taken>


 Principle ⑤ Compliance and Risk Assessment
  • Compliance Committee is responsible for a company-wide compliance risk assessment. Compliance Dept. confirms and discusses measures to address issues based on the results, and report to the Board Meeting.
  • PA’s risk assessment is performed on an individual basis. In case that inadequate activities and questionable financial troubles are confirmed, monitoring is performed for such high risk PA from multiple angles. In addition, we step up management of high risk PA’s activities while implementing individual case management by asking the respective policyholders directly. 

 

(3) Improvement and implementation of control over Compliance and Risk

“The Focal points” (extracted from the materials issued by LIAJ)

”Improvement and implementation of control over Compliance and Risk” are efforts in relation to concreate measures for Compliance and Risk Management based on a control environment and a risk assessment. Each company is required to improve and implement rigid control measures in light of the results of the previously-mentioned risk assessment to prevent inappropriate activities in the captive agency channel.

We take concrete measures to control Compliance and Risk Management from a viewpoint of customer protection. For example, the responsible manager and/or supervisor confirm customers’ intention to buy a new policy if they have a record of repeated lapse and cancellation or experience of a big loss at the time of SP policy cancellation. Starting last year, we ask a family member to sit down with an elderly customer at the solicitation table and sign the letter of consent, and also impose a strict solicitation restriction based on owned financial asset. Furthermore, PA are banned to receive cash to reduce the possibility of engaging in serious misconducts such as a fraud and appropriation. We step up efforts to improve compliance training, and strengthen compliance and risk control.

 

<Major actions taken>


 Principle ⑥ Clarify operation rules
  • We set up the operation rules in “Insurance Sales Compliance Manual” and others to prevent misconducts which conflict with Insurance Business Act and the authorities’ guideline. We also perform monitoring extensively and check with customers to read a sign of PA’s inadequate solicitation activities.
  • We have banned PA from receiving cash and reduced opportunities of leading to illicit behaviors. We include information calling for attention in our official website and a letter sent to customers, saying that “Manulife employees never accept cash”. 
Principle ⑦ Education and training
  • We conduct compliance training based on actual complaints and past incidents from a viewpoint of customer protection. We identify PA who have insufficient knowledge and understanding as risk employees. Their responsible manager or supervisor checks customers to see if solicitation activities are done appropriately or not.
Principle ⑧ HR and Reward (Award)
  • “Pledge to Customers Point” is introduced to PlanRight Advisor Award to assess how customer-oriented they are. PA who fail to meet the criteria are ruled out for awards. A compliance assessment ranks branches and reveals the results monthly. Branches which rank high in the compliance assessment are awarded. Visualizing the status of compliance assessment item achievements would further cultivate a mindset of not only managers and supervisors but each one of PA, and help them behave better in the field.
  • We reflect Compliance and Risk Management related items more than before in assessing managers/supervisors and solicitors. We have a systematic assessment in place to reflect not only their own performance but managerial responsibility for PA under their supervision in their pay and benefits.
Principle ⑨ Sales staff activity management
  • Branch/sales office managers and branch staff grasp and manage how and what each PA does in the field. HQ Compliance staff who are deployed to a territory office or other manage high risk PA activities.

 

(4) Compliance and Risk Monitoring and response to misconducts (predictor) 

“The Focal points” (extracted from the materials issued by LIAJ)

“Compliance and Risk Monitoring” oversees how Compliance and Risk Management Readiness is improved and functioned including a self-conducted risk assessment and control efforts. Risk situations and control measures’ effectiveness can be changed along with an environment surrounding the business, for example, an increase of remote solicitation activities due to the spread of COVID-19 and advancement of digitalization. To maintain effective Compliance and Risk Management Readiness, appropriate monitoring is required including an effort to gather information of inadequate cases (predictor) under control measures.

PA and contract types (including predictors) with concern over inadequacy are categorized as “Questionable” and monitored. In case that a misconduct and/or an incident occurs, the 1st , the 1.5th and the 2nd line of defenses work together to find out causes and draw out measures to prevent recurrence. They also work with the branch or the sales office concerned to take preventive measures.

We will keep PA in check while making concerted efforts with branch/office managers and entire sales organization to prevent any inappropriate behaviors in advance.

 

<Major actions taken>


 Principle ⑩ Compliance and Risk Monitoring
  • We have a system in place to restrict policies and policyholders with concern over inappropriateness from new business solicitation. Managers or supervisors check risky PA’s solicitation activities fully by calling or vising customers and confirm policies handled by them. Branch staff make a call to policyholders to check policies handled by online solicitation.
Principle ⑪ Respond to a sign of a misconduct (predictor)
  • In case that a branch/sales office identifies inappropriate cases (including predictors), they report to the 1.5th and the 2nd line’s Compliance Dept. immediately as it unifies the management of cases of concern. The 1.5th and the 2nd line of defenses work closely to investigate causes of concern and take preventive measures. As just described, we have developed a structure to prevent inadequate cases in advance.

 

(5) Communication

“The Focal points” (extracted from the materials issued by LIAJ)

“Communication” in this context means efforts in administration readiness and day-to-day operation to deliver necessary information at the right timing both internally and externally. A lack of communication due to an internal environment, etc. can be a hindrance factor to controlling and identifying inappropriate activities. It is therefore required to develop an environment and readiness which foster better communication internally and externally (i.e. customers, stakeholders among others)

<Major actions taken>


 Principle ⑫ Communication within the sales organization
  • As part of a branch/sales office audit, we conduct a PA questionnaire. HO’s departments concerned, the 1.5th and the 2nd line of defenses give the respective manager/supervisor instructions and coaching based on the results.
Principle ⑬ Company-wide communication
  • The management-led Townhall is held quarterly to discuss a wide variety of topics. BDM holds Townhall every month. To create an environment which ensures smooth communication, we ask our people to submit questions in advance and fill in a post-meeting questionnaire. We share the questionnaire results with the management and those in managerial roles. They make a good use of feedback information in running day-to-day business.
  • We also conduct the Engagement Survey for internal staff regularly to understand how well communication between boss and subordinates takes place. We feedback the results to the department concerned.
Principle ⑭ External communication
  • We set up Call Center and the point of contact in the official website for customers to make inquiry. We examine complaints voiced by customers and NPS (Net Promoter Score)*3 which customers are asked to respond upon completion of each procedure. We make a good use of them to improve the quality of our daily operation and deal with any inappropriate cases.
Principle ⑮ Whistle-blowing system
  • The management encourages all employees to leverage the Whistle-blowing service proactively. We have four reporting channels in place which are Compliance Promotion Dept., HR Dept., HO in Canada and the external hotline service. We publicly announce that “each and all channels enforce it rigorously by ensuring the anonymity is guaranteed completely and a person who blows a whistle is protected from any retaliation thoroughly. Thorough and fair investigations are proceeded upon report”.

 

*3 We ask customers to evaluate PA’s job and express opinions following the completion of each procedure to improve our daily operation.

 

(6) Auditing 

“The Focal points” (extracted from the materials issued by LIAJ)

With the three line of defenses, “Auditing” Dept. assumes a role of verifying if readiness and measures taken by the 1st line and the 2nd line in relation to compliance and risks are developed and implemented adequately and effectively, and leading to improvement. To improve Compliance and Risk Management Readiness in the captive agency channel effectively, Audit Dept. is required to play a vital role by understanding the attributes of the company’s captive agency channel and the environment surrounding the business.

To strength the check function of the three lines of defenses, we step up efforts to collect information internally and externally to enrich auditors’ knowledge who are responsible for examining sales activity-related risks. We also hire good talent and develop them as auditors.

 

<Major actions taken>


 Principle ⑯ Auditing
  • As part of offsite monitoring, auditors take part in regular meetings held by the 1.5th line of defense (Sales Compliance & Risk Management Dept.) as observers to collect information. They also have a system in place to check external information regularly.
  • They share information collected as above with the team members and reflect them, when necessary, to a risk assessment.
  • We assign staff with a good knowledge of solicitation related compliance while crafting a training program to develop auditors well-versed with sales activity-related risks systematically.
  • We understand work done by Field Audit Dept. (under the 2nd line of defense, which audits branch and sales offices) and other related administrative departments to verify sales offices operation, and continue discussing a need of additional resources for Audit Dept.

 

3. Conclusion

As described above, we have broadly engaged in the principles included in “the Focal points”. We will ensure enforcement of Compliance & Risk Management Readiness and make a perpetual effort to advance it further.