FDIC / Retail Insur Sales – What does the FDIC consider when evaluating Board and Management Oversight?

Compliance > Retail Insurance Sales
Q:  What does the FDIC consider when evaluating Board and Management Oversight?
A:   Pursuant to the FDIC examination manual, considerations would include the following:
Consider whether the institution’s board of directors has adopted written policies and procedures for the institution’s insurance sales program. If not, are they needed? Are the policies and procedures reviewed and updated as necessary?
Does the board of directors and management receive and review sufficient information to provide appropriate direction and control of insurance sales?
For retail insurance sales conducted through a networking arrangement with a third-party vendor, also consider whether:
  • The institution conducted an appropriate review of the third party’s qualifications, experience, regulatory history, financial condition, and references prior to entering into the arrangement;
  • The arrangement is controlled by a written agreement that is approved by the institution’s board of directors and contains the following elements:
    ° Description of each party’s duties and responsibilities;
    ° Description of the permissible activities by the third party on institution premises;
    ° Controls for the use of institution space, personnel, and equipment;
    ° Detailed compensation arrangements for all institution and third party personnel;
    ° Requirement that sales representatives are appropriately trained, licensed, and qualified;
    ° Requirement that the third party comply with all applicable laws and regulations;
    ° Authorization for the institution to monitor the activities of the third party and its sales representatives and to periodically review compliance with the agreement;
    ° Authorization for the institution and its banking regulatory agency to have access to such records of the third party as are necessary or appropriate to evaluate compliance;
    ° Indemnification for the institution for potential liability caused by the third party’s sales activities; and
    ° Written employment contracts satisfactory to the institution for personnel employed by both the institution and the third party; and
  • Institution management periodically monitors the third party’s compliance with the agreement.
This Q&A was based on information contained in the FDIC’s Consumer Compliance Examination Manual – June 2018, for Retail Insurance Sales, which may be found here:  https://www.fdic.gov/regulations/compliance/manual/9/ix-2.1.pdf

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