NEW YORK -- From time to time, a clutch of insurance-agent deceptions spills into the news. Deceived customers seek refunds. Insurance companies pay fines. Agents quit or are fired.
But after the sound and fury die, what happens to those agents whose clients cried foul? Some flee the business. Some are kicked out. But others bounce back into new insurance sales jobs. Maybe the companies chose to give them a second chance. Or maybe they didn't know that the agents had blots on their records.
So-called "company jumping" is one of the industry's sorrier secrets. An insurance agent facing complaints at Company A can jump to a job with Company B with no one usually the wiser. If asked for a reference, the companies merely verify employment. They don't tattle, for fear the agent will sue.
State insurance departments keep lists of agents with formal disciplinary records. To check someone out, call or write the department, located in your state capital. But the public record usually won't include pending actions or customer complaints. Those usually are kept on a separate list, for only the regulators to see. Your agent could come up clean on paper, yet be a weasel underneath.
Contrast this with the way the securities industry keeps the book on rogue stockbrokers. Every broker, good or bad, has a rap sheet on file with the National Association of Securities Dealers (NASD). It's known as the Central Registration Depository (CRD). To check a broker's file, just call your state securities office.
Odds are, you'll find only biographical information. But if there's any dirt, you can count on the CRD to dish it. You'll find out if your broker has ever been fired and why; if any customers have complained; what happened in each case; whether he's under investigation; whether he's been fined.
Some insurance agents also fall under the sway of the NASD. That happens because they choose to sell variable-life insurance and annuities-- products invested in stocks and bonds. For that, TTC a securities license is needed. With it, comes a file at the CRD.
If your own agent has a securities license, there's no better way than the CRD to check him out. There's an eye-popping difference between what your state securities department discloses and what you can get through most state insurance departments. The insurance department may tell you "no problem"; the CRD may reveal an entirely different story.
There's yet another reason for seeing your agent's record at the CRD, if he happens to have one. Securities administrators have been quicker to punish crooks.
To take one example, insurance agents are sometimes caught stealing their customers' funds. The NASD holds hearings and usually bars them forever from selling variable-life and annuities. State insurance departments, however, tend not to follow these cases up, so the agent might keep his regular insurance license. The theft punished by the NASD might not even be entered into the agent's insurance record. Only the CRD file would tell you the risks you run.
A national database exists of all state insurance actions taken against bad agents and firms. Another database covers investigations pending. Neither is open to the public. They're maintained by the National Association of Insurance Commissioners (NAIC) to help with law enforcement. Still, a bad record in State A isn't always a bar to entering State B. Another sorry secret is that agents can readily "state jump," too.
NAIC is trying to speed the states' exchange of information. This month, five states will start using its pilot Producer Information Network -- the first step toward linking state databases electronically.
Within two years or so, most of the states should be on line, says North Dakota Insurance Commissioner Glenn Pomeroy.
Once that happens, a disciplinary action in one state could swiftly be flashed to other states where the same firm or agent has clients. As the system developed, it might -- in CRD fashion -- include current investigations and consumer complaints.
Right now, however, the industry could make smarter use of the data on agents that exists. For example, more insurers should test their new hires against NAIC's rogue-agent list. They should improve the background checks, which may have been skipping important CRD material. And they should investigate their independent agents, who sell for several insurers at once. One agent barred by the NASD told me going independent was the easiest way to work.
You can write to Jane Bryant Quinn at: Newsweek, 444 Madison Ave., 18th floor, New York, N.Y. 10022.