Academic journal article Journal of Accountancy

What to Look for in an Insurance Professional

Academic journal article Journal of Accountancy

What to Look for in an Insurance Professional

Article excerpt

CPAs often collaborate with insurance professionals to analyze insurance alternatives and develop solutions to personal and business problems, including qualified and nonqualified retirement plans, tax planning, wealth accumulation and estate and business succession planning. In deciding which insurance professionals with whom to work, CPAs must ensure their clients have access to the best possible advice and the best possible products.


The environment in which insurance companies operate has changed dramatically in the past decade. Although the industry today is basically financially sound, buyers of life insurance policies should not take for granted a particular company's continued existence. Nor should it be assumed a life insurance policy's future performance will be as illustrated in a sales proposal.

Due diligence enables insurance professionals to make informed recommendations about insurance carriers and specific policy provisions. An insurance professional's failure to perform due diligence can increase the risk of

* Buying a product that does not meet the actual insurance need.

* Facing one or more unanticipated premiums after payments were expected to stop.

* Actually losing money through an insurance carrier's insolvency.

To properly advise their clients, CPAs must question both the insurance professional and the life insurance carrier. The quality of their answers, and the mere willingness to address difficult questions, can predict future policy service. CPAs need to do more than merely check the ratings of the insurance company an insurance professional recommends; they also need to scrutinize the insurance professionals themselves.


During the 1980s, many insurance agents, mostly large volume producers, became independent, leaving the companies whose products they previously had sold exclusively. To compensate for the market position the former carrier's name provided and the technology that company provided, independent insurance agents had to devise ways to position themselves as trusted insurance advisers. They did so by representing multiple insurance carriers and joining with other independent entities to develop referral networks.

Independent insurance agents bring objectivity to the insurance planning process through access to multiple insurance carriers, enabling them to recommend the right solution to the problem at hand. Many of today's more complex insurance cases are split between carriers to diversify the risk of placing large amounts of insurance with one carrier. Independent agents can accommodate this process and are experienced in managing the underwriting process on multiple carrier cases.


Many of the small business clients CPAs work with use life insurance products for a wide variety of needs, ranging from funding retirement plans to providing the liquid funds necessary to carry out buy-sell agreements. In advising these clients on selecting an insurance professional, CPAs should observe some rules.

Referrals. Network with insurance professionals whose businesses depend largely on referrals from CPAs and attorneys. Ask for references and call them to find out what reputation the agent enjoys with other CPAs and with attorneys. Find out if the agent understands the technical language CPAs use and if he or she has any special expertise that the CPA might not have. One way to judge an agent is the professional designations he or she holds. The best known life insurance designation is the Chartered Life Underwriter, granted by the American College in Bryn Mawr, Pennsylvania.

Client compatibility. Look for an insurance agency that matches the entrepreneurial nature of the small business client. Independent insurance agencies often exhibit the same entrepreneurial culture as the small businesses they work with. …

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