It’s no longer safe to say ‘safe’ in Colorado
How safe is safe? In Colorado, it appears that the term ”safe” is no longer safe for life insurance and annuity advertisers to use.
A regulatory amendment that took effect on July 1 adds the term “safe” to the list of terms that life and annuity advertisements may not use. Other additions to the list are the terms “secure” and “certificate of deposit or CD.” The prohibited terms list now numbers 19 verboten terms for use in life and annuity advertisements.
The change appears in Section 5.B of the amended Colorado Regulation 3 CCR 702 — 4, 4–1-2. The regulation is based on the National Association of Insurance Commissioners advertising model, with some amendments along the way.
It’s easy to understand the purpose of the change, which is to prevent misrepresentation in advertisements. (Specifically, the regulation says no advertisement shall use the listed terms “in connection with a policy in a context or under such circumstances or conditions as to have the capacity or tendency to mislead.”)
But life and annuity professionals are bound to wonder, how are they to portray the role of fixed life and annuity contracts or policies with various high-demand guarantees in a customer’s asset allocation (or product allocation) without using the word “safe”?
The online Merriam-Webster dictionary defines safe as: “not able or likely to be hurt or harmed in any way; not in danger; not able or likely to be lost, taken away, or given away; and not involving or likely to involve danger, harm, or loss.”
It is likely that these commonly understood definitions are what many insurance professionals have in mind when presenting those fixed and guaranteed contracts as “safe” options for consumers — i.e., “not able or likely to be lost, taken away.”
Some producers do this to distinguish the policies from products having no underlying guarantees or having no protection from potential loss of principal. This has been a national trend for the past several years.
A Colorado press officer tells me that regulators there have encountered problems with the misuse of the words “safe” and “secure,” as well as “certificate of deposit.” Hence, the move to prohibit those words. The department’s position is that “the amended regulation is now strong enough for the Colorado Department of Insurance to consider the use of such terms a violation, and if necessary, to push to the Colorado Attorney General’s Office for further review,” he said.
It would be difficult to find anyone in the insurance industry who objects to prohibitions against the use of misleading language in advertisements and marketing materials. Misrepresentation leads to headaches for all concerned — consumer, agent, company and industry.
But sometimes, regulations like this make more sense if there are qualifiers. This keeps the baby from being thrown out with the proverbial bathwater.
An example can be found in the advertising rules of Federal Reserve’s Regulation DD . The rules say, for example, that an advertisement “may not use the word ‘profit’ in referring to interest paid on an account.” Neither may an advertisement “describe an account as ‘free’ or ‘no cost’ (or contain a similar term such as ‘fees waived’) if a maintenance or activity fee may be imposed on the account.”
Of course, those stipulations apply to advertisements by depository institutions, not insurance firms, but the idea of including a qualifier with the statement is certainly applicable, especially for terms where use is accurate in some cases but not all. I’ve seen similar approaches in insurance regulations.
For now, it behooves industry professionals, compliance experts and other concerned parties to digest the regulation and the implications for their respective businesses.