Disclosures Fail to Reveal Intent
Nothing matters more than words. They bring utter delight and abject pain. We live and die by them. They bring meaning to existence.
And the insurance business sells them. The deal comes down to the contract spelling out terms and defining the promise. Then there are the disclosures, volumes of words amounting to nothing. If you have ever gone through a financial deal or a real estate closing, you have waded through a meaningless flood of legalisms.
I’ve gone through a few closings and as much as I tried to absorb the documents, I always ended up looking at a lawyer or a broker and asking for reassurance that something means what I think it means. There is just not enough time in the day to read every line, much less understand them.
In person we trust. Even though if push came to lawsuit, it’s the documents we’ll be poring over before a judge, we still want the word of the people who advise us. We want to be able to see the intent behind those words.
I am babbling on with these words because of an article by our own Cyril Tuohy on a Securities and Exchange Commission’s discussion about disclosures. Commissioner Michael S. Piwowar has the very sensible idea of finding out what consumers want from advisors and paring down disclosures to address those needs. The problem is consumers don’t always know what they need and the agency is supposed to draw on its knowledge of what can go wrong and account for them in the disclosures. I think you can sense a vicious cycle whirring to life here: if the SEC throws enough of those into the document, people don’t read them and the thing that they should have known, they do not.
Disclosures and the contracts are only as good as the intent behind them. A faithless partner will find the loophole to laugh at you through.
Agents and advisors, especially in insurance, are excellent at building rapport and trust. That’s why it’s especially galling when someone takes advantage of that position. It is what propels legislators to craft laws and regulators to crack down.
The best salespeople are experts at wielding words. In insurance, those words show up when people are considering their families and future. The responsibility is grave.
Regulation lays out the rules of the game, but cannot stop a cheater until the cheating is done.