Friday, May 18, 2012

A Pineapple, An Owl and a Pearson Test

In looking at why some communities have access to financial professionals and some do not, CFS has focused on regulatory barriers to entry that may be needlessly limiting entrants into the financial profession. One such barrier we have looked at is the licensing exam.  While a properly calibrated exam is an important part of consumer protection, an improper exam can do consumers and would be professionals more harm than good.

CFS has pointed out a lot of issues with insurance licensing exams, including a lack of  uniformity between states in terms of content, difficultly level and domain weighting.  For exams that measure entrance into the same profession, the tests look remarkably different from state to state.  There seems to be no public policy reason why this should be the case.

We have also noted the existence of curious exam performance data in states like Texas.

In recent weeks, there has been a flurry of attention about the exam used to measure aptitude among New York City's public school students.  According to coverage, the exam was littered with typos, confusing instruction and nonsensical questions. The New York experience is a good reminder that tests and test creators are not infallible.  Mistakes happen, and we ought to be willing to look at standardized tests from time to time and make sure they are doing what they are intended to do.

According to this powerpoint, that is exactly what the NAIC is doing right now with insurance licensing exams.  Stakeholders are engaged in a discussion about what steps to take.  Consumers in underserved markets will benefit if the organization is able to finally bring uniformity to the licensing process.

Any honest look at the licensing tests used today will reveal problems.  Here is hoping regulators finally get them fixed.

Thursday, May 10, 2012


A new study out from LIMRA found that 49 percent of all Americans are not contributing to any retirement plan.  The worst demographic was 18 to 34 years olds.  In this group, 56 percent were not saving.

As Washington, DC, and state leaders focus on changes to how retirement advice is given and received, these numbers should be kept in mind.  There is already a retirement savings crisis.  It is important it not be made worse.

As to why people are not saving, the survey found that:
Nearly half of consumers said they aren't planning to contribute to an IRA because they can't afford to, and only a quarter of Americans have worked with a financial professional to plan for retirement, the survey found.
These answers suggests any proposals that make savings more expensive or experts harder to find move us in the wrong direction.

Friday, May 4, 2012

Interesting Remarks from the LIMRA Chief

Robert Kerzner, CEO of LIMRA, recently spoke at the annual Life Insurance Conference. In interviews before his speech, he touched on Americans declining use of life insurance and how the industry has failed to keep pace with changing demographics.

Key point:
The average age of independent advisors is 52, and the average age of affiliated advisors is 47, he noted. Some of these older advisors continue to be influenced by old ideas about selling that just don’t resonate with younger people today, Kerzner contended.
Part of CFS's work is to make sure regulations in states are not unnecessarily standing in the way of new agents who might meet the needs of consumers today.  With more and more Americans needing financial security, it is important they have access to the individuals who can help.