Sales Practices Your Role in Mitigating Sales Practice Risks

Introduction About This Course Welcome to Sales Practices: Your Role in Mitigating Sales Practice Risks. MetLife’s Sales Practices Policy is based on the principle of treating customers fairly. While you should actively and effectively promote MetLife products and services, MetLife expects each of

us to do so in ways that are consistent with Company values, ethical principles, and policies. This course will answer these key questions: • What are the factors that affect sales practice risks? • What are the key elements when considering suitability? • What are the areas of supervision that can mitigate sales practice risks and ensure high

quality, persistent, and profitable sales?

All salespersons involved in the sale of a MetLife product must contribute to ensuring the quality and suitability of the sale for the customer is met. Knowing MetLife’s Sales Practices Policy, and risks associated with sales practices, helps earn the trust and loyalty of customers, strengthen Company reputation, and encourage customers to return in the future. Sales Practices and Risks Suitability

Sales Practices and Risks Definitions Sales practices and their associated risks take different forms, depending on the nature of the business being conducted. Sales Practices "Sales Practices" means any activity conducted by or on behalf of MetLife in order to influence a customer’s decision to purchase a product. Sales Practice Risk “Sales practice risk" is the risk that a product sold to a customer is not appropriate for the customer’s needs, and would therefore create customer dissatisfaction and may subject salespersons and MetLife to customer complaints and remediation, reputational damage, or regulatory action. In managing MetLife’s sales practice risks, factors to consider include suitability, sales supervision, and sales materials, including digital and social media communications.

Applicable Law Improper sales practices may violate MetLife’s Sales Practices Policy, local laws, and regulations. The Sales Practices policy is a framework of sales practice risks and controls that are customized according to local regulatory requirements in every market where MetLife conducts business. Regulators in local markets may have their own “Definition of Terms” such as Suitability, Supervision, Elderly, or Complaints that may be different from what is mentioned in MetLife’s Policy. Each distributor must meet the higher compliance standards of either local applicable laws and regulations or this Policy. You should also become familiar with the sales practices policy and regulations that apply to products in your market.

Who needs to know this policy? It may seem that the Sales Practices Policy only applies to MetLife salespeople and management involved in marketing and sales but there is certainly more to it than that. The Sales Practices Policy also applies to: All salespeople, anyone involved in the sales process, and all levels of management involved

in marketing or sales. This includes any third party distributors acting on behalf of MetLife anywhere in the world, through the MetLife personnel supervising the relationship.

All associates of the Company who support the sales process, including those in the

underwriting or new business areas as well as marketing or product development personnel who create product sales and marketing materials

Any third-party distributors (e.g., Banks, Brokers, Sponsors, etc.) acting on behalf of MetLife

anywhere in the world, including the MetLife personnel supervising the relationship.

What affects Sales Practices risks? Sales practices and their risks take different forms which depend on the nature of the business conducted by the Company. Sales practice risk depends on the following factors. Product The more complex the product type, the greater the risk of misunderstanding by the customer and/or by the salesperson. Products can generally be grouped into two categories: Protection Products and Accumulation Products.

Product Type Description Examples

Protection Products

Offer protection against a particular risk or group of risks

• Term life insurance • Accident and health insurance • Automobile insurance

Accumulation Products

May have features similar to protection products, but they also offer the customer the opportunity to build cash value inside the product for savings or investment purposes

• Cash-value life insurance • Endowments and variable or

unit-linked products

Customer Different types of customers may present different levels of sales practice risk.

Lower Sales Practice Risk Higher Sales Practice Risk Well-informed and financially sophisticated customers

Inexperienced or elderly customers who must rely on others for information or a basic understanding of insurance and investment concepts

Why is the Sales Practices Policy Important to you? All MetLife sales activities must comply with the basic principle of treating customers fairly. A basic pillar of the MetLife Sales Practices Policy is: Suitability of Sales Suitable sales increase customer satisfaction and persistency, which drives business growth and profitability for salespeople and for MetLife.

Suitability

Definition Suitability refers to the appropriateness of the sale of a specific product or transaction relative to a customer’s needs, financial profile, product features, and benefits. Suitable sales are expected to reasonably improve a customer’s financial situation.

A sale is suitable if the product is clearly presented to and understood by the customer. Some products are more complex and additional information may be required from the customer to ensure the product is suitable.

How to ensure suitable sales?

To ensure what you sell to customers is right for their needs, you must collect certain information from the customer. The amount of information needed from a customer depends on the type of product being sold. Basic protection products like term life insurance or an accident and health policy may require information such as: • eligibility for coverage • affordability of coverage • age • existing insurance coverage A complex investment product would require more information about a customer’s financial situation, risk tolerance, and investment objectives. The customer’s financial objectives should be discussed with the customer and evaluated by the company before the product is issued and the sale is completed.

Knowledge Check When making a recommendation to a customer, what are some of the elements you should consider when determining the suitability of a product recommendation? • Customer’s financial situation and needs • Product features are appropriate for the customer’s needs • Sales commission • The customer can afford the premium payments

Correct • Customer’s financial situation and needs • Product features are appropriate for the customer’s needs • The customer can afford the premium payments

What are the key elements? Here are some key factors to ensure the suitability of sales.

Product Knowledge A salesperson must know and understand the products to recommend and must make all appropriate disclosures to the customer.

Sales to Vulnerable Customers Customers are considered "vulnerable" if they are at a disadvantage in understanding insurance or other financial concepts, such as: • Elderly customers that may need to rely on others for information or a

basic understanding of insurance and investment concepts • Illiterate or undereducated • Ill or experiencing diminished mental capacity • Disabled Vulnerable customers present a higher sales practice risk because they: • May not have sufficient ability to understand product features • May make inappropriate financial decisions • May rely significantly on others for their financial decisions Extra care must be taken to ensure the vulnerable customer understands the product features.

Prohibited Sales Practices Salespeople must: • Follow MetLife’s high ethical standards • Use fair, honest, and transparent sales practices

• Comply with local regulations which may hold MetLife to an even higher standard of care

Disclosures Key features of the product being recommended must be disclosed to the

customer to ensure understanding and suitability. Some disclosures may even be required by local regulations. Depending on the product being recommended, the following disclosure examples will help a customer make an informed purchase decision: • Amount of coverage of the product • Premium amount • How long the premium must be paid • Significant coverage exclusions • Any limits on withdrawing money, including waiting periods and

charges • Other disclosures required by law

Replacement Sales A replacement sale occurs when an existing policy or product is replaced in whole or in part (by termination or surrender) and its premium is redirected or values are used in connection with the sale of a new product. Salespeople must ensure that the benefits of a replacement sale outweigh the advantages of having the customer retain the existing product. If a salesperson uses replacement as a method of selling new policies, regulators may view that as “churning,” which is a prohibited sales practice.

Knowledge Check

What should you consider when reviewing a MetLife customer’s replacement coverage in determining that it is suitable? • Benefits outweigh the advantages of retaining the existing policy • Costs and amounts of new coverage • Existing benefits based on age and health of customer • Surrender charge • Salesperson’s ability to qualify for the sales contest

Correct

• Benefits outweigh the advantages of retaining the existing policy • Costs and amounts of new coverage • Existing benefits based on age and health of customer • Surrender charge

Exam Now that you have reached the end of the course, let’s test your knowledge. You will need to score 80% or better to pass the exam and receive credit for completing the course.

Question 1 of 6 While the final suitability decision for complex products is the responsibility of Underwriting or New Business, the suitability review process begins with ____________. (Select the appropriate answer.) • The customer • Customer service • The salesperson • The sales manager Correct - The salesperson

Question 2 of 6 What are some of the elements that a salesperson should consider when determining the suitability of a product recommendation? (Select All that apply.) • Customer needs • Product features • Sales compensation • Affordability Correct • Customer needs • Product features • Affordability

Question 3 of 6 Depending on the product being recommended, what information would help the customer make an informed purchase decision? (Select All that apply.) • Amount of coverage of the product • Premium amount • How long the premium must be paid • Significant coverage exclusions Correct • Amount of coverage of the product • Premium amount • How long the premium must be paid • Significant coverage exclusions

Question 4 of 6 What should the salesperson consider when recommending that a customer replace an existing policy? (Select All that apply.) • Benefits of new policy outweigh the advantages of retaining the existing policy • Costs and amounts of new coverage • Existing benefits based on age and health of the customer • Surrender charge • Sales commission Correct • Benefits of new policy outweigh the advantages of retaining the existing policy • Costs and amounts of new coverage • Existing benefits based on age and health of the customer • Surrender charge

Question 5 of 6 According to the Sales Practices Policy, which of the following does NOT describe a “suitable product”? (Select the appropriate answer.) • Product premium exceeds customer’s ability to pay

• Product is clearly presented to the customer

• Product is understood by the customer

• Product reasonably improves a customer’s financial situation Correct - Product premium exceeds customer’s ability to pay

Question 6 of 6 Who owns the final decision regarding the suitability of a MetLife product for an individual customer? (Select the appropriate answer.) • Sales Manager • New Business/Underwriting • Salesperson • Compliance officer Correct - New Business/Underwriting

Congratulations! You have passed the exam with a score of XXX%. You will receive credit for the course.

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