"Life insurance and annuity companies that invest in a strong ethical infrastructure with verifiable policies and procedures have better financial results shown by higher A.M. Best ratings, higher cost and revenue efficiencies. Shareholders (or policyholders for mutual companies) are rewarded with higher profits. They also have greater cost efficiencies including lower costs of regulatory compliance and lower expenses," said one of the study authors, Dr. Martin F. Grace.

"These data show that companies with a tangible commitment to ethical business practices and compliance monitoring show strong financial results."

This is also good news for consumers.

"For consumers, higher financial ratings are the sign of a solid company. Lower lapse rates mean that fewer people are dropping their policies after they purchase them, indicating companies may be better matching the product to the consumer. The startlingly lower complaint index ranking in this study suggests that consumers are more satisfied with companies that have measurable, documented ethics programs," said Grace. "These practices lead to better results for the consumer."

The study, "The Economic Consequences of Voluntary Quality Certification Programs," was conducted by Dr. Robert W. Klein and Dr. Grace as an economic analysis of the value to companies and consumers of a company’s qualification in the Insurance Marketplace Standards Association (IMSA).

According to the study, IMSA-qualified companies are associated with:

• Almost two levels higher A.M. Best ratings
• 4 percent higher Return on Equity,
• 8 percent increase in cost efficiency,
• 3 percent increase in revenue efficiency,
• 27  percent lower legal fees and expenses (an average savings of $217,221), and
• 88 percent lower investigation and policy settlement expenses (an average savings of $632,602).

Conversely, companies that are not IMSA qualified have

• 3.2 - 4 percent higher lapse rates,
• 10 percent higher rate of regulatory discipline, and
• 67 percent higher ranking on the study’s Justified Complaint Index.

An executive summary of the study is available at www.IMSAethics.org.