The president of a major insurancecompany was quoted as saying: “I don't have insurance with mycompany from a conflict perspective. I just think it's not rightfor me to be insured by my own company.” The questions posed toreaders were: (1) Is this ethical concern warranted, and (2) Howcan any ethical concerns be addressed?

Not one respondent felt it was outright unethical to buyinsurance from a carrier you work for, or from one you represent asan agent or broker. However, there was a strong 70-30 split as tothe advisability of doing so.

The majority believes it is not a good idea to buy from one'sown company, while a significant minority sees absolutely nothingwrong with the practice. A few cited situations where ethics may beinvolved.

The majority view will be presented first.

A CEO of an insurance carrier is not in favor of his companyinsuring him or any of its employees. “Why would you ever have yourcarrier exposed to a loss on your own property? It's not ethics;it's common sense.” This executive notes that his firm does noteven knowingly use the services of its insureds. “Why increase ourliability exposure for our own incurred injury.”

All responding adjusters and adjusting executives agree thatwhile ethical, it is a bad idea. One questioned if all employeeswould be treated the same after a loss. He also noted that theadjuster assigned to an employee loss may be uncomfortableadjusting a colleague's (or a superior's) loss.

From the standpoint of the employee with the loss, the concernwas what reasonable action could be taken against the company ifthe employee was unhappy with the settlement offer. “If theemployee is unhappy, how do they raise the issue?”

A senior claims executive noted: “We in the claims departmentare put in an uncomfortable position when we have to handle claimsof corporate officers or board members. In each instance, potentialconflicts needed to be addressed.”

When these situations arise, this executive places himself “inthe middle” between the adjuster and the claimant officer. “This isnot the ideal way to communicate claims information, but I can'timagine asking one of my adjusters to deny the claim of the companypresident–which we've had to do! I also do not want my subordinatesto experience the pressure such 'discussions' can entail, or havingto choose between either keeping his or her job or handling a claimto conclusion properly.”

Another adjuster saw implications beyond loss adjustment: “Iapplaud the decision to not be insured with your own company. Howcould a CEO sign off on any reduction of rates or broadening ofcoverage that might benefit their own coverage without being in acompromised position? It would be untenable.” This adjuster saw nonegative message implied from not insuring with the carrier youlead–perhaps showing a lack of confidence in your own company: “Isee just good common sense. We could use more of it.”

Underwriters were also generally opposed to the idea of buyinginsurance where you work. “I know many employees of insurancecompanies who won't buy from their own carrier. It avoids potentialconflicts and keeps information private,” said one underwriter.

Another underwriter noted that one reason not to buy from yourown company may be that the employer does not offer the appropriatecoverage for a particular employee. “Maybe your company does notoffer a special program for high-valued homes and associatedcontents. It would make sense to shop elsewhere.”

This same underwriter, however, did cite pressure whenunderwriting an employee. “Employees did get 'judgmental' breaks.We just sucked it up and moved on.” Also noted in this response wasthe potential for an unethical purchase if premium breaks–notoffered to similar, non-employee insureds–were given to employees,or if no commission was charged.

A quartet of non-CEO executives were opposed to the idea. “It'snot unethical, but unwise” wrote one. Another commented: “There aregood arguments on both sides, but as long as employees get the sametreatment as other insureds–no premium breaks or favorable claimstreatment–it is ethical.”

The third had a claim under an employer's policy that soured thework experience. “I asked that the claim settlement proceed asnormal and hoped they would do nothing to interfere with a criminalprosecution. My company screwed up the adjustment, and it resultedin the responsible party getting a lesser criminal penalty. It leftme particularly hostile to my insurer-employer and, in part, led meto leave that employment after decades of service.”

The fourth worked for a carrier that prohibited employees frominsuring with the company because of potential problems if a claimarose. “Just my luck, I got hit in a parking lot by one of ourinsureds and had problems with the claim, anyway.”

An actuary also recommended against buying from an employerbased on a personal situation. “It's a horrible idea to buy fromyour own company. My experience was an accident where my companyinsured both me and the other driver. The adjustment was botchedand bad faith was a real possibility. No employee should ever be inthat position with an employer.”

A CEO of a residual pooling facility offered four good reasonsnot to buy from an employer.

o First, there will be a perception of special claims treatmentfor an employee whether there was special treatment or not.

o Second, it would not be a good idea to have to sue youremployer over a claim.

o Third, any accidental mistakes made in rating that lead to anincorrect discount will create problems–especially if the mistakesare caught during an underwriting audit.

o Fourth, privacy must be considered.

An agent association employee recommends that those in similarsituations not insure with a company supporting their group. “I had'Marx Brothers-type' claim service from an insurer who stronglysupported our association. There was no way to complain. I moved myinsurance at renewal and learned my lesson.”

Agents commenting were split on the issue. Those opposedexpressed comments similar to those from insurance companyemployees. For example: “I want to be able to sue and not beg. Forthe same reason, I won't insure any close friends or relatives. Ican help them better if I'm not involved as an agent for theinsurer.”

Another agent, and former adjuster, replied: “It's commonpractice to insure with an employer or a represented company, butthere is one overriding reason not to–privacy of medical recordsand personal information.”

On the other hand, most agents favored the idea of buying froman employer or represented company. “It would be like the CEO ofGeneral Motors driving a Ford. Your company deserves your loyalty.As an independent agent, should I buy from an exclusive agencycompany? Not on your life! I'll get the best service from thecompanies I represent.”

Another representative answer from an agent was: “Not buyingfrom your own company sends the wrong message. Buying from anothercompany is inconceivable.” Another wrote: “I can't imagine buyingfrom a competitor. I do not want or expect favorable treatment. IfI had to look for a good reason not to buy from my own company, itwould be privacy reasons.”

The bottom line is that most respondents believe buyinginsurance from a company you work for or represent–while notunethical–may be unwise. (See the accompanying infographic for theprimary conflict concerns expressed by readers.)

The suggested solution was the universal cure for anyexposure–avoidance. Just don't buy insurance from your employer ora company you represent.

However, there are also risks to consider from the other pointof view. Those favoring purchase from an employer or representedcompany cited these reasons:

o Not doing so creates a horrible image for the employer'sproduct and services.

o Not helping the competition to succeed.

o An expectation of better service.

This group strongly suggested that the insured employee orproducer not exert any pressure for favorable treatment.

So, what would you do? If you would like to offer additionalviews on this subject, go to Sam Friedman's March 23 blog entry onthis topic at www.property-casualty.com.

What Is NU's Next Question Of Ethics?

Insurance regulators are charged with making personal linesinsurance widely available. Nothing has undermined the industry'simage more over the years than the battles between regulators andcarriers over the availability and affordability of auto andhomeowners insurance.

Are carriers and their producers ethically required to assist inthis effort? What are the ethical responsibilities of insurers andtheir agents and brokers, if any, with regard to providinginsurance to all who approach them for personal lines coverage?

Please forward your responses to Dr. Peter R. Kensicki [email protected], or mail it to his attention at Eastern KentuckyUniversity, 108 College of Business and Technology Center,Richmond, Ky. 40475-3101.

Please identify your role in the insurance business–agent,adjuster, risk manager, etc.–and keep in mind that the identitiesof all respondents will remain confidential.

Please respond by April 13. A column recapping the responseswill appear in the May 25 edition of National Underwriter.

Peter R. Kensicki is a professor of insuranceat Eastern Kentucky University in Richmond , Ky., as well as amember of the Ethics Committee of the CPCU Society in Malvern, Pa.He may be reached at [email protected].