One insurance commissioner in the Northeast recently denied an insurer a rate increase that would have anticipated a 3 percent underwriting gain. The commissioner’s justification: Given the state of the economy, the insurer should not profit at all.
Naturally, there was no shortage of criticism of the insurance commissioner’s actions. Yet the commissioner’s personal ethics are not at issue here. Rather, the issue is how insurers and their employees should respond to the decision—on an ethical level.
One Georgia employee of an insurer summarizes three possible internal actions: “Take the rate and live with it. Tighten underwriting standards. Cease writing business in the state.”
A Pennsylvania respondent suggests adding procedures to reduce underwriting and claim-adjustment expenses. Such reductions could be accomplished by “freezing hiring, downsizing, limiting travel and education expenses, reducing employee benefits and reducing commissions.”