Filed Under:Agent Broker, Coverage Issues

Cross the Bridge

Don’t wait for an ethics dilemma to decide your actions

Welcome to March, long-time National Ethics Awareness Month for the insurance industry. And by "long-time," we are talking before Enron, Wall Street (the original, not the sequel) and well before any regulator dreamed up the idea of how great it would be to require ethics training.

Forgive my sarcasm, but in my experience the vast majority of agents are honest folks. And by this time of life, it may just be baying at the wind to think any of the criminal minority will go to a 3-hour class and emerge with a head-slapping revelation.

Because you write the product yourself, you are well aware it is comprehensive in coverage and highly competitive in premium. In fact, if you didn’t know the prospect’s business was ineligible for the package, you would have proposed it yourself. The ineligibility does not arise from the prospect, but rather from another occupancy in the same building. You also realize part of the competitive price results from the carrier largely delegating the underwriting of the package to the agency, so there is only a slight chance the carrier will ever inspect the business and discover the ineligibility.

Your competitor who presented the proposal is new to the industry, and you can easily understand how he made such a mistake. The package is clearly a great deal for the prospect, who you believe is not going to understand the underwriting "technicality." You also have no desire to disparage or embarrass the other agent for what is most likely an innocent "rookie" mistake. What do you do?

Applying these three paths to our case above, here are possible considerations:

  1. Situation-based: Even though the carrier may never find out, the prospect has an unfair advantage over other tenants of the building, who are being written correctly. If the carrier does find out, the other agent’s reputation and future ability to place business with that carrier is likely to be impaired, and this account is clearly not worth the long-term damage to a valued carrier relationship. Maybe an informal visit to the agent’s supervisor, whom you’ve long known from serving with your local agents’ association, can settle the entire issue quietly, leading the other agent to withdraw his erroneous proposal without any damage beyond a possible unhappy prospect.
  2. Rule-based: The underwriting rule has a valid purpose, because the other exposure in the building significantly increases the fire hazard. Although the insured may not be happy, the package should never have been offered, and you have an obligation to the carrier to let them know of the error.
  3. People-based: The decision will vary depending whether the "people" you focus upon is the carrier underwriter, the client or the new agent. If the underwriter, you must let him know he is being put on a risk in error. If the client, you want her to know what she may be risking by accepting the flawed proposal and the error is discovered. If you focus on the new agent, it creates entirely different issues: When you were new, you made similar mistakes, and you are certainly glad no one called you on the carpet or took away one of your then few accounts over such an error, so will you just let this one go; or drop by to see the new agent for a bit of experienced advice to withdraw the error before the carrier finds out.

Note that while all three paths will lead to right and honest answers, those answers may be in direct conflict with each other—yet you must choose just one. Which will it be? Which, in your opinion, will build the greatest trust in our industry and your own professionalism? Which will best allow you to sleep well tonight? Which best fits your own beliefs and style to the extent that you have no doubt facing the same basic facts in any future case you will make the same decision, thus building consistency, predictability and trust in yourself and others watching you?

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