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

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

The majority believes it is not a good idea to buy from one's own company, while a significant minority sees absolutely nothing wrong with the practice. A few cited situations where ethics may be involved.

The majority view will be presented first.

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

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

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

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

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

Another adjuster saw implications beyond loss adjustment: “I applaud the decision to not be insured with your own company. How could a CEO sign off on any reduction of rates or broadening of coverage that might benefit their own coverage without being in a compromised position? It would be untenable.” This adjuster saw no negative message implied from not insuring with the carrier you lead–perhaps showing a lack of confidence in your own company: “I see just good common sense. We could use more of it.”

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

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

This same underwriter, however, did cite pressure when underwriting an employee. “Employees did get 'judgmental' breaks. We just sucked it up and moved on.” Also noted in this response was the potential for an unethical purchase if premium breaks–not offered 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's not unethical, but unwise” wrote one. Another commented: “There are good arguments on both sides, but as long as employees get the same treatment as other insureds–no premium breaks or favorable claims treatment–it is ethical.”

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

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

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

A CEO of a residual pooling facility offered four good reasons not to buy from an employer.

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

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

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

o Fourth, privacy must be considered.

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

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

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

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

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

The bottom line is that most respondents believe buying insurance from a company you work for or represent–while not unethical–may be unwise. (See the accompanying infographic for the primary conflict concerns expressed by readers.)

The suggested solution was the universal cure for any exposure–avoidance. Just don't buy insurance from your employer or a company you represent.

However, there are also risks to consider from the other point of view. Those favoring purchase from an employer or represented company cited these reasons:

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

o Not helping the competition to succeed.

o An expectation of better service.

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

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

What Is NU's Next Question Of Ethics?

Insurance regulators are charged with making personal lines insurance widely available. Nothing has undermined the industry's image more over the years than the battles between regulators and carriers over the availability and affordability of auto and homeowners insurance.

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

Please forward your responses to Dr. Peter R. Kensicki at ethics@eku.edu, or mail it to his attention at Eastern Kentucky University, 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 identities of all respondents will remain confidential.

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

Peter R. Kensicki is a professor of insurance at Eastern Kentucky University in Richmond , Ky., as well as a member of the Ethics Committee of the CPCU Society in Malvern, Pa. He may be reached at ethics@eku.edu.

Special Reports /

A Question Of Ethics: Should You Get Coverage From Your Own Company?

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