question-mark Are there ethical obligations to communicate the insurance industry's legislative and lobbying positions to your clients? Should insurers and agents impose their political views on customers because they believe the changes are ultimately in the best interests of clients? Check out the response to the latest column by NU's ethics columnist, Peter R. Kensicki, and offer your own views on the subject right here.

In his latest column, “A Question of Ethics,” in NU's March 15 edition, Mr. Kensicki wrote the following:

The majority of those responding to these questions see no ethical responsibility to communicate legislative positions to clients–although many think it is a good idea to do so. However, the majority also believe lobbying should be done only when the proposed changes directly benefit clients.

“There is no need to tell you're lobbying. No ethical issue at all,” said one Minnesota agent. “However we should not push an agenda unless it directly benefits clients.”

A property underwriter agreed: “We all have the right to be active in the legislative front. We have no ethical obligation to disclose this to any of our clients. In the end, we will not make the final decision. That is for the legislator or regulator.”

A Utah risk manager, who has also held positions with insurers and brokers, noted: “I have been there. I know and understand the various perspectives. I don't believe insurers and agents have an ethical obligation to communicate their positions.”

As to imposing their views on clients, the risk manager wrote: “A company and its executives have a duty to act legally, morally and ethically to foster the interests of their company. If the interests of the company and client diverge, the higher duty is still to the company. The clients have their own resources to protect their interest.”

A university professor slightly disagreed with the risk manager: “As a general rule, there is no obligation to divulge political activities to a client. However, if in an issue, the interests of the client and the insurer or agent diverge, disclosure would be important. Where a client's interests are affected, the client should be grateful to be informed and grateful to be given the means to affect the outcome.”

An insurance company administrative manager did not believe disclosure was required: “An insurer has no obligation to disclose to customers their political positions and lobbying activities. Insurers should have a strategic focus on pursuing legislative actions that will better the industry, company and ultimately the consumer.”

An insurance ethicist wrote that “while I think insurer and agents should disclose their position on issues of interest to their clients, they do not have an obligation to do so. In the interest of transparency and open communications, it is a good idea.”

Two strong responses in favor of disclosing legislative positions were put forward.

A Kentucky agent and former registered lobbyist and risk manager responded that “agents must talk to their clients about these issues. I would demand that my agent keep me informed of any legislation that may impact my business. Canon 1 of the CPCU Code of Professional Ethics states, 'CPCUs should endeavor at all times to place the public interest above their own.' This should apply to all insurance professionals.”

An author of insurance texts and retired consultant also cited the CPCU Code with his response favoring disclosure: “I subscribe to Canon 7 of the CPCU Code, 'CPCUs should assist in improving the public understanding of insurance and risk management.' This should be an ethical obligation of all insurance professionals.”

He added that “our challenge is in clarifying issues for our clients, not staking out a position. It behooves us to explain the reasoning behind various positions as objectively as possible, and then describe our own position and what we are doing to promote it.”

An employee of an insurer was also in favor of disclosure: “Forwarding a company legislative agenda may well be in the best interests of the consumer. If a proposal will be beneficial, or at least less harmful, such as reducing the need for some rate increase, reducing potential for insolvency or making insurance more available, the position should be disclosed.”

This respondent added that “if legislative views are presented fairly and explained fully, a customer has the ability to support, oppose or ignore the call to legislative action. We have that 'utmost good faith' obligation to protect our customers' best interests, and that means legislatively, too.”

Most responses dealt with the ethical nature of lobbying efforts and how it should involve clients.

A former lobbyist and residual market manager asked: “How could you find involving customers unethical? If an insurer or agency can show their clients how a piece of legislation will negatively affect them, it is in the interest of the client to involve the client and take action. Most clients need those of us in the insurance business to monitor legislation and give information to the public.”

A Florida agent noted: “I believe most people do not know what is best for them in regards to insurance. I like to think I push for the side that will be the fairest and most beneficial to the greatest number of people. By illustrating how a proposed bill will affect our clients, we show we are operating in their interest.”

The administrative manager quoted earlier warned that “if the lobbying activity strictly benefits the insurer only, it may be unethical. Our efforts must ultimately benefit the insurance business and its customers.”

The agent and former risk manager concurred: “We must put pressures of self-interest aside and determine what is best for the client. We must then inform and seek to involve the client.”

An association executive responded: “I do think we should be allowed to enlist the aid of customers in legislative decisions that impact those customers. If done with transparency, it contributes to our ability as a society to make good decisions.”

He added that “however, if a change is not in the best interests of our clients, it should not be supported. We need to be able to justify our position and we have an obligation to make our perspective known. In the marketplace of ideas, all sides have an obligation to present their cases clearly.”

An Illinois agent strongly believes we must be involved in lobbying, using the health care debate as an example: “I have an ethical obligation to point out what I think is right or wrong with this proposed legislation. Sitting on the sidelines in this debate is unethical. We know the problems, and they must be ethically explained to the public and our customers.”

Another agent used the health care debate to make his point: “There are no one-way streets in ethics. We all must explain our positions clearly so proper decisions can be made. Explanations are the key.”

He added that “no one disagrees with the ultimate goal of health care, but the path to that goal must be made clear. To sit on the sidelines is to fail to meet the ethical obligation of educating the public and delivering a properly prepared product to the marketplace.”

Another agent, and former company employee, noted that industry lobbying efforts on certain issues to help lower premiums many times actually hurt agents and companies alike: “Whenever we go to meet our legislators, we are always taking the position of what is best for customers first. For example, tort reform helps our customers with lower premiums, but hurts us with lower commissions. I could name a dozen things that we lobbied for to help the public at a cost to us.”

Another respondent wrote that “if our positions are really good for the policyholder, we should be able to make our case directly to them. With technology, we should be able to educate our clients on the validity of our positions. If we can't, then maybe the validity of our position is the real ethical issue. For example, if the intent of lobbying is to suppress competition, it would not be ethical.”

One person responding wondered if disclosure of lobbying efforts should fall on others: “What is sufficient ethical disclosure for regulators and the elected officials in control of those regulators? Perhaps it is those people who should disclose every lobbyist's approach and meeting.”

A good summary was provided by an agent from Massachusetts, who wrote that “lobbying is part of the American way to educate elected officials on the effects of pending legislation. I have had many legislators tell me they cannot possibly know all about the issues with which they deal. If we in the insurance business do not help explain the ramifications of pending legislation, who will?”

This agent added that “we better understand the problems that can be created or solved with regard to insurance issues. It is always better to be part of the solution than to have to deal with the results after the fact. Conveying information to customers and getting them involved is ethical. They can decide whether or not to get further involved.”

In review, most believe there is no ethical obligation to communicate lobbying efforts and legislative positions to customers. However, there is an ethical and professional obligation to improve public understanding of insurance.

In addition, lobbying–if conducted in the best interests of customers–is ethical, but it wouldn't hurt to keep clients informed and give them full and complete reasoning for positions taken on pending legislation.

(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. In his next column, in NU's May 31 edition, Mr. Kensicki talks about CPCU's new code of professional responsibilities.)

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