In most states an insurance agent has no legal duty torecommend coverage to an applicant for insurance unless the agent,in some manner, assumes that duty (see “Special Circumstances MayMean Agents, Brokers Owe Greater Duties To Clients,” April 18, 2011edition of NU). But the question for this column is: Whatethical responsibilities does an agent have with regard torecommending coverage—and do those duties vary if the producer is abroker?”

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The majority of those responding believe a producer, if he orshe is a professional, has at least two duties: The first is touncover relevant exposures of clients; and the second is to makerecommendations as to the treatment of those exposures. Themajority also agreed that it did not matter if the producer was anagent or a broker—the duties remained the same.

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An insurance consultant wasparticularly strong in his opinion. “Any insurance professional isethically and morally, if not legally, obligated to point out lossexposures to the client. It makes no difference if there is a meansto insure the exposure. If the producer knows of an exposure toloss, he or she is obligated to point it out and documentsuch.”

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Another risk-management and insurance consultant agreed: “Theproducer has superior knowledge regarding the terms and applicationof highly complex contracts. Therefore the producer has an ethicalduty to use that knowledge and skill to add substance and qualityto the customer's purchasing decisions.”

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A slightly different take came from an agents' associationexecutive. “Part of being a professional is sharing expertise withclients. We could hide behind the law, but it would beunconscionable for an agent who calls himself a professional tosimply sell whatever coverage is requested without at leastattempting some risk analysis.”

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A producer from Florida noted, “My clients hire me for advice onthe best way to protect their assets. Ethically I must recommendproper solutions.”

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Similarly, a retired California producer responded, “I do notcare what the law says. Common sense and professional ethics createthe perception that any producer owes a duty of care to recommendcoverages—even those not requested that are in the best interest ofthe client. In simple terms, no producer should be an 'order taker'under conventional market conditions.”

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A regular responder from Minnesota was almost insulted by thequestion. “Attorneys have told us to quote options but notrecommend. I'm in the business of protecting people. I will notlive in fear of an E&O suit. My joy, and my personal duty, isclosing insurable loopholes—and that requires identifying them andrecommending solutions.”

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The Golden Rule came up in a number of responses. For example, aMassachusetts producer wrote, “Remember the Golden Rule: treat theclient the way you would want to be treated. Anyone receivingadvice from a professional or an expert in any filed expects toreceive sound advice with suggestions, recommendations and choicesbased on the experience of that professional.”

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Ethical Exceptions

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A District of Columbia attorney noted, “Ethics is more of adiscretionary, conscience-driven phenomenon. Typically ethicalchoices involve 'multiple right decisions.' Proposing a quote forinsurance requested clearly meets any legal duties and is notunethical. Failing to make a recommendation may well be a marketinggaffe but is no breach of ethics.”

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A property underwriter had this to say: “When a producer trulyrepresents only the insurer, he or she must ethically follow theguidelines of the insurer. Those guidelines may include, forexample, an instruction to not recommend any coverage not availablefrom the specific insurer.”

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In keeping with that exception, some responding did note adifference between those producers in the American Agency(Independent) System and those in the Captive, Exclusive or DirectWriting distribution systems. In the latter group, it was commonlynoted that those producers are “agents” in the true sense of theword as used in the insurance business. They do represent theinterests of the insurer and must ethically follow the instructionsof their principal. However, for producers in the American AgencySystem, according to the agents' association executive, “thedistinction between an agent and broker is meaningless. Anindependent agent should be representing the best interests of hisor her client.” 

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