It's Time To Get 'Personal' About Ethics

However, given a careful definition of "right" and "wrong" and specific facts, almost all employees in any business would not only be able to tell how they would react but also explain why such actions are "right" or ethical, he said.

Underlying the second type of response is that people employed in "routine" jobs have policies and procedures to follow that have been ethically tested over time. Therefore, the majority of their activities fall within the boundaries of the rules and are ethical.

Producers and adjusters, however, work day to day with unique situations. Each insured or claimant presents a different set of facts. It is not possible to make routine judgments in these cases and, therefore, producers and adjusters are subject to more ethically challenging jobs.

One producer was blunt: "The survey must have been taken of a group with a majority of company people. Company people dont see as many unethical or borderline ethical requests as do agents."

The third type of response indicates that when most people are faced with an illegal or unethical request, they clearly know that what is being asked is wrong and refuse to go along. Or, as the corporate attorney cited earlier said: "The usual impermissible demand is outside the values of the individual and is routinely rejected."

The fourth type of response–"others have ethical challenges"–was the vast majority (about 80 percent of responses were of this nature). Given that the question asked for personal situations, this was a surprise. It should not have been.

In an unscientific survey, I looked back through my correspondence since I began writing for NU on ethics and found that about 90 percent of all situations presented for this column were "other" oriented, while only about 10 percent were personally faced issues. "It is unethical for adjusters to receive bonuses," said a nonadjuster. "That producer should not also claim to be a risk manager," said a nonproducer. It is human nature to focus sensitive issues on others.

With those general categories of responses as background, there were a significant number of ethical issues identified–mostly by producers.

One producer notices client requests to present relevant underwriting facts in a "special way." He believes there is an implicit (and sometimes explicit) belief on the part of insureds that there is always another agent or broker who will "bend," make the special presentation, and get the business.

There is also, in the back of the clients mind, the belief that underwriters, under pressure to write business, will "bend" the rules to make an account acceptable or to price it favorably. This producer indicates it is his most consistent ethical dilemma.

Other producers face dilemmas as to what to do with clients that, while not overtly unethical, have an aura or scent of "being sleazy." Producers feel uncomfortable with the risk, but do not have any concrete reason to walk away from the account.

A number of producers have trouble with insurers who use credit scoring in underwriting. For example, one producer noted that his primary insurer had a tradition of looking at an account from a historical perspective. Good relations, along with few or acceptable losses over a long period, meant an automatic renewal.

However, when the insurer switched to credit scoring, it also chose to ignore historical information. "Bad credit is a reflection of overall attitude. Bad credit may lead to looking to a loss to financially bail out the insured" became the insurers attitude. Previously acceptable accounts suddenly became unacceptable due only to a low credit score.

This same producer noted that a second insurer he uses reports that its loss experience with good- or high-credit-score insureds was poor compared to low- or medium-score insureds. Given those conflicting attitudes, he wondered what were the ethics of using credit scoring as the major determinant in underwriting.

Another producer noted that he had, at one time, thought to delay reporting a claim so that his current year loss ratio would not be affected. It was one of those "no brainer" decisions for him as he quickly reported the claim. Others indicate that sometimes insureds, at or near renewal, will ask to delay reporting claims–a similar "no brainer."

Yet another producer faces a dilemma when she strongly believes a rate or premium is too low. "I have obligations to both the insured and the insurer. I would fight with an underwriter if I felt a premium was too high. Do I have the same obligation to the underwriter when I believe the premium is too low?"

As a final producer example, a current agency owner, and former vice president of marketing for an insurer, believes it is unethical for an insurer to court the rollover of a book of business and then, in a couple of years, demand that the agent switch that same business to another insurer. "It doesnt seem ethical to actively seek and reward an agent for rolling over business one day and then threaten and punish that same agent because of the business the company originally wanted." A number of marketing situations present ethical questions.

Insurance consultants were also heard from. One questioned the ethics of seeking legislative prohibition of competitors activities. It was not uncommon, for example, for agent associations to seek laws that would prohibit banks from selling insurance. While these requests were framed by the ethical problems of a lender of money also being a seller of insurance for the collateral, the result would have been a decrease in competition for the agents.

(It would be interesting to research proposed legislation to see if banks have sought to prohibit insurance agencies from loaning or advancing premiums to its clients.)

Another consultant, specializing in litigation, found most personal ethical challenges coming from the attorneys for whom he works.

"Sometimes they suggest a slight change in wording of an opinion that, while not incorrect, introduces an ambiguity into the opinion. But it is always easy to say no and explain why. Personally, the hardest part of this job is to explain why a client seeking an opinion is wrong or why they have no case. But it is part of the job–consulting in a fair, accurate, honest and professional manner."

An employee of a school district risk pool offered this final example. In a previous job, a code of ethics was distributed to every employee. "The problem was very few practiced the qualities described in the book, there was no enforcement of the ethics by management, and there were no repercussions for those acting in direct opposition to the ethics. The effort, the book and the code were meaningless. The firm was unethically practicing its ethics!"

In conclusion, it appears that the survey results of members of the Central Texas CPCU Chapter were and remain accurate. Over 80 percent do not perceive pressure from their employer to perform any act considered unethical.

Other results from the survey indicated that more than 90 percent believe that managers and supervisors provide good models of ethical conduct. The same number believe management would follow up on an ethics complaint.

Over 75 percent believe adopting some type of ethical code would help when an ethical challenge is faced. And, while only 23 percent of those surveyed were producers or adjusters, 54 percent of the group believed they faced more ethical challenges in their work (36 percent believed all have the equal opportunity to face ethical challenges).

Ethical challenges are out there. A slight 2 percent said that for career success, they frequently faced such challenges, but 24 percent admitted to sometimes being challenged.

However, the insurance industry is doing a good job of ethics education. An overwhelming 95 percent believe the business is giving adequate (18 percent) to very good (43 percent) opportunities to learn about ethical decision-making in business.

And that is why we will continue to present these "A Question Of Ethics" columns here in NU. The roots of insurance are deep in utmost good faith. Ethical practices will make our business strong.

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.

Question Of Ethic:

One of the producers responding to this column occasionally has an underwriter say, "See what kind of premium we can get for this account." The producer wonders if this is ethical.

Both the client and the insurer want "the best price," but they do not mean the same thing when they say that.

What do you believe is the ethical response the producer should make when asked to determine the final premium for an account? Does it make a difference if the producer is an agent of the insurance company or a completely independent broker?

Please forward your responses to Dr. Peter R. Kensicki at ethics@eku.edu or Eastern Kentucky University, 107 Miller Hall, Richmond, Ky. 40475-3101. All responses will be kept confidential.

The next column on "A Question Of Ethics" will appear in the July 21 edition of NU.

Reproduced from National Underwriter Edition, April 14, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.