Broker Put On The Spot When An Account Shifts

? What are the ethical responsibilities to the former client of the producer who lost the business, if any?

? Do those ethical responsibilities differ depending on whether the producer has a chance to regain the account?

Producer responses varied, but risk managers were consistent in their replies.

Some producers said the former broker should speak up. An Oregon producer suggested that "if the producer has concerns, he should reveal them to the former client. He could suggest a third party review the new plan. There is a responsibility to the former client for his or her past business."

A California producer agreed: "A higher degree of responsibility lies with existing clients. However, ethics say whether the business can be recaptured or not, there is a ?tail? of responsibility to former clients. I would inform my former client of the potential pitfalls of the new plan."

An Indiana producer reaffirmed a belief that responsibilities do not end when business moves: "Failing to warn could lead the former client to a bad decision. If the client were to find you knew about a problem and refused or failed to warn, that client would never trust you again. You will feel better about yourself and sleep better knowing you did your best for the former client."

A Minnesota producer does not see it as an ethical problem just one of concern for the welfare of those with whom he worked: "I would contact the former client and offer to review the new program. I want both of us to have peace of mind."

An agent association executive also believes it is not an ethical situation, but one that still requires some action: "Assuming serious weakness in the new plan, the former producer could advise caution without going into details. The producer could also walk away with a clear conscience."

However, the majority of producers responding believed that, generally, no discussion of the new plan with the former client was appropriate. An Ohio producer said: "To criticize the plan would appear as ?sour grapes' and reduce the professional stature of the former producer. Thank them for the previous business and ask them to call if the new plan does not work out."

A New York broker, who is also an attorney, stated there was no obligation to the former client, with the exception of knowing solid information that the new broker was involved in fraud or criminal activity on the account: "Perceived bad judgment is not enough. It can be argued that the interests are terminated with the merger."

A Florida producer responded that the former broker "only has the duty to service any outstanding issues from the past relationship and should refrain from offering an opinion on the new direction without all the facts and entering into a consultant's relationship with the former client."

A California producer agreed: "If the producer has the account until renewal, that producer has a responsibility to keep the insured informed, including any inadequacies of the new program. If the producer was replaced by a broker-of-record letter, there is no responsibility."

Another Florida producer warns: "No good deed goes unpunished! There are many ways to develop loss financing programs, and the producer must be sure he or she has all of the relevant information before approaching the customer. But you should always do what is best for the customer. Trust is important."

A Kentucky producer wrote: "I was fired. This eliminates my responsibility for giving my opinion' of what is best for that customer, short of an obligation to report a legal, ethical or moral issue with the program."

Another Kentucky producer offered a different reason: "It would be unethical to discuss the new program with the prior client unless you are asked for an opinion. It would be best to bid on the program in the future and structure the bid to reveal any weakness."

As indicated, a number of producers were uncomfortable with an uninvited attempt to reveal problems or weaknesses with the new program. A common cannon in most codes of ethics prohibits disparaging comments about other people or their organizations as per-se violations of the code.

Both producer-attorneys responding warned that many states have laws against disparagement, with one noting that "unsolicited opinions on the new program could be meddling, and might even rise to tortuous interference."

A producer who was once a risk manager also believes there is no ethical responsibility: "Your opinion is only ?an opinion.' The client has the responsibility to decide what is in its best interests. You may send a letter indicating your cautions, and then, if your concerns were valid, the client may come back. If not, the client will never come back."

Many respondents indicated they would like more facts. A Kentucky producer warned: "Perhaps the new broker's ideas are not so bad or even an improvement. Insurance plans are subjective and the decision should be left to the client."

While producers had different views, risk managers did not. They were all against any unsolicited comments from former producers.

A risk manager for a group of restaurants said: "The former producer does not have the whole picture anymore, and there are likely new nuances. It is the client's responsibility to determine what is best for its own operations." A Texas risk manager for a manufacturing organization agreed: "The former producer's belief that the new program is bad is not an absolute fact."

An Indiana manufacturing company risk manager commented: "The new program may be contrary to the needs of the former client, but that client no longer exists and now belongs to a larger organization with an entirely different risk profile. The former producer has absolutely no idea as to the level of [risk] tolerance of the new organization, nor has he or she access to the underwriting data to be able to make an accurate judgment as to whether the new program is good, bad or otherwise. The only time unsolicited comments may be acceptable is if the client lacks a Risk Management Department or other trained professional personnel capable of evaluation of the plan or if the plan on the surface is blatantly inept."

A Utah risk manager suggests the former producer should discuss his or her concerns with the new broker: "If the new broker is not receptive to the advice, the former broker should notify the new broker of his or her ethical duty to discuss potential problems of the new plan with the client."

While there were varying opinions on whether the former producer should or should not express concerns to the former client, every respondent agreed that if any ethical situations exist, it makes absolutely no difference whether the former producer has a chance to regain the business or not. "Do what is right under the facts and circumstances. Just be sure you know the current facts and circumstances," said one respondent.

Three respondents identified another ethical problem with the scenario. While they all stated it differently, a Minnesota producer said it most succinctly: "The new producer was out of line to share the confidential plans for the client. At worst it is inappropriate and at best it is unethical."

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.

Reproduced from National Underwriter Edition, October 28, 2004. Copyright 2004 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.