Welcome to March, where we join the CPCU Society and other insurance organizations to celebrate National Ethics Month.
An odd thing happened on the way to this month's article. I had a couple of long-delayed wisdom teeth pulled. To make a long story short: Painful complications ensued, I ended up with a broken jaw that now houses enough metal and cable to supply a Third World country's electrical grid, and at the time of this writing, I'm drifting in and out of a haze of pain pills and muscle relaxants.
So what seemed like a simple, seemingly isolated decision has had a major impact on my wife, church friends, organizations with whom I work and others.
It all reminds me of a class I taught about the concept of ethics and stakeholders. Frankly, the old bromide often cited by ethics seminars that "ethics is what you do when no one else is watching" is a crock.
Someone is always watching in our business—and those interconnected folks whose lives are affected by the ripples of our actions are "stakeholders." To ignore them is to miss a key point of all ethical behavior: that what we do, no matter how seemingly isolated, will affect others, for good or ill, and we must consider them when making ethical choice.
Clients are an obvious example, and the one most cited by regulators when promulgating ethical educational requirements. But this ignores a plethora of other possibilities.
For example, consider a classroom discussion based upon a past case study scenario I've used in my "Street Level Ethics" course, developed with the support of the Insurance Institute of America and American Institute for CPCU:
"You can't believe what you hold in your hand. This should have been the simplest claim in the world to pay, but not anymore. For some reason, of the hundreds of polices you have seen from this carrier on this type of account, this one is totally messed up. The usual endorsements are missing, including the one that provides coverage for this particular claim.
The underwriter claims the agent asked for the policy that way. When you call the agent, she tells you she just asked for the typical policy. So one of them made a big mistake, but you don't know which. All you know is that this insured is being given the honor of paying for the mistake. You know if this account had been handled by standard procedures, the claim would be covered. But you also know that following the policy in your hand means you have to turn it down. If you do, by all rights, the insured should be suing somebody for E&O. Some days you just hate this job!"
Because this case is written from the adjuster's viewpoint, it provides a clear example of how an agent's actions, possibly taken even by the most ethical of producers without any thought beyond what was best for the insured, can severely impact the professional behavior and even job satisfaction of other insurance practitioners.
Yet we find from E&O case files and conversations with carriers and adjusters that similar situations are all too common.
For example, someone may have been careless in processing the application, either at the carrier or agency level. Mistakes happen, but did you ever consider the ethical implications? If your ethical goal is to provide a high level of excellence in serving the public, how well do you think the person who made a relatively minor clerical oversight served the adjuster? And if the carrier messed this up, shouldn't the agency have caught the error when the policy was first issued instead of waiting for it to blow up in the adjuster's face at claim time?
Now, notice the path of stakeholder destruction doesn't stop with the adjuster.
First, if the adjuster's decision is to follow the clear language of the policy—and that would be an honest, ethical choice—isn't the insured about to be adversely affected? And if we have learned anything from Sandy and similar disasters, igniting an insured's anger often lights the fuse for a string of explosions that can wreak havoc on agents, carriers, adjusters, regulators and, of course, anyone politically connected with FEMA.
That's a lot of collateral damage, all from a simple oversight or misunderstanding. Kind of puts a whole new spin on "zero defects," doesn't it? And you thought all this brouhaha over workflow was just an E&O issue!
Many may suggest that because the adjuster knows this is an error, he should take on the mantle of industry savior and, "do the right thing." But what would that be?
To the underwriter, the policy was issued correctly. Where does the adjuster get off arbitrarily putting the carrier at more risk? Carriers often complain that some of their claims representatives can't resist playing Santa Claus with the carrier's money. But isn't that better than an angry insured or a loyal agent left with mud on his face (or an E&O claim in his record)?
Let me introduce you to other stakeholders in this transaction: the carrier's stockholders and/or other insureds. When an adjuster pays a claim that isn't covered, or in a burst of generosity overpays a claim to please an insured (and possibly the agent), that money has to come out of someone's pocket. While everyone, including many politicians, likes to think such extra funds are simply plucked from the overflowing larders of the fat-cat carriers, in reality every nickel a carrier touches has to come from someone else. As the wits like to say, only the government can print money; the rest of us have to earn it.
Likewise, carriers will have to pull those additional funds from some bucket, and that bucket will eventually have to be refilled from additional premiums, lowered dividends, or other sources. The ultimate penalty would be for a carrier to suffer financial losses severe enough to cost its stockholders, lower its reserves and capital base, leading to employee layoffs and possibly insolvency. Along that path the carrier would exit various marketplaces, shrinking the available insurance pool for the public, leading to higher premiums from the remaining carriers. So now add every other agent in the area to the stakeholders.
We haven't even mentioned the impact on the agent if the adjuster sticks to the policy language he's holding. Let me introduce you to yet another stakeholder if the insured decides to pursue recovery against the agent: the agent's E&O carrier. Now add to that specific E&O carrier's costs the potential impact of such claims on the overall E&O experience of certain agencies and states—can you say "rate increase"?
So much for "ethics is what you do when no one is around." The bottom line is we often overlook just how the impact of our individual choices can ripple far beyond our office, staff or clients.
And each thread we have considered here can be extended farther. Consider the impact on the lives of family members of individuals who are directly affected financially by bad or careless decisions. And what of the emotional pain felt by loved ones who have to see their family member endure another brutal day at work facing situations that should have been far more pleasant if someone else had just held up their end of the bargain? To return to my wisdom teeth for a moment, suffice it to say I've become well aware of the pain of those watching you needing those pain pills.
So the next time you hold one of those "simple" insurance transactions like an application or binder, take a moment to realize what else lies in your palm: hundreds of fellow professionals, insureds and just plain folks who have, in some way big or small, a true stake in how you perform your actions and their outcomes. Ethics isn't simply a matter of doing no wrong. The real challenge of ethical behavior is making decisions based upon which of possibly many options is the "most right."
One thing you do when you're in my current condition is distract yourself with old books and movies when you're coherent enough to tell Indiana Jones from Darth Vader. And therein I discovered some ethical words of wisdom for the ages.
There is a key moment in "Indiana Jones and the Last Crusade" when the ancient knight guarding the Holy Grail advised Indy in choosing which was the true Grail that would save them all, or which false choice would bring doom. His words are good advice for us all: "Choose wisely."
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