Ethical Issues in the Insurance Industry Jeff Bolling Columbia College Abstract Ethical behavior is crucial to preserving not only the trust on which insurance transactions are based, but also the public’s trust in the insurance industry as a whole. Sometimes the push to act unethically comes from the consumer. How many consumers expect their insurance agents to falsify their applications or claims? You like your agent, he or she likes you, they really want to help you out, that’s just another conflicting loyalty.
Over the years many have experienced unethical behavior by insurance agents. I have had them give their sales pitch to me and my family just to find out later that the product they sold us was completely wrong for our needs and way over priced. Greed seems to play a role and being ignorant of the industry adds to the issues. Sometimes agents get incentives or “kick backs” for promoting or selling certain products.
The products being offered may not even be needed by the consumer but just because it creates a bigger paycheck for the agent they pitch it to you and you buy it.In the following pages we will look at areas that have been identified as critical ethical issues in the insurance industry today. The central ethical issue in the insurance industry centers around money over customer support. Several facets differentiate those who see insurance as a vocation and those who view the profession as a means to a financial end.
If an insurance agent enters into the profession without a strong ethical foundation he may quickly discover that people would rather not do business with him.Honesty in the insurance industry plays a central role in continued success and growth. According to the Insurance Journal, a single dishonest act by an insurance agent can spell doom for his business career and taint his reputation for years to come. Insurance agents and agencies must look at the value of selling clients effective policies that may not net as large a return over selling them unnecessary coverage for short-term financial gains.
An insurance agent must decide whether he wants to dishonestly chase the dollar or treat his clients with honesty and respect.An insurance agent must understand that he works to protect the assets and even the health of his clients. The health and well being of a client and the protection of his assets should play a central role in his thinking. An insurance agent who ignores the needs of his clients in favor of his own financial gain enters into an ethical conflict with the demands of his profession. Ignoring the needs of clients can manifest in the casual manner in which the agent deals with emergencies or the lack of timely processing of claims when the client suffers adverse effects to his livelihood.
An insurance agent in the business solely for monetary gain is nothing more than a mercenary according to the Insurance Journal. These individuals often look at those who purchase policies with them as customers--mere purchasers of goods and services. An ethical, professional insurance agent views policy purchasers as clients--someone who has entered into a support pact with them. Professional insurance agents have an ethical obligation to support clients in the client's time of need in accordance with the client's policy.While the life and property and casualty insurance industries have many differences involving such things as products, delivery systems, company operations, and regulatory requirements, several studies have suggested that the ethical environments of the two key segments of the U.
S. insurance industry are actually quite similar in terms of the key ethical dilemmas faced by those working in either part of the industry. In an effort to gather information regarding the key ethical issues encountered in the industry over time, a survey was conducted in 2010.In each survey, participants were presented with 32 ethical issues and were asked to rate each issue on a 5-point scale where 5 meant it is a major problem today in the property and casualty/life insurance industry, and 1 meant that it is not a problem in the industry today. Twenty-eight of the issues reflected ethical problems facing businesses and their employees in general, whereas the other four were ethical issues of special relevance to professionals.
Issue means were calculated for each issue in each study and the issues in each study were ranked according to the relative size of their means as compared with those of the other issues in that study. Analysis of data from recent surveys indicated that in 2003, the extent to which most of the 32 issues studied were perceived as presenting ethical problems to those working in the life insurance industry had diminished somewhat from the troubled ethical environment during the first half of the 1990s. However, the key ethical issues encountered in the life insurance business changed little from 1990 to 2003.Eight of the 10 issues perceived as presenting the greatest ethical problems for the industry were the same in all three life insurance studies, and one additional issue that ranked ninth in the two earlier studies ranked eleventh in the 2003 study.
Although analysis of this data indicated “an overall increase in the extent to which the 32 issues studied were perceived as having caused ethical problems for the property and casualty industry over the decade,” the key ethical issues encountered in the property and casualty business changed little from 1989 to 1999.Eight of the 10 issues perceived as presenting the greatest ethical problems for the property and casualty insurance industry were the same in both the 1989 and 1999 studies. Comparison of the key issues from the five studies (three life and two property and casualty studies) indicated that there appears to be considerable similarity between the ethical environments of the life and property and casualty insurance industries in terms of the issues perceived by insurance professionals as presenting the greatest ethical problems.The key ethical issues identified in each of the five studies all included the following eight issues, the first four of which are issues of concern to businesses and their employees in general and the last four of which are issues of special relevance to professionals: 1. failure to provide products and services of the highest quality in the eyes of the customer 2.
failure to provide prompt, honest responses to customer inquiries and requests 3. alse or misleading representation of products or services in marketing, advertising, or sales efforts 4. conflicts between opportunities for personal financial gain (or other personal benefits) and proper performance of one’s responsibilities 5. lack of knowledge or skills to competently perform one’s duties 6.
failure to identify the customer’s needs and recommend products and services that meet those needs 7. failure to be objective with others in one’s business dealings 8. isrepresenting or concealing limitations in one’s ability to provide services These findings help to answer the first question raised earlier: The life insurance industry is different from the property and casualty insurance industry, so why look at what it has done in an attempt to improve our ethical environment? “Despite the many differences that exist between the life insurance industry and the property and casualty insurance industry, some key similarities appear to exist in their recent ethical environments, particularly in the general nature of the key ethical issues facing both industries. With these similarities among the key ethical problems encountered in both segments of the U. S.
insurance industry, it makes sense for the Society and others in the property and casualty insurance industry to examine steps taken by the life insurance industry to improve its ethical environment. References: Anne Federwisch/ Ethical Issues in the Insurance Industry www. scu. edu/ethics The Highly Troubled Environment of the Insurance Industry www.
springerlink. com HP Terrell/ Ethical Issues in Insurance www. bmei. org
