Integrity and Decisions

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Integrity and Decisions

• Real World Questions In Insurance

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Fact Insurance Agents have Independence/Autonomy

• Many of you are independent-- lots of latitude
• Who gives you feedback, keeps checks your
  motives/behavior?
• Question Do you talk to other agents about what
  you do?

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Responsibilities in Business

• To your Insurance companies
• To Customers
• To employees
• To boss/es
• To your family
• To your community
• To God

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The challenge Balancing Responsibilities
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Key tension in the business

• How do you balance your desire to sell and your
  service to customer?
• This is found in any business
• (AA Enron, Salespeople, Doctors)

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Typical Challenges

• sell client what they need
• know what you are selling
• are they fully covered?
• Are they over covered?

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Why do insurance people do the wrong thing

• Why do they sell client more than what they need?
• Why dont they fully cover clients?

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Lots of Pressures!!!

• Pressure from Boss
• Pressure from Vendors
• Pressure from Clients
• Pressure from personal situations
• Pressure from performance expectations
• Pressure from fellow employees

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Moral Decisionmaking

• How do you decide the right thing to do?
• How do you help others to make right decisions?

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CPCU Society Ethics Code

• Specified Unethical Practices
• 1.To violate any law or regulation duly enacted
  by any governmental body whose authority has been
  established by law.
• 2.To willfully misrepresent or conceal a material
  fact in insurance and risk management business
  dealings in violation of a duty or obligation.
• 3.To breach the confidential relationship that a
  member has with his client or with his principal.
• 4.To willfully misrepresent the nature or
  significance of the CPCU designation.

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CPCU Ethics Code (contd)

• 5.To write, speak, or act in such a way as to
  lead another to reasonably believe that the
  member is officially representing the Society or
  a chapter of the Society unless the member has
  been duly authorized to do so.
• 6.To aid and abet in the performance of any
  unethical practice proscribed under this Section.
• 7.To engage in conduct which has been the subject
  of a presidential or Board of Directors directive
  to cease and desist.

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CPCU Guiding Questions

• Questions to help decide if the situation or
  decision has ethical dimensions
• Is it legal but unethical?
• Is it necessary?
• Does it involve a core ethical principle such as
  honesty, integrity, truthfulness, etc.?

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Guiding Questions Info

• Information gathering questions
• Who are the stakeholders and what are their
  rights?
• Consider the source, reliability, and accuracy of
  all relevant information.
• Who should be involved in this decision?
• Do I have enough information to make a sound
  ethical decision? If not, how do I get it?

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Guiding Questions Options

• Questions to help identify and evaluate
  alternatives
• Am I rationalizing to justify what I want to do?
• Am I using anyone for my own personal gain? (Who
  will be injured and how)
• Are there conflicting loyalties to stakeholders?
• What would result in the long run if everyone did
  this?

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Guiding Questions Conclusion

• Questions that help in reaching a decision
• Could I defend my position before the Board of
  Directors, the CEO, or the media?
• What would ______________________ do? (Fill in
  the name of the best role model you know.)
• Will this seem to be the right decision a year
  from now? Five years from mow?
• Do I have the moral courage to take the more
  ethical course of action? (Am I willing to pay
  the price for my convictions?)

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Example

• In discussing a premium quote with a customer,
  you ask them to remind you how far they drive to
  work each way. Oh, 5 miles, they say. You
  know that they live 15 miles from the town they
  work at.
• How do you handle this?

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Example 2

• You explain to a client what the minimum coverage
  entails on their policy. They say that they
  only want the minimum. You know they have quite
  a lot of assets and probably should protect
  themselves more. What do you do?

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Submitted Example

• An employee in a small department becomes aware
  that the representative for one of the vendors
  being considered for a contract is the relative
  of their Vice President.  The VP does not give
  any indication this is a relative. Our company
  policy requires clear disclosure of relationships
  with external parties.This appears to be a
  conflict of interest, but if the employee reports
  it, the VP will know it was reported by one of a
  very few people in their department.  How should
  the employee handle this situation?  Even though
  our company has a strict "no retaliation" policy,
  there are bound to be some hard feelings, but the
  employee is uncomfortable dealing with this rep.

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Submitted Example

• The company, either publicly traded or private,
  has a statement publishes its ethics policy on
  the public portion of its website.  The policy
  includes a statement that the company will follow
  all applicable laws.  However, executives tell
  management that the goals must be met (sales,
  revenue, etc.) and imply or sometimes even
  directly state that if legal requirements have to
  be bent or even broken to achieve the goals, then
  that is what management is expected to do.
   Executives only state this verbally nothing is
  in writing.  In this environment, what options do
  ethical managers have?

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Example

• We are always competing for customers with other
  agents. Sometimes when we are filling out a
  clients info we will leave some things vague, or
  ask questions in such a way that we wont need to
  find out about potential problems in short, we
  dont lie, we just dont try too hard to find the
  truth

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Case Example

• Talk about being in the right place at the right
  time! One of your small restaurant accounts has
  been chugging along for years with fairly level
  sales. But due to new building development
  nearby, that restaurant is suddenly one of the
  hottest spots in town. Her sales are going
  through the roof, and every Friday when you stop
  for lunch, she is beaming ear to ear at the
  crowded dining room. On the one hand, you are
  happy for her new-found success. On the other,
  you are dreading renewal time. You know that when
  the carrier finds out about the much higher sales
  figures, it will do an audit that will make her
  head spin. Youve tried to prepare her for it,
  but since shes never had to pay an additional
  audit premium in the past, you arent really sure
  she has gotten the message.

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Case 1 continued

• Renewal time comes and goes, and lo and behold,
  no audit appears. You drop an e-mail to the
  underwriter and ask where the audit is in the
  pipeline. To your surprise, the return e-mail
  says that past audits have generally revealed
  that these types of accounts generate
  insufficient additional audit premiums to justify
  the resources and effort. So the carriers
  position is now simply to close the policy year
  on these accounts without an audit. As you read
  the message on your computer, you find yourself
  with mixed emotions. Your client just caught a
  major break, but you also know the carrier is
  leaving a lot of money on the table. Whats your
  next step?

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Case Example 2The Life of a Field Underwriter

• One of your top agencies is positively salivating
  at the next trip your company is sponsoring. But
  there is one fly in the ointment. In addition to
  the increase in property and casualty premium
  required for the agency to qualify, your employer
  has added a life requirement. While minimal, the
  rule has been handed down from on highno matter
  how much PC the agency writes, without at least
  one life insurance application during the
  qualification period, the agency isnt going. You
  cant believe that in an 18-month period, an
  agency of this size hasnt written a single life
  insurance policy with your company, but this one
  hasnt. When you called and asked about it, the
  agency told you quite clearly that your companys
  life insurance policies are among the worst in
  the business, and they cant ethically place any
  of their clients with you when the agency has
  other carriers with vastly superior life
  products. Besides, they find it hard to believe
  you would disqualify them from the trip
  considering the amount of PC they place with you.

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Case 2 continued

• While relating this tale to one of your
  compatriots, he suggests a simple solution. Call
  them up and tell them to write a policy on YOU.
  When you question the wisdom of this, and also
  point out you really dont need another life
  policy, your compatriot responds, Okay, then you
  tell them they arent going on the trip. Look, a
  couple of my agencies were in the same boat, so I
  bought policies from them. Nothing extravagant,
  just enough to qualify them for the trip. Once
  the trip is over, Ill drop the policies, with no
  harm done. You know they deserve to go, and our
  life products are pretty lousy. Why punish the
  agency for doing the right thing by their
  clients?
• You have to call the agency. Are their trip plans
  dead, or do you get a life?

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Example

• You are applying for Long Term Care Insurance on
  December 7. The agent asks you birthday which is
  Nov. 4, 1947 making you 59 years old for rating
  purposes. Your agent says, if the birthday is
  within 30 days of the application date (so no
  earlier than Nov. 8), agent can use prior year
  (58) for rating purposes. Agent says, heres what
  Ill do since youre so close to the cutoff. I
  dont send my applications in until the end of
  week, well just date everything December 4 and
  well be OK.
• Do you sign the documents with the actual date of
  application December 7, or do you take advantage
  of the agents offer and date everything December
  4?

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Case 3 Matching Siding?

• These hail storms are enough to drive an adjuster
  crazy! As you pull up to the umpteenth house
  turning in a claim from the most recent
  golf-ball-size bombardment, you can already tell
  whats coming. You can see from the driveway that
  on the front and one side of the house, the
  siding looks like its been hit by grapeshot
  fired from a cannon. It will definitely have to
  be replaced. Walking around the outside of the
  house with the owner, you note the other side and
  back seem untouched. You tell the owner you can
  approve replacing the two damaged sides, but
  there will be no need to pay anything for the
  other two. But wait a minute! the owner cries.
  This siding goes back a few years.

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Case 3 Continued

• There is no way those new sides are going to
  match the old ones. If they dont match, my house
  is going to look stupid. And I know folks who
  tried to sell their homes with siding that didnt
  match, and they took a huge hit on the selling
  price. So it seems only fair that you replace all
  four sides. After all, every bit of this problem
  was caused by the hail storm. You understand his
  problem, and in fact, find his argument
  reasonable. The policy speaks to replacing
  damaged property only. While the argument as to
  whether siding which no longer matches is
  considered damaged is one often debated by
  coverage experts, the basic insurance principle
  of making the insured whole certainly favors
  the owners viewpoint. With all the hail damage
  in the area, you know no one will question your
  decision on this claim. What do you decide?

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Case 4 Who shall pay?

• You cant believe what you are holding in your
  hand. This should have been the simplest claim in
  the world to pay, but not any more. 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. When you
  check with the underwriter, he claims the agent
  asked for the policy that way. When you call the
  agent, she tells you she just asked for the
  typical policy.

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Case 4 continued

• So one of them made a big mistake, but you dont
  know which. All you know for sure 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 EO. Some days you
  just hate this job!
• Do you decide not to punish the insured for the
  mistakes of others? Or do you follow the clear
  language of the policy you are holding?

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Personal Scenarios

• Learning from each other Some personal scenarios!

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Final Thoughts

• Often, doing the right thing is clear, even if
  its not easy
• We tend to cut corners for short-term apparently
  inconsequential issues, but this can come back to
  haunt us
• Having Ethical Habits takes practice, and some
  thoughtfulness.