Are We Making Teaching Insurance Ethics Too Hard?
Our reliance on an ethical framework for decision making impacts almost everything we do as insurance agents and consultants to the industry. Yet we repeatedly witness decisions that lack an ethical basis, and these lapses impact everyone. In the case I will discuss below, one wrong decision impacted the agency’s commissions, the carrier’s premium and possibly the errors and omissions insurance carrier. In this article, I’ll discuss how we can simplify teaching ethics and help embed ethical considerations in all our decision-making processes.
I follow insurance-related social media, and I recently ran across this anonymous post on an insurance social media page that shall go undisclosed. (Apparently, the post was subsequently taken down after over 250 comments, some not so nice.) Here is that question asked by this new agent.
So, I am fairly new to the industry. I sold a client an auto insurance policy. It was cheaper just not to add their 16-year-old son to the policy. I told them they were automatically covered since they are a relative. My customer was very happy to save on his premiums
“This morning, I got a call that the insured’s son totaled their brand new 2024 Audi, and the other party’s vehicle is totaled, and they suffered injuries to multiple people including children.
Am I in trouble?”
You Have Got to Be Kidding Me
At first, I and some others thought it was joke. Sadly, I do not think it was. There were many, many replies, most of them quite scathing. Things like, “Are you mental?” and “You’re in the wrong industry” gave me a good feeling. Although not polite, I knew that most of the agents instantly knew this was unethical and could pose a big problem for that agency.
After reading this, I sent the post to a colleague asking, “Do you wonder why agency errors & omissions (E&O) carriers are nervous?”
He was a long-time carrier employee, and he immediately responded, “So are the carriers.”
We Have Simply Got to Do Better
We have simply got to do better in stressing ethics, in policing (I hesitate to use that word) employees’ decisions and in teaching ethics to our new and even our seasoned learners. Agency owners can no longer assume their employees, especially the newer agents, will behave ethically.
I’ve taught ethics for a few years (more than I care to mention). It is usually a difficult and dry topic to teach. I incorporate case studies, a lot of discussion and a great “pet peeve” session.
Very often, if learners feel comfortable, they will discuss unethical behavior they witnessed that their bosses ignored or, in some cases participated in. When that occurs, it sends a negative message to other employees who “do things right” all the time.
A Simple Way to Teach Ethics
Both my parents and my brother were independent agents, and Rotarians, as am I. Rotary Clubs across the nation usually have at least one agent in their ranks, and it is a wonderful organization for a variety of reasons.
Rotary has a stellar mantra we read at every meeting and that my father posted in our home in my childhood as a reminder. It’s called “The Four-Way Test.”
Let’s take the social media post above and dissect it by the Four-Way Test.
- Is it the TRUTH?
The truth is that the agent should have insisted the potential insured disclose the 16-year-old driver on the application and explained that any teenage driver will be expensive to insure. The subsequent accident apparently caused by the teen highlights the reasons that younger drivers, especially male drivers in some states, create extremely high auto premiums. So, FAIL.
- Is it FAIR to all concerned?
Not only did the agency lose commission, but the carrier also lost a bundle of premium. Additionally, the insured could face a coverage issue with the failure to disclose the young driver. Finally, other policyholders pick up the slack for the premium losses for this type of behavior because we are all supposed to pay our fair share. So, no, this was not fair to all concerned.
- Will it build GOODWILL and BETTER FRIENDSHIPS?
This failure will assuredly not build goodwill and better friendships. There are going to be a lot of people upset if the carrier does its due diligence and ferrets out the details of this application process.
- Will it be BENEFICIAL to all concerned?
The final “no” answers this question. The only one who initially benefited was the insured by saving premium and then laboring under the illusion that the rate would always be so low with that undisclosed driver in the household. It was not beneficial to the agency owner, nor was it beneficial to the carrier or potentially, the E&O carrier.
The Four-Way Test may be an uncomplicated way to teach ethics. Maybe we’re making the teaching of ethics too hard, too complex, or too boring.
Some Recommendations to Avoid Agency Ethical Dilemmas
- Discuss ethics often in your agency. Use case studies to keep people’s interest and let others discuss their situations and their ideas.
- Hire for critical thinking. Part of the problem we have in our nation is that many have never been taught to think critically. Folks, if we can’t tell a fact from an opinion, we have no critical thinking skills, because that is the basis of solid reasoning. Consider pre-screening applicants for their ethical behavior and their critical thinking skills. Don’t assume they learned ethics or critical thinking in school or at home.
- Your agency may not get a second chance with your markets. Once a person in an agency acts unethically, or gives the appearance of an ethical lapse, the underwriter and the carrier team usually paints that entire agency with the same negative brush. Read the conclusion of this article for more on that thought.
- Never assume you can fix every instance of unethical behavior. Some leopards never change their spots. In today’s extremely litigious society, it is better to let that rainmaker go off to greener pastures than to keep them on and face an E&O claim or serious reputational damage. I cannot tell you the number of times I have been told, as a risk management consultant talking to a manager or owner, that, “I should have fired that person a long time ago.” We simply cannot look the other way. The potential cost to our pocketbook and our reputation is simply too high.
These are just a few recommendations for reducing ethical problems in your agency. I’m sure you can think of more.
The Institutes’ Ethics Course
The CPCU Institutes offers a free ethics course to any of those pursuing designations. In fact, it’s a mandatory course before you earn a designation. According to the Institutes website, here is what the course offers.
After completing Ethics 311, you will be able to do the following.
- Build an ethical framework that you can apply to important business decisions and scenarios.
- Recognize and address ethical dilemmas in the workplace to preserve customers’ trust in your organization.
- Determine strategies and practical methods for handling conflicts of interest.
Remember, though, many have no background in ethical decision making. One simply doesn’t become “ethical” through osmosis. We must be mentored, corrected, supported and reminded to seek direction when the action we’re about to take does not match the feeling in our “gut” or conscience.
Most importantly, we must remain open-minded enough to take constructive criticism and seek direction when we are not sure how to act.
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