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NAHU

NAHU. Ethics In Business. Why? Maybe it’s because the insurance industry is so highly regulated. Maybe it’s because NAHU makes a point to promote ethical behavior. Maybe it’s because the insurance industry realizes that ethical practices make good sense!

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NAHU

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  1. NAHU Ethics In Business

  2. Why? Maybe it’s because the insurance industry is so highly regulated. Maybe it’s because NAHU makes a point to promote ethical behavior. Maybe it’s because the insurance industry realizes that ethical practices make good sense! Whatever the reason, “Insurance and Financial Services” should be highly credible! Good Ethics is Good Business

  3. Employee perception of workplace ethics rank industries as follows (from best to worst): Insurance Financial Services Business Services Wholesale Trade Technology Health Services Communication Manufacturing Retail Trade Transportation The Good News 2001 Walker Information National Employee Benchmark Study on Integrity in the Workplace

  4. Marc Drizin, vice president and loyalty specialist from Walker Information, attributes the rating for insurance and financial services to two factors: “Both of these industries are regulated and have compliance requirements.” “The success in these industries is dependent upon a company’s ability to build a good reputation in the marketplace.” Ranking the Best to the Worst

  5. Statistics show that one out of every five employees in the insurance industry is aware of at least one ethical violation over the last two years. We still have a long way to go! The Bad News

  6. When insurance and financial services employees were asked to: “Describe the behavior you suspect is or was in violation,” half reported witnessing unfair treatment of employees four in 10 reported improper/personal use of company resources 25% reported lying or intentionally misleading customers What Kind of Ethical Violations?

  7. Half reported lying on reports or falsifying records Half reported lying to their supervisors Four in 10 reported conflicts of interest Any Other Ethical Violations?

  8. Walker Information Vice President Jeff Marr suggests, “Integrity is clearly a top-down value. If senior leaders don’t exhibit the behaviors and decisions of high integrity, the company’s employees aren’t going to go the extra mile to do the right thing.” How Can We Raise The Bar?

  9. Leadership is critical if you want to build an ethical organization (not just CEOs and board members). Ethical leadership can come from any of us. For a collective industry to make significant strides ethically, each employee has to commit to doing what is right. We must do it because it is the right thing to do. Our actions speak louder than words. True or False?

  10. Consider this scenario: You are at a movie, which have just ended. As the person in front of you gets up, you see him drop a twenty-dollar bill from his coat on to the floor. What would you do? take the money and run? say nothing and leave it for the cleaning crew? tap the person on the shoulderand let him know he dropped some money? Would your answer be different if it was a five-dollar bill? How about a quarter? Why Ethics?

  11. You can’t put off this decision till tomorrow. The person who dropped the money is about to leave and be gone forever. There is not enough time to use a “lifeline.” You can’t call a friend or poll the audience. The decision is completely up to you! Whatever action you take or don’t take is a direct reflection of your character! The Moment of Truth

  12. It is defined as the combined moral or ethical structure of a particular person. Character is also defined as the combined principles, values and beliefs of an individual. Some children were asked during a tutoring program, “What is character?” One little boy stood up and said, “It is the stuff inside you” – a simple, but accurate answer? What is Character?

  13. “Professional ethics” is defined as the set of principles or values we use to guide us professionally. “Ethics” is defined as a principle of right or good conduct; a system of moral principles or values; the rules or standards governing the conduct of the members of a profession. Character in Your Professional Life?

  14. Ethics provide guidance when we are confronted with a new or unfamiliar situation. Ethical behavior is critical in maintaining trust between an insurance or financial services professional and the clients he or she serves. A “Code of Ethics” provides guidance beyond just doing what is a legal or regulated practice. Why Are Ethics Important to Our Industry?

  15. Rebating – Splitting a commission or paying a client for his business. Prohibited except in Florida and California and punishable by loss of license. Twisting – Convincing a prospect to let a policy lapse or to surrender a policy so that a competitive company can sell him a new policy that is not in the best interest of the prospect. A Review of Prohibited Practices

  16. Churning – Convincing a prospect to replace a policy with a new policy from the same company, which is not in the best interest of the prospect. Misrepresentation – When during an insurance transaction an agent unintentionally makes statements or presents misleading or false information to the prospect. To avoid misrepresentation, an agent must thoroughly understand the product or service he or she is selling. Many states require the delivery of a “Buyer’s Guide” to protect the prospect. Prohibited Practices

  17. Fraud – Intentionally misrepresenting any information in an insurance transaction. Punishable by fines and/or imprisonment. Failure to Remit Premiums – It is unacceptable for an agent to hold a premium for an unreasonable length of time. Premiums should be submitted to the insurance company at the earliest opportunity. More Prohibited Practices

  18. Some say, “If it’s legal, it’s ethical.” Building long-term relationships means going well beyond what is legal. You have to do what is “right” for the client. Your sense of right and wrong probably came from your family. It is from our families that we, hopefully, learned the basic rules for building relationships and getting along with people. Looking for Guiding Principles

  19. The first step is to look back at the Twelve Great Character Lessons of Youth: Cheaters never win Do the best you can Forgive and forget Be thankful for what you have Sisters are people too (so are brothers) Always tell the truth Be sure to say “please” and “thank you” Don’t forget to clean up after yourself What goes around comes around To give is to receive If you don’t have something nice to say, then don’t say anything at all Treat other people the way you would like to be treated Searching for Principles That Support Long-Lasting Relationships

  20. The second step is to translate our list of personal character lessons into a list of business principles. Translations: Cheaters never win – Don’t deceive or mislead to get ahead. Do the best you can – Always do what is in the client’s best interest. Forgive and forget – Don’t let anger or frustration influence your future actions. Translating Personal Character Lessons Into Business Principles

  21. Be thankful for what you have – Clients come first; prospects come second. Sisters are people too – Clients, co-workers and competitors deserve to be treated with dignity and respect. Always tell the truth – Always tell the truth. Be sure to say “please” and “thank you” – Conduct yourself in a professional manner. Translations (Continued)

  22. Don’t forget to clean up after yourself – If you make a mistake, go back and fix it. What goes around comes around – Your professional success and reputation are the result of the way you conduct your business. To give is to receive – If you provide a valuable service, you will be rewarded. Translations (Continued)

  23. If you don’t have something nice to say, then don’t say anything at all – Before you speak, think about being considerate and respect your client’s confidentiality. Treat other people the way you would like to be treated – Clients, co-workers and competitors deserve to be treated with respect, dignity and compassion, just as you want to be treated. Translations (Continued)

  24. An agent is working on a large life case with an older couple. All of the preliminary meetings with the clients have gone well, and the agent has scheduled a meeting to complete and sign the application. During this meeting, the clients say that they would like to have their son review the proposal. The agent fears that this sort of third-party involvement could cause the clients to become confused and possibly delay the whole process. The agent convinces the clients to sign the application. He then submits the case to underwriting with the understanding that he will send the proposal to the clients’ son for his review… Case Study #1

  25. The agent does send the information to the clients’ son, though not right away. Unfortunately, when the clients’ son calls the agent to discuss the proposal, the agent is unavailable and a little slow in getting back to him. By the time the agent and son finally discuss the proposal, it is too late to make any changes because the policy has already been issued. How should the agent have handled this situation? Here are two suggestions. Case Study #1 (Continued)

  26. Suggestion 1: When the clients bring up their desire to have their son review the proposal, the agent should STOP the application process immediately and schedule an appointment with the clients and their son. Preferably, the agent should set the appointment before the end of this meeting. Keep in mind that the son represents another prospective relationship to develop. If the proposal the agent has presented is in the clients’ best interest and he or she openly shared their thoughts and expertise with the son, they will have created the foundation for a new relationship. Case Study #1 (Continued)

  27. Suggestion 2: The agent can avoid this situation by asking one simple question early in the relationship with the prospective clients: Are there any other advisors you would like to have involved in this decision-making process? This question demonstrates a commitment to the clients’ best interest as well as a willingness to be a partner with the clients’ “circle of advisors.” Remember, the agent’s success is dependant upon his/her ability to build great business relationships; consequently an agent should always be looking for opportunities to meet and serve new people. Always do what is in the clients’ best interest. Case Study #1 (Continued)

  28. Agents “A” and “B” are both independent agents working in the group health market. Agent A has found him/herself in a competitive situation with Agent B three times over the last six months. In each case, when Agent A has met with the prospective clients, it becomes apparent that Agent B has misrepresented the features and benefits of the plans offered by the XYZ Insurance Company. Agent A knows this because he/she also represents XYZ Insurance Company and is familiar with its plans. In two of the three cases, the clients have enrolled with Agent B with what Agent A believes is an unrealistic view of the plan’s benefits. This is very frustrating for Agent A because not only has he/she lost the business, but also he/she believes that Agent B has misled the clients. What should Agent A do? Case Study #2

  29. The appropriate action is not as clear as it may seem. If we keep our focus on building relationships, however, here are some possibilities. First let’s consider the prospective client. Even though Agent A is not the “writing agent,” that doesn’t mean they can’t offer information. Remember, if they provide value, they will be rewarded. Agent A could present the client with marketing materials from XYZ Insurance and highlight the commonly misunderstood features or benefits. This information would be valuable to the benefits administrator. Case Study #2 (Continued)

  30. Second, Agent A could also make their selves available as a resource for future questions or issues. Both of these actions would demonstrate the agent’s commitment to the client’s best interest and develop the agent’s relationship with the prospective client, thus positioning Agent A for next year’s renewal. Next let’s consider Agent A’s possible actions with respect to XYZ Insurance and Agent B. Case Study #2 (Continued)

  31. If Agent A assumes that XYZ and Agent B share thier desire to serve the client’s best interest, and if Agent A is committed to maintaining the integrity of industry he/she works in, here are a few possible actions. First, Agent A could contact the local sales representative for XYZ and suggest that additional training may be needed for Agent B with regard to the company’s plan designs. This action demonstrates that Agent A values his/her relationship with XYZ and is committed to help the company maintain its reputation in the field. Case Study #2 (Continued)

  32. Second, to raise the level of commitment to professionalism in the industry, Agent A could send Agent B information regarding the professional development opportunities provided by local, state or national trade associations (like NAHU). By inviting Agent B to participate in these activities, Agent A is helping to create a healthy and competitive environment committed to serving the client’s best interest. Case Study #2 (Continued)

  33. Life and health agent John Q. Salesman receives a phone call from Bob K., an employee of ABC Corporation. John has worked with ABC Corporation as its group health agent for several years, and occasionally the benefits administrator has referred employees directly to him for assistance. Bob (the employee) asks a few questions regarding COBRA and, during the course of the conversation, he discloses, in confidence, that he is considering resigning from his current job. A few days later John (the agent) gets a call from the benefit administrator about a rumor in the office that Bob was thinking about quitting. The benefit administrator wanted to know if John knew anything about it. Case Study #3

  34. Question: What should John do? Case Study #3 (Continued)

  35. As life and health insurance agents, we are trusted and confidential advisors. We have a responsibility to the clients we serve to keep their best interest in mind and to hold sensitive information in confidence. This is even more critical in light of HIPAA privacy regulations regarding patient privacy. While this information regarding Bob’s future employment may not be considered protected health information, John still has a responsibility to keep information disclosed to him confidential. Case Study #3 (Continued)

  36. It would be appropriate to make the following statement to the benefits administrator: “As a life and health agent, I have an obligation to maintain client confidentiality and take that responsibility very seriously. This responsibility extends to all the people with whom I consult, including the employees of my corporate clients. My professional reputation is dependent on my ability to develop the trust and confidence of the people I serve, and I hope you can appreciate my commitment to the principle of confidentiality.” Case Study #3 (Continued)

  37. This statement works to develop the relationship with the benefits administrator by emphasizing John’s commitment to conduct himself in a professional manner while maintaining the confidence that Bob has placed with him. Remember: “If you don’t have something nice to say, then don’t say anything at all.” Case Study #3 (Continued)

  38. Conflicts of Interest As an agent in the insurance and financial services industry, an agent will have to identify and disclose any conflicts of interest. A conflict of interest can best be described as a situation where an agent gets into a position where they are representing or advising clients who have opposing needs, goals or interests. To best serve the clients an agent must represent, they need to identify and disclose, as soon as possible, any conflict of interest they discover. Other Ethical Issues for Insurance Professionals

  39. An agent serves on a board or committee, for a friend’s company, that has the authority to make purchasing decisions for the products they sell. The accountant recommends key man insurance. You are a decision-maker and represent a life insurance company that could fill this need. Conflict of Interest! Examples of a Conflict of Interest

  40. The agent feels pressured to get a client’s case underwritten. The client indicates that he wants to move to another carrier because of increased costs. The owner says if costs don’t come, down he’ll discontinue the insurance. In reviewing the applications the agent suspects medical information has not been disclosed. The agent is caught between an obligation to provide accurate information to the carrier and the client’s desire to reduce cost. Conflict of Interest! Examples of a Conflict of Interest

  41. An agent feels pressure to sell a product even if it is not in the client’s best interest because your agency is looking for a big bonus from XYZ Company. To get that bonus, a certain number of cases have to be placed with XYZ Company. XYZ’s product does not meet the needs of the client but the agent is encouraged to sell it anyway. Conflict of Interest! Examples of a Conflict of Interest

  42. First, recognize that the conflict exists. Second, disclose the conflict to the people involved. Finally, search for a solution that does not compromise an agent’s professional integrity. Resolving Conflicts of Interest

  43. For the purpose of our discussion, a corporation is any entity created by an individual or group of individuals for the purpose of engaging in or developing the insurance industry. Within our industry there are many different types and sizes of corporations. In all cases, large or small, it’s people who lead and govern these corporations – people whom we (the consumers, employees, agents, vendors and stockholders) count on to provide us with direction and ethical standards. While issues, objectives and opportunities are different from one corporation to another, there are two common goals that all corporate leaders should consider to ensure ethical practices. Corporate Governance

  44. Goal/Challenge 1: Balancing the Needs of All Stakeholders All corporations serve the needs of multiple stakeholders, defined as any individual or group of individuals whointeract with and benefit from the activities of a particular corporation. Corporate Governance (Continued)

  45. Common stakeholders include: Stockholders Employees Representatives Customers Vendors Neighboring communities Corporate Governance (Continued)

  46. The common element for all stakeholder groups is that, in each and every case, the stakeholder is in a mutually beneficial relationship with the corporation: Stockholders provide capital in exchange for profits. Employees provide labor in exchange for compensation. Customers provide payment in exchange for products and services. Vendors provide products and services in exchange for payment. Communities provide public services in exchange for economic development. Corporate Governance (Continued)

  47. A corporate leader interested in building an ethical business must keep each of these stakeholders’ interests in mind at all times. Impossible? Keep in mind that these relationships are “mutually beneficial.” That is to say, benefits to one group of stakeholders should, by design, be benefits to all of the other stakeholder groups as well. Corporate Governance (Continued)

  48. Invariably, ethics and integrity come into play when corporate leaders take actions and set policies that exploit one stakeholder group for the benefit of another. For example: Corporate Governance & Ethics

  49. Using inferior materials in an effort to cut costs and boost profits for the benefit of stockholders without regard to the needs of the customer. Offering excessive bonuses and stock-option plans to employees without regard to the impact on stockholder return on investment. Damaging or polluting the local community’s environment in an effort to maintain current price levels for customers on the other side of the world. Corporate Governance & Ethics (Continued)

  50. Goal/Challenge 2: Balancing Long-Term and Short-Term Objectives Actually this is an extension of the first challenge, “to balance the needs of all stakeholders,” because it is the long- and short-term needs of each stakeholder group that come into question. The ethical breach usually occurs when the pressures associated with meeting short-term demands cause corporate leaders to take actions or set policies that undermine the company’s or stakeholders’ long-term objectives. A classical example of this indiscretion is “cooking the books” in order to achieve a quarterly profit or influence a lender when cash is tight. Corporate Governance & Ethics (Continued)

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