Integrity and Decisions

1. Integrity and Decisions Real World Questions In Insurance

2. 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?

3. Responsibilities in Business: • To your Insurance companies • To Customers • To employees • To boss/es • To your family • To your community • To God

4. The challenge: Balancing Responsibilities

5. 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)

6. Typical Challenges: • sell client what they need • know what you are selling • are they fully covered? • Are they over covered?

7. Why do insurance people do the wrong thing: • Why do they sell client more than what they need? • Why don’t they fully cover clients?

8. Lots of Pressures!!! • Pressure from Boss • Pressure from Vendors • Pressure from Clients • Pressure from personal situations • Pressure from performance expectations • Pressure from fellow employees

9. Moral Decisionmaking: • How do you decide the right thing to do? • How do you help others to make right decisions?

10. 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.

11. CPCU Ethics Code (cont’d) 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.

12. 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.?

13. 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?

14. 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?

15. 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?)

16. 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?

17. 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?

18. 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.

19. 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?

20. 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 won’t need to find out about potential problems– in short, we don’t lie, we just don’t try too hard to find the truth…

21. 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. You’ve tried to prepare her for it, but since she’s never had to pay an additional audit premium in the past, you aren’t really sure she has gotten the message.

22. 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 carrier’s 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. What’s your next step?

23. 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 high—no matter how much P&C the agency writes, without at least one life insurance application during the qualification period, the agency isn’t going. You can’t believe that in an 18-month period, an agency of this size hasn’t written a single life insurance policy with your company, but this one hasn’t. When you called and asked about it, the agency told you quite clearly that your company’s life insurance policies are among the worst in the business, and they can’t 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 P&C they place with you.

24. 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 don’t need another life policy, your compatriot responds, “Okay, then you tell them they aren’t 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, I’ll 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?

25. 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, here’s what I’ll do since you’re so close to the cutoff. I don’t send my applications in until the end of week, we’ll just date everything December 4 and we’ll be OK. • Do you sign the documents with the actual date of application December 7, or do you take advantage of the agent’s offer and date everything December 4?

26. 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 what’s coming. You can see from the driveway that on the front and one side of the house, the siding looks like it’s 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.

27. Case 3 Continued • There is no way those new sides are going to match the old ones. If they don’t match, my house is going to look stupid. And I know folks who tried to sell their homes with siding that didn’t 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 owner’s viewpoint. With all the hail damage in the area, you know no one will question your decision on this claim. What do you decide?

28. Case 4: Who shall pay? • You can’t 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.

29. Case 4 continued • So one of them made a big mistake, but you don’t 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 E&O. 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?

30. Personal Scenarios • Learning from each other— Some personal scenarios!

31. 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.