ethics in the insurance sector (23 pages)

8/13/2019 Ethics in the Insurance Sector (23 Pages)

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Ethics in

Insurance

Sector


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What is Ethics?

Ethics involves learning what is right or wrong, and then doing the rightthing -- but "the right thing" is not nearly as straightforward as conveyed in

a great deal of business ethics literature.

Many ethicists assert there's always a right thing to do based on moral

principle, and others believe the right thing to do depend on the situation --

ultimately it's up to the individual. Many philosophers consider ethics to be

the "science of conduct."

eniors e!plain that ethics includes the fundamental ground rules by which

we live our lives. hilosophers have been discussing ethics for at least

#$%% years. Many ethicists consider emerging ethical beliefs to be "state of

the art" legal matters, i.e., what becomes an ethical guideline today is often

translated to a law, regulation or rule tomorrow. &alues which guide how

we ought to behave are considered moral values, e.g., values such as

respect, honesty, fairness, responsibility, etc. iscussions around how

these values are applied are sometimes called moral or ethical principles.

Business Ethics is now a Management Discipline:

(usiness ethics has come to be considered a management discipline,

especially since the birth of the social responsibility movement in the

)*+%s. n that decade, social awareness movements raised e!pectations

of businesses to use their massive financial and social influence to

address social problems such as poverty, crime, environmental protection,

eual rights, public health and improving education. n increasing number

of people asserted that because businesses were ma/ing a profit from


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using our country's resources, these businesses owed it to our country to

wor/ to improve society. Many researchers, business schools and

managers have recogni0ed this broader constituency, and in their planning

and operations have replaced the word "stoc/holder" with "sta/eholder,"meaning to include employees, customers, suppliers and the wider

community.

1he emergence of business ethics is similar to other management

disciplines. 2or e!ample, organi0ations reali0ed that they needed to

manage a more positive image to the public and so the recent discipline of

public relations was born. 3rgani0ations reali0ed they needed to better

manage their human resources and so the recent discipline of human

resources was born. s commerce became more complicated and

dynamic, organi0ations reali0ed they needed more guidance to ensure

their dealings supported the common good and did not harm others -- and

so business ethics was born.

4ote that *%5 of business schools now provide some form of training in

business ethics. 1oday, ethics in the wor/place can be managed through

use of codes of ethics, codes of conduct, roles of ethicists and ethics

committees, policies and procedures, procedures to resolve ethical

dilemmas, ethics training, etc.


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INSURANCE - The indication o !eo!ms

6 - central to the insurance reform process - is an autonomous,

regulatory authority endeavoring to protect the interests of policy holders7

and regulate, promote 8 ensure orderly growth of the insurance industry.

1he 6 has been empowered to carry out several functions, including9

: romoting and regulating professional organi0ations connected with

insurance 8 reinsurance

: mproving the efficiency while conducting the insurance business

: Establishing a code of conduct for players in insurance

: etermining the specification of accounts, and the manner in which

funds are invested

: ;aying down prudential norms for investment for both life and general

insurance companies


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T"E SI# STE$ INSURANCE $%ANNIN& $R'CESS

nsurance lanning is the process of providing advice and assistance to

clients to determine whether and how clients can meet their financial

needs and life


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services have been as/ed. 2or this one could include analy0ing the assets,

liabilities and cash flow, current insurance coverage, investments or ta!

strategies.

= De.eloping and p!esenting /inancial $lanning !ecommendations

and0o! alte!nati.es:1he 2inancial lanner should offer 2inancial lanning

recommendations that address the goals, based on the information

provided. 1he planner should go over the recommendations with the client

to help and understand them so that one ma/es informed decisions. 1he

planner should also listen to the clientcoach


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Ethics in insu!ance toda, 1p!esent scena!io2:

ccording to insurance sta/eholders, the issue of compliance with ethics and

best practices should govern mar/et strategies and operations.

ta/eholders have warned that the sector's efforts at achieving a more robust

financial capacity would be rubbished if steps are not ta/en to address unethical

practices and the prevalence of fa/e institutions in the industry.

nsurance operators need to devote more of their energies and resources to

ensuring the emergence of a new order in terms of players' attitude to the issue

of ethics.

nsurance, being a business that is based on trust, could only win the admiration

and patronage of the buying public when there is a widely ac/nowledged effort

by operators to operate by the rules laid down by trade bodies and the regulatory

authorities.

3ne would agree that the level of capital companies have had to raise within the

last few years is uite challenging. 1hat is why there must be a collective resolve

by underwriters, bro/ers, loss ad@usters, and agents to ensure that the additional

funds in@ected into the sector are safeguarded and used optimally through strict

adherence to ethics of the profession. 3perators are usually e!pected to display

more commitment to ethical standards in all the operations. 1here should not be

any room for unprofessional and unethical practices in the dispensation.

Aenerally, the fear of losing business, rate cutting and offer of illegal

inducements has compromised insurance operators' compliance to the industry's

ethics.


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ndustry watchers say e!perience of non compliance with ethics in the insurance

industry is a reflection of the situation in the larger society, adding that

professionalism, honour, service and social responsibility, should be the /ey

attributes of the sector.


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Insu!ance and Ethics

nsurance, by definition raises ethical uestions. nsurance might be

viewed as man


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between what people e!pect and what insurance provides, insurance is

one of the most highly regulated industries in our country. lthough it is

national in scope, it is one of the few industries of its /ind that is primarily

regulated at the state level with $% different sets of laws and regulationsgoverning insurance.

istorically, insurance has played an important role in the

development of world economies. Dnfortunately, there are times when the

industry has not been a good corporate citi0en. n some cases, the

insurance industry has a history of discrimination, usurious prices, and

dishonest business practices.

s insurance a good business after all? oes it raise so many ethical

uestions that we should @ust avoid or eliminate it?

3nce loo/ed at carefully, insurance is a wonderful and much

needed product. nsurance, at its core, is a pooling of community ris/s. t is

a formali0ed way for people to come together and help each other. 2or

e!ample, when we pay life insurance premiums, we are putting our money

together, not @ust to help ourselves but to help other families. When

someone else dies, his family benefits because a payment can be made

from this pool of premiums and the investment income that arises from it.

When we die, our claim is paid to our family, from the same pool. eople,

in more informal ways, have done this for centuries. When someone dies,

those remaining help the family. 1his may appear very basic, but insurance

is much more powerful than @ust survivor benefits. nsurance allows us to

ta/e ris/s and therefore fully live our lives. nsurance is reuired in most

industries and professions. 1his gives us some assurance of the uality of

goods and services that we use. Fommercial insurance for industries and

professions has underwriting standards that reuire certain practices,

safeguards, licensing, and so on. n this way, insurance provides a form of


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safety net for consumers both in terms of the product or service delivered

and remuneration if there is malfeasance.

&ery few of us would have surgery, ride in an airplane, get on

an elevator, eat in a 6estaurant, and drive cars, if there was no insurancein place. Even more compelling, in many cases, without insurance we

would not enter into these businesses. Without insurance one mista/e

could ban/rupt the business and shatter customer confidence. nsurance

not only provides protection to the consumer, but also frees us to conduct

business.

nsurance, @ust li/e money, is not an evil unto itself. t is a

channel that can be used in very good and helpful ways. 3nce we accept

the proposition that insurance actually is a good business, the ethical

concerns do not end. n fact, in many ways, they @ust begin. Every day in

running an insurance business, ethical considerations arise.

few of the uestions insurance corporatists confront daily are9

). What is a fair price to charge? hould we charge as much as we can, as

little as we can, or something in-between?

#. What is the proper level of customer service? Gust enough to get by,

more than the customer has bargained for, or something in-between?

H. What /inds of policies and procedures should govern the running of the

company? hould we follow the letter of the law, the spirit of the law, or

both?


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I. Which laws are we tal/ing about, man


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Institute o! Insu!ance Ethics

Mission and Purpose

1he mission of the nstitute for nsurance Ethics is to develop programs

that will educate members of the insurance and financial services industry,

as well as the consuming public about the nature of ethics, social

responsibility, and the application of high ethical standards. primary

purpose of the nstitute will be to consider the role of ethics as an

alternative to additional regulation of the insurance and financial services

industry. Dnli/e many other businesses, insurance is based on mutual trust

between insurance producers and insurance clients. 1rust, in turn, is

based on the highest ethical standards.

Vision of the Future

1he nstitute for nsurance Ethics will be a highly visible advocate for ethics

and ethical behavior in the life insurance and financial services industry. t

will be a strong, clear voice for ethical conduct and social responsibility

within the insurance industry. 1he leadership shown by the institute will

create ever-growing awareness of ethical issues among insurance and

financial services professionals. 1hrough its growing leadership and

influence, insurance professionals will gain more and more formal training

in ethics and in dealing with ethical situations that they confront. 1hrough

that training and awareness, consumers will continue to gain trust and

confidence in insurance professionals and in the insurance industry.


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C'DE '/ ET"ICS

elling ;ife nsurance is li/e selling intangible product. o, the mar/eting

staff needs to observe a set of norms in his her professional conduct,

which ma/e him her worthy of trust and faith.

1he Fode of Ethics for the life insurance, mar/eting staff

). 1o perform his her duties in high esteem.

#. 1o give utmost priority to the client's interest.

H. 4ot to disclose client's confidential and personal information

I. 1o ensure prompt and sincere service to the client and his or her family.

$. 1o use appropriate methods in convincing clients to protect their

insurable interest.

+. 1o ma/e truthful and accurate presentations.

J. 1o improve his her /nowledge of life insurance through constant study.

K. 1o set a plan and wor/ accordingly.

*. 1o maintain fair relations with colleagues.

)%. 1o strictly follow the concerned laws and regulations.

)). 1o obtain proposals only on the lives of persons who fits in the

physical, moral and financial standard defined by the Fompany.

)#. 1o be loyal to the 3rgani0ation.


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1he 6 has formulated a Fode of Fonduct for the mar/eting staff which

comprises two broad group heads vi0. "o's" and "on'ts". 1hey are listed

herewith9

Do3s

). dentification of mar/eting staff and the insurance agency - certificate of

;icense to be shown to the prospect on demand.

#. Match the needs of his her client with various products available with

his insurer.

H. Wor/ out the premium to be charged so that his her prospect is able to

weigh the economic or financial implication of the proposal on his her

resources.

I. (ring to the notice of his her client the implication of various uestions

in the proposal form and other documents and advise the client to disclose

all the material information.

$. isclose to the insurer all relevant information.

+. nform the prospect about acceptance or re@ection of the proposal by the

insurer.

J. 3btain all documents from the prospect for the completion of the case.

K. ssist the policy holder in matters of9

Flaim settlement,

Effecting nominationassignment,

6evival, change of address,

E!ercise of various options.


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Don3ts - No Ma!4ete! shall

). olicit or procure insurance business without holding a proper

authori0ation#. nduce the prospect to omit to disclose the material information in the

proposal form

H. nduce the prospect to submit wrong information in the proposal form or

in the documents submitted to the insurer for acceptance of the proposal

I. (ehave in discourteous manner.

$. nterfere with any proposal introduced by any other insurance

mar/eters.

+. 3ffer different terms and conditions other than offered by the insurer.

J. art with or share his incentive with rospect or with any other person.

K. 6eceive a share of the policy proceeds from the beneficiary.

*. Fompel any person to terminate an insurance contract with any insurer

in order to effect a new proposal within three years from date of such

termination.

)%. pply for fresh license to act as an insurance mar/eter if his her

earlier license authori0ation have been terminated with in five years from

the date of termination.

)). 6emain or become a director of any insurer carrying on insurance

business in ndia.


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Ethics in insu!ance: Building !elationships th!ough t!ust

1he momentum of the private insurance sector leaves no doubt in one


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inspiration for ethics thus comes from the highest source L from a need to

impact the industry.

3n the flip side, a lac/ of ethics can have serious conseuences. ;itigation

and costs of settlement, business losses, a reduction in ratings, andincreased scrutiny are not half as damaging as the loss to image and

reputation. t's a fact that good ethics ma/es good business sense. 3f

course, the mandate for good ethics always stems from the top. Which

e!plains, why at (irla un ;ife, they have introduced a system of chec/s

and balances that guards against concealment and why they follow norms

of compliance and adhere to 6 regulations so scrupulously that their

boo/s and processes are open to audit at all times.

While top management can lay down a code of ethics and reuest

adherence, its implementation depends on the individual. s lbert

Einstein said, "Ethics is an e!clusive human concern without any

superhuman authority to bac/ it.C. Ethics is that discipline, that momentum

that challenges a company to rise above themselves and raise the bar

each time they interact. t is the means by which they measure

themselves, the strength by which they progress, and the light by which

they shall be remembered. t is the way ahead - for each individual and for

his industry.


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CASE STUD5:

F3E 32 E1F 4 632E34; F34DF1

FF ;3M(6-FE1

6ahul a!ena is a policy holder who is an unsatisfied consumer of FF

;3M(6. e shares his personal e!perience with us.

Member's 6ating of this roduct9Member's 6ecommendation of this

roduct9No

Fustomer ervice9Flaims ettlement96atesremium96ange of lans9taff ttitude9

ros9 4oneFons9(usiness ethics

The Cheating (, ICICI

4ow if things could not get any worse, am currently going through what

can only be termed as the blatant cheating of a customer from one of

ndia


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)+-))-%$9 fter chec/ing the list of cashless garages on their company

website, and verifying the same with your customer service

representatives as well as the garage of choice utograph /oda,3fficial /oda dealers, towed the car to the wor/shop. ll papers as

desired by FF were handed over to the garage to produce to the

nsurance agent at the time of the survey. 1he only reason pic/ed an

authori0ed /oda garage, even after /nowing the ridiculous prices they

have, was because FF told me they had a cashless facility for that

garage.

)*-)#-%$9 t J9H%pm, get a call from Mr. bhay stating that FF cannot

process my cashless claim as a third party has been in@ured and a case

has been filed. e instructed me that if want my car could pic/ it up after

paying the full amount. then spo/e to Mr. uresh hetty, who stated, Bthe

FF legal department had advised them not to pay the claimC. as/ed for

a written copy of the clause in the policy where it is stated that the claim for

vehicle repairs cannot be paid unless the case is solved in court. also

spo/e to my long time insurance agent from 4ew ndia ssurance who

confirmed that there is no such reuirement and that FF is /nown to

harass its customers on large claims.

was put on the line with Mr. Napil Madgar who stated that he was the

6egional Manager. as/ed him to provide me with the clause as

mentioned above. owever he rudely told me that he does not /now and

even though he was sitting in the office, he did not ta/e the bother to

atleast try and assist me. 1ill date, Mr. bhay and Mr. hetty were well

mannered and helpful to the e!tent they could be, but must say that the

manner of spea/ing of Mr. Napil leaves a lot to be desiredO s it was


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am putting this topic up here now to W64 all other members Pand the

thousands of non-members who view this thread everydayQ that FF are

F3M;E1E FE1 4 3 431 A&E M4 (3D1 1E6

FD13ME6. 1hey will try anything in their power to wriggle out of payinga large claim, which they are rightfully entitled to pay. 1his tactic is

probably their company policy, hoping that finally the customer will give up

and forget about it.

Well, this is not happening here with me and rest assured this case will be

followed till its rightful conclusion. nd hopefully it will serve as a lesson to

FF and other insurance companies that the Fustomer is no longer @ust

going to lie down and ta/e the F6 that is meshed out to them.

My 2inal notes 3 431 E; W1 FF, whether it


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1he ethical and spiritual path in insurance, and in life, is an individual one.

t times, it can feel li/e a solitary path. Ethics is not reached by consensus

but by conviction. 1he ethical path may not be popular but it does standthe test of time. Ethics is not a hard and fast set of rules but is based upon

guiding principles. Ethics should guide our communities, yet they are

deeply personal. bove all, ethics and the spiritual compass that underlies

our individual ethical code, is not a destination, it is not even a @ourney, it is

the @ourney.What is good, right and true usually stands the test of time and

may not always be immediately apparent. 1he ethical Bsta/e in the groundC

will always be scrutini0ed and critici0ed by someone.


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Presented by:

Faiza Ishaq 12

Divya Kamath 23

Nahid Potrick 3

!anish Pun"#ani $ 3%

ethics in the insurance sector (23 pages)

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