Insurance Ethics From Agency to Premium Audit
I was on the phone yesterday discussing insurance ethics with a workers comp consultant from West Virginia. He used to be an independent premium auditor who worked for insurance companies performing yearly premium audits. From that conversation, I thought I would cover the rules and expectations of insurance ethics using outside sources and my own experiences.
When I attained my ChFC, the organization had 20 canons to follow for a financial advisor – now there is only one, which stands above all the rules. See the last section of this article for that one most important rule. I always use this rule as part of my insurance ethics and general ways of conducting myself in business.
The articles that I have written on ethics can be found at this link. One of the requirements for almost any insurance license is an ethics course before renewal.
Most states have rules/laws in place for agents to follow with their client insureds or potential clients. The independent brokers/agents association (BIG I) covers this very well.
To the Public
I believe that serving the public as an Independent Insurance Agent is an honorable occupation, affording me a special opportunity to serve society and offer valuable insurance products and services to the public.
I believe that as an Independent Insurance Agent, I am serving the interests of my clients by responding to their expressed insurance needs.
I will strive to further the public’s understanding of insurance, endeavor to promote safety and loss control in my community and strive to participate in civic and philanthropic activities that contribute to my community.
To the Insurance Companies, I Represent
I will respect the authority vested in me by the insurance companies I represent, and work to maintain open lines of communication with them.
To Other Independent Insurance Agents
I will strive to maintain positive relations with other insurance agencies in my community, competing with them on an honorable and fair basis.
I will follow all insurance laws relative to the conduct of my business.
I will work with other Independent Insurance Agents for the betterment of the insurance business and endeavor to elevate the standards of my occupation by following this Code of Ethics and encouraging other Independent Insurance Agents to do likewise.
Insurance Ethics – Claims Handling
One of the most glaring parts of the insurance process originates with the claims department. As one claims supervisor told me many years ago, the insured finds out how good their policy is when a claim is filed.
Most States Include The Unfair Claims Practices Act as what not to do in the area of claims handling. The following list comes from the NC Statutes. Most states have the same list. The list is a little long. I wanted to include the whole part of the Act.
Unfair Claim Settlement Practices. – Committing or performing with such frequency as to indicate a general business practice of any of the following: Provided, however, that no violation of this subsection shall of itself create any cause of action in favor of any person other than the Commissioner:
a. Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;
b. Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
c. Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
d. Refusing to pay claims without conducting a reasonable investigation based upon all available information;
e. Failing to affirm or deny coverage of claims within a reasonable time after proof-of-loss statements have been completed;
f. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;
g. Compelling [the] insured to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insured;
h. Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled;
i. Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of, the insured;
j. Making claims payments to insureds or beneficiaries not accompanied by [a] statement setting forth the coverage under which the payments are being made;
k. Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
l. Delaying the investigation or payment of claims by requiring an insured claimant, or the physician, of [or] either, to submit a preliminary claim report and then requiring the subsequent submission of formal proof-of-loss forms, both of which submissions contain substantially the same information;
m. Failing to promptly settle claims where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; and
n. Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.
Insurance Ethics – Workers Comp Premium Audits
The ethics for a Workers Comp premium auditor comes from the National Society of Insurance Premium Auditors (NSIPA) of which I have been a member for 15+ years.
Premium Auditors shall be prudent in the use of information acquired in the course of their duties. Premium Auditors shall not use confidential information for any personal gain or in a manner that would be detrimental to the professional conduct of the insurance business. Premium Auditors shall not disclose to any other person any confidential information entrusted to or obtained by them unless a disclosure of such information is required by law.
Premium Auditors shall provide the same high standard of professional service to all policyholders regardless of color, sex, national origin, or type of business pursuit. Impartiality, integrity, honesty, and common courtesy shall be shown to policyholders, agents, accountants, and others with whom they may be in contact while carrying out their duties.
Premium Auditors shall continually strive to improve their professional knowledge, skills, and competence, in the insurance business generally and in the practice of Premium Auditing specifically.
Premium Auditors shall conscientiously perform their duties in a manner that will assure equity and improve the efficiency of the insurance mechanism.
Premium Auditors shall perform their duties in a dignified and professional manner that will bring credit to the insurance business, and they shall assist in maintaining and raising professional standards in the insurance business.
Premium Auditors shall refrain from entering into any activity which may be in conflict with the interest of their employers or which would prejudice their ability to carry out objectively their duties and responsibilities.
Premium Auditors shall not attempt by direct or indirect means to injure maliciously or falsely the professional reputation or practice of another Auditor.
Premium Auditors will cooperate in extending the effectiveness of the profession by interchanging nonconfidential or nonproprietary information and experience with other Premium Auditors and encouraging fellow Auditors to improve and update their education.
One Rule That Outshines Them All
In all of the insurance ethics websites/articles that I researched for this article, one rule stands out. The same rule is the ChFC rule that I mentioned earlier – The Golden Rule.
Treating others as you wish to be treated remains the best rule of all in any type of business. The agent/adjuster/premium auditor sources that I used brought this concept up in their introduction to the rules.
For example, I had someone call me after hours and request that I write his company a Ghost Policy, which is illegal in most states. He became irate that I wrote an article about them, but I was not an agent. I calmed the caller down and gave him a phone number to call a local agent who specializes in micro-company policies.
I could have become irate and hung up on the caller. The Golden Rule kicked in and my insurance ethics were intact.