Ethics Goes Beyond Law

1.5       The Beginning of Ethics in the Insurance Industry

In the past the insurance industry as a whole has enjoyed a genuine trust in society. During those years, consumers came to rely on a life insurance policy and a health coverage as a foundation for economic security. Business owners praise their whole life policy simply as a “sinking fund” policy that came in handy during business turndown or an economic recession.  Property damage insurance gave individuals a sense of peace about their property risk factors. Casualty insurance provided coverage to protect against damages of lawsuits.  So the insurance industry has generally enjoyed a stellar reputation through the years.

But the change occurred in mid 1970’s. Various aspects of the insurance industry came under scrutiny.  Some of these aspects were low paying interest whole life insurance policies and gaps in the health insurance programs. Health maintenance organizations (HMOs) and universal life products burst on the horizon to change the existing landscape. Then the industry’s agents came under the microscope for their interaction with the general public.

Early insurance education began in the U.S. in Philadelphia in 1904 when Dr. Solomon Huebner began the first college program in insurance at the Wharton School of the University of Pennsylvania.

In 1927, the American College was founded with the establishment of the CLU (Chartered Life Underwriters) Program.  Subsequently, the CPCU (Chartered Property and Casualty Underwriters) programs began in 1942 with Dr. Harry J. Loman as the Institute’s first Dean. The initial CPCU Code of the philosophies of ethics and the practice of ethical behavior must pervade human awareness in private life and in a professional career. It is generally compared to morality, which involves a pattern of one’s actual action. Ethicists may be absolutists or relativists.

The programs referred to above paved the way for a comparable program in the property and liability field in 1942 known as the CPCU program. This designation was offered by the American Institute of Property and Liability. The first Dean of the Institute was Dr. Harry J. Loman. The purpose of this educational organization was to:

  • Advance the higher education of those engaged in the life insurance and property and casualty insurance fields.
  • Promote and maintain the high moral and professional standards.
  • Cooperate with extending its influences and educational programs.
  • Maintain effective relations with regulators, consumer groups, and industry movements.
  • Ethics and Professionalism

For the good of the society, we should not unquestioningly embrace a random value system for the mere fact that it is a value system. There are at least three universal precepts that exist in most civilized societies and religion:

  • Honesty;
  • Respect for other persons;
  • Respect for others’ property.

Those ought to be the qualifying parameters for any belief system chosen by an insurance professional.

Honesty — Without honesty, there is no chance of a successful business relationship. While dishonesty is destructive in one’s personal life, it usually is fatal in business. People are inclined to be more forgiving in personal relationships than they are in business relationships. One dishonest act can tarnish an entire career.

Respect for Other Persons — Respect for other persons refers to respect for a person’s physical and emotional well-being. Disrespect could manifest itself by such actions as rudeness, harassment, slander, discrimination, abuse, assault and murder. Some transgressions of this tenet are so nefarious that there are laws against such behavior. While there may be no law against rudeness, would you continue to do business with someone who was rude to you?

Respect for Others’ Property – Respect for another’s property is shown by being careful and considerate of a new lawn which the neighbor just planted or a newly painted fence Disrespect could manifest itself by such actions as neglect, carelessness, vandalism, theft and destruction. Property and casualty insurance producers are in the express business of preserving the assets of clients. Disrespect for a person’s property is the antithesis of the noble mission of an insurance professional. Would you knowingly conduct business with people who cheat their customers out of money or property?

1.7       Ethics and Principles of Insurance

Insurance Ethics is similar to the ethics requirement for any other Fiduciary position.  Since Agents and Adjusters are tied to state regulation.  The insurers could lose their license and Certificate of Authority to transact business in their state if they conduct their business in an unethical manner.  Because the insurance industry is tied so closely to ethics because of their fiduciary responsibility to the public, the insurers often keep strict reins on the individuals who are interacting with the public on a daily basis so that they do not mislead anyone.  Still under the “strict reins” an individual has to have personal and professional ethics to guide him or her in making ethical decisions in any number of situations.


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