What is a subordinate to do?

I recently read an article published in early March about the suspension of 16 current and former registered representatives of State Farm VP Management Corp for misconduct involving FINRA's Continuing Education requirements for registered representatives.
Nine of the sanctioned representatives were supervisors who directed or allowed subordinates to take a proficiency test for them. One was a supervisor who directed a subordinate to take the test for other registered representatives. Six of the sanctioned representatives completed the proficiency test for their supervisors. What the article does not include is the number of subordinates, if any, who were asked to take the test for their supervisor and refused. If there are any out there, I offer my heartfelt thanks for taking the ethical high road in a situation that could have cost you your job.
While I have never been asked to take a test for a supervisor I have been asked by a supervisor to cover claims that were clearly not covered. I am happy to say that I refused and there were no repercussions from that refusal. The supervisor just went ahead and issued the payment himself. While I could not stop the payment, at least I had the piece of mind that it did not come from me.
So how do you react when asked to do something by a superior that violates your personal code of ethics? How do you weigh the possible consequences, such as losing your job, when faced with this type of dilemma? This situation has always been a hard one for me to deal with. First, what kind of supervisor puts an employee in this position? The supervisor has violated the trust given by both the employer and the employee. And how can the employee refuse without serious consequences? Most companies will have a human resources representative who can help out the employee. But many are still afraid to give specifics about the bad behavior of their supervisor because of fear of reprisals.
What this boils down to, at the most basic level, is an abuse of power. Those who are invested with power over others should be held to a very high ethical standard by their employers. To paraphrase Dr. Norm Baglini - "A company is only as ethical as its most unethical employee."

Conflicts of interest

I know many people in the Restoration business as well as many people who are adjusters. I am dismayed to learn of a practice that is occurring, wherein restoration vendors are rewarding adjusters with 25 dollar AmEx gift certificates every time they receive an assignment. I do not know how prevalent this practice is. But even if it is occurring only with one particular vendor and one particular adjuster, that is too often. Adjusters are required to sign conflict of interest statement that prohibit them from accepting gifts from vendors. Now, many if not all of these policies have so wiggle room in them, with language that says if a vendor buys you lunch you can accept it as long as you reciprocate the lunch on another date. And some of these policies may even give a dollar threshold like 25 dollars. But if there is a practice of routinely accepting vendor's gifts that are designed to fly under the radar of the conflicts policy, then the practice is unethical and should be stopped. I understand that many adjusters feel overworked, underpaid and under appreciated. I certainly did when I did the job. And I also know that many will rationalize the gift by saying that it really does not influence their decision about who to give the restoration assignment to. While this may be true, it does give rise to the appearance of impropriety. And the appearance can be just as devastating as the real thing. Imagine what this looks like from the outside looking in.
No one is perfect and everyone will have an occasional lapse in judgement. But a continued practice of accepting gifts is the first step to a more egregious lapse. No one becomes unethical overnight. It occurs in little increments, each one pushing you just a tiny bit more over the line. Then suddenly one day you wake up to find an attorney general at your door with a subpoena.
The vendors in this scenario are just as guilty as the adjusters. The insurance industry is heavily invested in its relationships with vendors. We need them in order to keep our promises to our insureds. They need us to grow their business. With such a symbiotic relationship, why would a vendor jeopardize the relationship and the individual adjuster by making such an offer? What ever short term advantage is gained will ultimately be undermined when the practice comes to light and the vendor is tossed off the "approved" list.

Tougher ethical decisions?

Many of the observations we make and examples we give about “unethical” behavior are in fact based upon illegal behavior. And sometimes if not illegal, “unethical” behavior springs from a violation of what we inherently measure as right versus wrong. Rushworth Kidder of the Institute for Global Ethics in Camden, Maine makes the point that the really tough ethical decisions aren’t based on right versus wrong decisions, but spring out of right versus right decisions, decisions that are forced between competing attractive values such as truth versus loyalty, individual versus community, justice versus mercy, and so on. I know I have personally had dilemmas in these areas.

I would be interested in hearing how often insurance professionals struggle with right versus right decisions in their day-to-day work, and how they go about resolving them.

Let's Walk and Talk Ethics

Roughly twenty years ago, I had the privilege of being a co-worker of Dr. Peter R. Kensicki at the American Institute for CPCU and Insurance Institute of America.

On pleasant summer days, Pete and I often took lunchtime walks on the quiet roads that wind through the scenic “horse country” around the Institutes in southeastern Pennsylvania. On these walks, our talk often turned to politics, which in turn often got around to ethics. In particular, I remember our discussions about the Senate’s Supreme Court Justice confirmation hearings for Robert Bork. Now that was an event full of ethical considerations!

Within a year or so after I joined the Institutes, Pete left to become a professor of insurance at Eastern Kentucky University, where he still teaches. In addition to his professorial duties, Pete writes the “Question of Ethics”column that appears in the National Underwriter (P&C edition).

I always look forward to Pete’s column because it never fails to provoke thought. And, I’m sorry to say, it’s maybe as close as I can now get to the live, and always lively, talks we had on our lunchtime walks twenty years ago.

Pete’s column in the January 7, 2008, edition of NU (P&C) examines the ethical implications of the anti-concurrent causation (ACC) language that has been included in property insurance policies since the 1980s.

A major part of the ACC language is contained in the wording that precedes several policy exclusions, such as those eliminating coverage for flood and earthquake. The wording says, in part, “Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”

The ACC language has been at the heart of numerous coverage disputes about losses caused by Hurricane Katrina in 2005. In these disputes, the insurer has cited the ACC language in denying coverage for some or all of the property loss suffered by a policyholder, on the basis that flooding was an excluded cause that contributed “concurrently or in any sequence to the loss,” even though hurricane (windstorm) is a covered cause of loss.

Pete’s exploration of the ethical implications of this issue, with input from several insurance professionals reflecting a wide range of opinions, is must reading for anyone concerned about the fairness of the ACC language.

Actually, if ethics matter, the column should be required reading for everyone in the insurance industry who’s involved in any way with policies containing the ACC language.

Pete’s column may not change everyone’s stance on the ACC issue, but it will certainly expose anyone who reads it to the basic ethical issues involved. That encourages each of us to question our existing ethical views on an important insurance issue.

What could be more appropriate than that during Ethics Awareness Month?

If, after reading Pete’s column or reflecting on this issue, you would like to post comments here, about either the ACC language or other policy provisions with ethical dimensions, I encourage you to do so.

Pete, thank you for your column, and keep up the fine work. The next time you’re near Philly, let’s get together and take a walk.

Pete’s next Question of Ethics column—on the subject of underinsurance—will run in the April 21 edition of NU. I’ll be looking for it.

SHOW ME THE MONEY!!

I'm agree with Donna. She wonders how an industry that was founded on good faith has strayed? That's an easy answer. Show me the money. Show me where, when and how it pays to be ethical. Show me a shareholder of an publicly traded insurer who says its okay if my shares don't perform well as long as ABC insurer is ethical. Show me a policyholder who says its okay to charge me a little more on my policy to fund ethical development. In today's environment where a long term investment is measured in days, not years, ethics seems to be a long term goal that can be shelved for short term results. Its easy to talk ethics, but its better to show good results. Reputation is important, and I don't want to get a reputation as a manager who can't deliver good results.

Now don't get me wrong, investors don't want their shares of a publicly traded insurer to suffer if the insurer "gets caught" doing something unethical. Similarly, policyholders don't want to be the one who suffers because of unethical business practices of their insurer. But if someone else gets caught, or someone else suffers, well that's okay, right? I mean, come on, what are the chances of getting caught?

Some would say that it's not just our industry, its the era we live in. Rogue traders, performance enhancing drugs, price fixing, price gouging, etc...

Just win baby!

The ends justifies the means!

Doesn't it?

I like to think that we see more unethical behavior today, not because there is more, but because it is publicized more. I think there was just as much unethical behavior in the industry 20, 30 or 50 years ago as there is today. I'm not saying that its okay, it is what it is. What I hope that this publicity means that there will be less unethical behavior tomorrow.

The simple fact of the matter is that it is difficult to measure ethics using any type of measure, let alone financial measures.

Ethics is qualitative, not quantitative.

Ethics is an all the time thing, not just a some of the time thing.

Our ethics are always there, they just aren't as apparent when the decisions are easy, they are apparent when the decisions are hard. Choosing between what's legal and what's illegal isn't ethics. Ethics is choosing between two rights, knowing that your decision has an impact on others. Ethics is making decisions that can be win-lose decisions that involve you determining who wins and who loses. Ethics is making those decisions that keep you awake at night.

I can teach you ABOUT ethics, but I'm not sure I can teach you ethics.

I believe I am an ethical person. I'd like to believe I am just as ethical as the people who came before me in this industry, maybe even more so, and I hope those who follow will be more ethical than me.

corporate ethics

Every day there are articles in our industry publications detailing the latest legal proceedings against insurance executives. In many cases the circumstances that have lead to these trials were "business as usual" practices in the insurance industry. So how is it that our industry, which is founded on the premise of utmost good faith, strayed so far from center? My personal opinion, as a claims person, is that the industry has forgotten its original purpose - to indemnify the policyholder for covered losses. Instead, the focus has been on ROI for investors. I agree that every insurer should be profitable but the ethical dilemma comes from how the profitability is created. Obviously, an underwriting profit is desirable. Yet many insurers threw out the underwriting guidelines and severely under priced risks in order to show a short term profit. Claims departments should watch their loss adjustment expenses. But overloading an adjuster with files, rather than hiring staff, is not the appropriate way to do it. I believe that there is a corporate responsibility to the policyholders, the employees and the stockholders. So is it ethical to overload an adjuster or assign an adjuster to a claim that he or she does not have the expertise to handle? Is it ethical to ask an adjuster to handle a claim in a location when they are not licensed to do so? Is it ethical to insist on regulatory compliance and turn a blind eye to the quality of the adjustment? Is it ethical to put employees in a position that they are so concerned for the security of their job that they are forced to engage in unethical practices instead of standing up for what they believe to be the ethical position?

Welcome!

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