Ethics In Insurance Sector

Ethics in Insurance Sector What is Ethics? Ethics involves learning what is right or wrong, and then doing the right thing -- 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." Seniors explain that ethics includes the fundamental ground rules by which we live our lives. Philosophers have been discussing ethics for at least 2500 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. Values which guide how we ought to behave are considered moral values, e.g., values such as respect, honesty, fairness, responsibility, etc. Discussions around how these values are applied are sometimes called moral or ethical principles. Business Ethics is now a Management Discipline: Business ethics has come to be considered a management discipline, especially since the birth of the social responsibility movement in the 1960s. In that decade, social awareness movements raised expectations of businesses to use their massive financial and social influence to address social problems such as poverty, crime, environmental protection, equal rights, public health and improving education. An increasing number of people asserted that because businesses were making a profit from using our country's resources, these businesses owed it to our country to work to improve society. Many researchers, business schools and managers have recognized this broader constituency, and in their planning and operations have replaced the word "stockholder" with "stakeholder," meaning to include employees, customers, suppliers and the wider community. The emergence of business ethics is similar to other management disciplines. For example, organizations realized that they needed to manage a more positive image to the public and so the recent discipline of public relations was born. Organizations realized they needed to better manage their human resources and so the recent discipline of human resources was born. As commerce became more complicated and dynamic, organizations realized they needed more guidance to ensure their dealings supported the common good and did not harm others -- and so business ethics was born. Note that 90% of business schools now provide some form of training in business ethics. Today, ethics in the workplace 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. INSURANCE - The indication of reforms IRDA - central to the insurance reform process - is an autonomous, regulatory authority endeavoring to protect the interests of policy holders; and regulate, promote & ensure orderly growth of the insurance industry. The IRDA has been empowered to carry out several functions, including: * Promoting and regulating professional organizations connected with insurance & reinsurance * Improving the efficiency while conducting the insurance business * Establishing a code of conduct for players in insurance * Determining the specification of accounts, and the manner in which funds are invested * Laying down prudential norms for investment for both life and general insurance companies THE SIX STEP INSURANCE PLANNING PROCESS Insurance Planning is the process of providing advice and assistance to clients to determine whether and how clients can meet their financial needs and life‘s goal through proper management of financial resources. ♦ Establishing and defining the client – planner relationship: The Financial advisor should clearly explain or document the services to be provided and define the responsibilities. The advisor should explain fully how he will be paid and by whom. The advisor should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests. The advisor should agree on how long the professional Relationship should last and how decisions will be made. ♦ Gathering client data, including goals: The Financial advisor should ask for information about the financial situation. The planner should mutually define the personal and financial goals, understand the time frame for results and discuss, if relevant, how one feel‘s about risk. The Financial Planner should gather all the necessary documents before giving the advice. ♦ Analyzing and evaluating the financial status: The Financial advisor should analyze the information to assess the current situation and determine what one must do to meet the goals, depending on what services have been asked. For this one could include analyzing the assets, liabilities and cash flow, current insurance coverage, investments or tax strategies. ♦ Developing and presenting Financial Planning recommendations and/or alternatives: The Financial Planner should offer Financial Planning recommendations that address the goals, based on the information provided. The planner should go over the recommendations with the client to help and understand them so that one makes informed decisions. The planner should also listen to the client‘s concerns and revise the recommendations as appropriate. ♦ Implementing the Financial Planning recommendations: The planner and the client should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your ‗coach‘, coordinating the whole process along with professionals such as solicitors or stockbrokers. ♦ Monitoring the Financial Planning recommendations: The planner should agree on who will monitor the progress towards the client‘s goals. If the planner is in charge of the process, he/she should report personally to review the situation and adjust the recommendations, if needed. Ethics in insurance today (present scenario): According to insurance stakeholders, the issue of compliance with ethics and best practices should govern market strategies and operations. Stakeholders have warned that the sector's efforts at achieving a more robust financial capacity would be rubbished if steps are not taken to address unethical practices and the prevalence of fake institutions in the industry. Insurance 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. Insurance, being a business that is based on trust, could only win the admiration and patronage of the buying public when there is a widely acknowledged effort by operators to operate by the rules laid down by trade bodies and the regulatory authorities. One would agree that the level of capital companies have had to raise within the last few years is quite challenging. That is why there must be a collective resolve by underwriters, brokers, loss adjusters, and agents to ensure that the additional funds injected into the sector are safeguarded and used optimally through strict adherence to ethics of the profession. Operators are usually expected to display more commitment to ethical standards in all the operations. There should not be any room for unprofessional and unethical practices in the dispensation. Generally, the fear of losing business, rate cutting and offer of illegal inducements has compromised insurance operators' compliance to the industry's ethics. Industry watchers say experience 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 key attributes of the sector. Insurance and Ethics Insurance, by definition raises ethical questions. Insurance might be viewed as man‘s attempt to control and influence an environment that we all know is in God‘s hands. Man‘s attempt to insure anything is, at best, limited. Insurance is nothing more than a pooling of money to provide limited reassurance for a limited set of assets or circumstances. Many people look to insurance to provide them with a complete sense of security and assurance. When they buy insurance some people think, ―Oh, now I don‘t have to worry, everything will be taken care of.‖ Unfortunately, over the years, the insurance industry has often nurtured this paternalistic and incorrect notion. Because they do not control the world, insurance is only a partial or stopgap measure to deal with the uncertainties that the world presents. Insurance does not provide the kind of universal coverage and assurance that many people look for. Many ethical concerns with insurance exist because of this gap between consumer expectations and genuine insurable risk. For example, people are often disappointed, angry or disillusioned to find that the insurance they have been paying for does not cover a particular situation. This can leave consumers feeling that insurance is a poor economic value or a ―rip-off‖. In this business managers frequently hear statements like, ―I‘ve paid thousands of rupees of premiums, and this small claim isn‘t covered‖ or ―Because I forgot two payments, my coverage was cancelled. Now my claim won‘t be paid after paying premiums for many years‖, or ―I didn‘t understand what I bought, I thought everything was covered.‖ Not meeting a customer‘s expectations can feel frustrating and dissatisfying to them. Because of this difference between what people expect and what insurance provides, insurance is one of the most highly regulated industries in our country. Although it is national in scope, it is one of the few industries of its kind that is primarily regulated at the state level with 50 different sets of laws and regulations governing insurance. Historically, insurance has played an important role in the development of world economies. Unfortunately, there are times when the industry has not been a good corporate citizen. In some cases, the insurance industry has a history of discrimination, usurious prices, and dishonest business practices. Is insurance a good business after all? Does it raise so many ethical questions that we should just avoid or eliminate it? Once looked at carefully, insurance is a wonderful and much needed product. Insurance, at its core, is a pooling of community risks. It is a formalized way for people to come together and help each other. For example, when we pay life insurance premiums, we are putting our money together, not just 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. People, in more informal ways, have done this for centuries. When someone dies, those remaining help the family. This may appear very basic, but insurance is much more powerful than just survivor benefits. Insurance allows us to take risks and therefore fully live our lives. Insurance is required in most industries and professions. This gives us some assurance of the quality of goods and services that we use. Commercial insurance for industries and professions has underwriting standards that require certain practices, safeguards, licensing, and so on. In this way, insurance provides a form of safety net for consumers both in terms of the product or service delivered and remuneration if there is malfeasance. Very few of us would have surgery, ride in an airplane, get on an elevator, eat in a Restaurant, and drive cars, if there was no insurance in place. Even more compelling, in many cases, without insurance we would not enter into these businesses. Without insurance one mistake could bankrupt the business and shatter customer confidence. Insurance not only provides protection to the consumer, but also frees us to conduct business. Insurance, just like money, is not an evil unto itself. It is a channel that can be used in very good and helpful ways. Once we accept the proposition that insurance actually is a good business, the ethical concerns do not end. In fact, in many ways, they just begin. Every day in running an insurance business, ethical considerations arise. A few of the questions insurance corporatists confront daily are: 1. What is a fair price to charge? Should we charge as much as we can, as little as we can, or something in-between? 2. What is the proper level of customer service? Just enough to get by, more than the customer has bargained for, or something in-between? 3. What kinds of policies and procedures should govern the running of the company? Should we follow the letter of the law, the spirit of the law, or both? 4. Which laws are we talking about, man‘s laws, God‘s laws, or both? When can and should we make exceptions to our policies and procedures? 5. How should we contract with other companies? Should we get as much as possible, give as much as possible, or something in-between? 6. What should our benefits and compensation be for the people working within the company? Should we pay them as little as possible, as much as possible, or Something in-between? 7. What should be done when someone is not doing the job? Should we help them, get rid of them, or keep them no matter what? How can we best address these ethical dilemmas? There are no hard and fast answers to any of these questions. Based upon the situation, any of the answers may be right. It is possible to face the changing questions, and the changing answers, every day depending upon the individualistic views and ethical followings. Institute for Insurance Ethics Mission and Purpose The mission of the Institute for Insurance 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. A primary purpose of the Institute will be to consider the role of ethics as an alternative to additional regulation of the insurance and financial services industry. Unlike many other businesses, insurance is based on mutual trust between insurance producers and insurance clients. Trust, in turn, is based on the highest ethical standards. Vision of the Future The Institute for Insurance Ethics will be a highly visible advocate for ethics and ethical behavior in the life insurance and financial services industry. It will be a strong, clear voice for ethical conduct and social responsibility within the insurance industry. The leadership shown by the institute will create ever-growing awareness of ethical issues among insurance and financial services professionals. Through 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. Through that training and awareness, consumers will continue to gain trust and confidence in insurance professionals and in the insurance industry. CODE OF ETHICS Selling Life Insurance is like selling intangible product. So, the marketing staff needs to observe a set of norms in his / her professional conduct, which make him / her worthy of trust and faith. The Code of Ethics for the life insurance, marketing staff 1. To perform his / her duties in high esteem. 2. To give utmost priority to the client's interest. 3. Not to disclose client's confidential and personal information 4. To ensure prompt and sincere service to the client and his or her family. 5. To use appropriate methods in convincing clients to protect their insurable interest. 6. To make truthful and accurate presentations. 7. To improve his / her knowledge of life insurance through constant study. 8. To set a plan and work accordingly. 9. To maintain fair relations with colleagues. 10. To strictly follow the concerned laws and regulations. 11. To obtain proposals only on the lives of persons who fits in the physical, moral and financial standard defined by the Company. 12. To be loyal to the Organization. The IRDA has formulated a Code of Conduct for the marketing staff which comprises two broad group heads viz. "Do's" and "Don'ts". They are listed herewith: Do's 1. Identification of marketing staff and the insurance agency - certificate of License to be shown to the prospect on demand. 2. Match the needs of his / her client with various products available with his insurer. 3. Work 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. 4. Bring to the notice of his / her client the implication of various questions in the proposal form and other documents and advise the client to disclose all the material information. 5. Disclose to the insurer all relevant information. 6. Inform the prospect about acceptance or rejection of the proposal by the insurer. 7. Obtain all documents from the prospect for the completion of the case. 8. Assist the policy holder in matters of:  Claim settlement,  Effecting nomination/assignment,  Revival, change of address,  Exercise of various options. Don'ts - No Marketer shall 1. Solicit or procure insurance business without holding a proper authorization 2. Induce the prospect to omit to disclose the material information in the proposal form 3. Induce the prospect to submit wrong information in the proposal form or in the documents submitted to the insurer for acceptance of the proposal 4. Behave in discourteous manner. 5. Interfere with any proposal introduced by any other insurance marketers. 6. Offer different terms and conditions other than offered by the insurer. 7. Part with or share his incentive with Prospect or with any other person. 8. Receive a share of the policy proceeds from the beneficiary. 9. Compel 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. 10. Apply for fresh license to act as an insurance marketer if his / her earlier license / authorization have been terminated with in five years from the date of termination. 11. Remain or become a director of any insurer carrying on insurance business in India. Ethics in insurance: Building relationships through trust The momentum of the private insurance sector leaves no doubt in one‘s mind that it is amongst the foremost growth sectors of our country. A market share of 26.18 per cent in five years is testimony to this. But even while one braces himself to avail of the numbers within his/her sight, they need to realize that the "long-term" will belong to that company which rigidly benchmarks ethics for itself and for the industry. In a business, where the customer entrusts the company with his / her financial savings, ethics has a direct relation to sales. The greater the trust, the more the sales. There are many ways to build trust through ethics, the most fundamental being the way the product is designed. It should offer complete clarity and transparency and the literature supporting the product should not overpromise the benefits or understate the risks. For eg: At Birla Sun Life, the use of the sales illustration, the inclusion of the policy proposal form, and the free look period they offer have served to win their customers' trust. By giving customers the option to track investments online and by publishing the performance of the funds against benchmark indices, specifically prepared for Birla Sun Life by CRISIL, they prove that they are an open and reliable organization. Ethics is an attitude that needs to touch every aspect of the customer relationship. It entails having great reverence for the customer's needs, being open to suggestions and insights that might enhance his / her comfort levels, building in riders and flexibility options that address these needs, providing assistance and clarity in documentation and upgrades, and settling claims on time. Ethics means being fully accountable, not just to the company and to its customers, but to the industry they serve. The inspiration for ethics thus comes from the highest source — from a need to impact the industry. On the flip side, a lack of ethics can have serious consequences. Litigation and costs of settlement, business losses, a reduction in ratings, and increased scrutiny are not half as damaging as the loss to image and reputation. It's a fact that good ethics makes good business sense. Of course, the mandate for good ethics always stems from the top. Which explains, why at Birla Sun Life, they have introduced a system of checks and balances that guards against concealment and why they follow norms of compliance and adhere to IRDA regulations so scrupulously that their books and processes are open to audit at all times. While top management can lay down a code of ethics and request adherence, its implementation depends on the individual. As Albert Einstein said, "Ethics is an exclusive human concern without any superhuman authority to back it.‖. Ethics is that discipline, that momentum that challenges a company to rise above themselves and raise the bar each time they interact. It is the means by which they measure themselves, the strength by which they progress, and the light by which they shall be remembered. It is the way ahead - for each individual and for his industry. CASE STUDY: CODE OF ETHICS AND PROFESSIONAL CONDUCT ICICI LOMBARD-CHEATS Rahul Saxena is a policy holder who is an unsatisfied consumer of ICICI LOMBARD. He shares his personal experience with us. Member's Rating of this Product: Member's Recommendation of this Product:No Customer Service: Claims Settlement: Rates/Premium: Range of Plans: Staff Attitude: Pros: None Cons:Business ethics The Cheating by ICICI Now if things could not get any worse, I am currently going through what can only be termed as the blatant cheating of a customer from one of India‘s largest Companies – ICICI. The following is a timeline as to what happened and continues to happen. 12-11-05: Accident took place. Police report was made. Insurance company was notified and claim number received. 16-11-05: After checking 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 – Autograph Skoda, Official Skoda dealers, I towed the car to the workshop. All papers as desired by ICICI were handed over to the garage to produce to the Insurance agent at the time of the survey. The only reason I picked an authorized Skoda garage, even after knowing the ridiculous prices they have, was because ICICI told me they had a cashless facility for that garage. 19-12-05: At 7:30pm, I get a call from Mr. Abhay stating that ICICI cannot process my cashless claim as a third party has been injured and a case has been filed. He instructed me that if I want my car I could pick it up after paying the full amount. I then spoke to Mr. Suresh Shetty, who stated, ―the ICICI legal department had advised them not to pay the claim‖. I asked 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. I also spoke to my long time insurance agent from New India Assurance who confirmed that there is no such requirement and that ICICI is known to harass its customers on large claims. I was put on the line with Mr. Kapil Madgar who stated that he was the Regional Manager. I asked him to provide me with the clause as mentioned above. However he rudely told me that he does not know and even though he was sitting in the office, he did not take the bother to atleast try and assist me. Till date, Mr. Abhay and Mr. Shetty were well mannered and helpful to the extent they could be, but I must say that the manner of speaking of Mr. Kapil leaves a lot to be desired! As it was obvious that I was not going to get an accurate answer on the phone, I have asked for a written statement by fax from the company showing me where this clause is mentioned. I was assured that it would be with me by 10am the next day. Nothing came. On 20/12/2005, I receive the biggest shock of my life. I get an unsigned fax from ICICI stating that they will NOT HONOUR my insurance at all stating the limitation in the policy of ―PACEMAKING‖. No explanation was given as to what they mean by pace making, and my agent at New India told me that this is a motor sport activity and does not apply to my case at all. All further attempts to get a proper reply from ICICI has fallen on deaf years, and a fax sent on the 20th to their MD – Mr. Sandeep Bakshi has not been replied too till date. There is no-one at ICICI who is willing to take responsibility, all their written correspondence is unsigned, and there is no-one you can speak to who will give you a straight answer. This from a company who‘s slogan is ―Haam hai na!‖ I should take them to court for false advertising alone! I have now approached the WIAA who are supporting me completely. This battle will now move to the Insurance Regulatory Board. From there I can move the Consumer Court if I am not happy with the verdict. However this will now take time and I have no choice but to fund the entire repair costs myself. But, from all the legal opinions I have taken, I am in very good standing legally and I should win my case plus penalties and other expenses paid to me. I am putting this topic up here now to WARN all other members (and the thousands of non-members who view this thread everyday) that ICICI are COMPLETE CHEATS AND DO NOT GIVE A DAMN ABOUT THEIR CUSTOMERS. They will try anything in their power to wriggle out of paying a large claim, which they are rightfully entitled to pay. This 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. And hopefully it will serve as a lesson to ICICI and other insurance companies that the Customer is no longer just going to lie down and take the CRAP that is meshed out to them. My Final notes – DO NOT DEAL WITH ICICI, whether it‘s their banking, insurance or loans. They will gladly take your money with a smile, but when it comes to actual customer service, they are the WORST I have ever had the displeasure of dealing with. Conclusion: The ethical and spiritual path in insurance, and in life, is an individual one. At times, it can feel like a solitary path. Ethics is not reached by consensus but by conviction. The ethical path may not be popular but it does stand the 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. Above all, ethics and the spiritual compass that underlies our individual ethical code, is not a destination, it is not even a journey, it is the journey. What is good, right and true usually stands the test of time and may not always be immediately apparent. The ethical ―stake in the ground‖ will always be scrutinized and criticized by someone. Presented by: Faiza Ishaq – 12 Divya Kamath – 23 Nahid Potrick – 37 Manish Punjwani - 38