 This is the presentation that Ted
Pappas used when he was chosen to speak at the NAMIC
(National Association of Mutual
Insurance Companies)
Commercial Lines Seminar on
February 28 th , 2008 in Chicago.

Ethics In The Insurance Industry
Theodore M. Pappas,
CLU, CIC, CWCA

Ethics Awareness Month for the
Insurance Industry

What We Sell
But A Promise

OUR PROMISE:
To pay a claim in the event of an unknown contingency

To Sell An Intangible
All you have is your credibility and perceived honesty

What Do We Know About Our
Industry?
Eventually you will be between a rock and a hard place

“Perhaps THIS Will Refresh Your Memory”

We have a fear that there are a finite number of customers
“Entrepreneurs have this horrifying sense of scarcity, that the customers they have, are the only ones in the world”
-G. Richard Shell
Prof. Of Legal Studies & Management
Wharton School,
University of Pennsylvania

Defending an E&O claim is…
…A Liars Contest

Your Reputation,
Past ethical behavior, will be the key issue

If you have a history of :
Misrepresenting a risk, being creative in rating a risk or – simply ignoring the rules

That will be used to discredit you

REMEMBER
A jury of your peers has absolutely no idea how or what you do for a living

If the opposition can demonstrate you are less than ethical…

“ Touche !”

ETHICS:
A system of moral standards or values

ETHICS:
Rules or standards governing the conduct of a person or members of a profession

Easy To Define?
Different people and different organizations have different standards and values

An action considered ethical by one may not be considered ethical by another

In time of war?
Capital Punishment?
To steal to feed your children?

If it’s difficult to answer these questions covered by rules or laws, it’s more difficult to answer business ethical questions

Business Choices
Not between Right and Wrong…
…but between 2 RIGHT answers

LAW:
Minimum Standard

Ethical Behavior
Abides by the spirit of the law

Qualities Society Views as Ethical:
Honesty
Integrity
Responsibility
Respect
Courage

Ethical Decision:
Make best choice in compliance with duty
Rather than the best choice for him or her personally

Primary Cause of Unethical Behavior
Conflict of Interest

Conflicts of Interest
Do not equate to unethical behavior
Think of them as temptations to resist

Conflicts of Interest
Arise from unique circumstances
Relationships
Business Arrangements
Not known to the other party

TRANSPARENCY
-Eliot Spitzer

Impossible to eliminate all conflicts of interest

Acting Ethically
“Doing The Right Thing”

What are my legal duties and contractual obligations?

What benefits, what costs or harms each course of action produce?
Which alternative leads to best overall results?

Does one course of action best respect the moral rights of all?

Is one course of action fairer to all the parties than are the others?

Examples of Ethical Behavior:

Only making promises you can keep
Fulfilling all promises you make, or explaining why they can’t be fulfilled
Honesty in all communications

Stay within your area of expertise
Never oversell your knowledge or abilities
Disclose bad news timely
Disclose unavoidable conflicts of interest
Work through proper channels

Maintain confidences
Quickly admit and rectify mistakes
Associate with others known for their ethics and integrity
Join organizations that support ethics and integrity

People who display these characteristics are perceived as dependable and trustworthy

Add to this
In-depth and up-to-date knowledge on the technical side of the business

You are an
Insurance Professional

Insurance Generates Conflicts of
Interest

Ethics Comes Down To The
Golden Rule

Christianity: Do unto others as you would have them do unto you
Judaism: Thou shalt regard thy neighbor as thyself

In Judaism: Thou shalt regard thy neighbor as thyself
In Buddhism: Hurt not others with that which pains yourself
In Islam: No one is a believer until he loves for his bother what he loves for himself.
In Hinduism: Good people proceed while considering that what is best for others is best for himself.
In Christianity: Do unto others as you would have them do unto you
In Confucianism: What you do not want done to yourself, do not do to others.

CASE STUDIES
Sharing Information About an insurer
Intellectual Property
Board Member Conflict of
Interest
Underwriting Information
Treatment of Employees Application Misstatements
Gifts and Conflicts Competitor Misdeeds
Renewal Pricing
Insurance Certificates
Downsizing
Referrals to Competitors
Claim Settlements
Personal Relationships and
Duty to the Employer
Data Sharing
Surplus Lines Declinations
Commission Levels
Hiring Practices
Duty to Customers
Rebates and Premium
Financing

“It is easy to find successful businessmen, but not so easy to find men who put character above business”
- Orison Swett Marden 1908

“ Even if you are on the right track, you’ll get run over if you just sit there”
- Will Rogers
“ Never try to fool the men you represent.
Tell them what is possible and what is impossible to do. And look upon a single contract as something sacred - - a pact to be observed; an agreement which is your bond of good faith”
- Philip Murray
“ Your word is who you are.”
- Admiral James Greer
“Good enough seldom is”
- Debbie Fields

TEST

Special Thanks to….
D.C. Department of Insurance
Paul J. Winn, CLU ChFC
WebCE LP, LLLP
IRMI
National Alliance

Competition is an
Economic Fact of Life

1725 DeSales St. NW, Washington DC 20036 www.mclaughlin-online.com
202-293-5566
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