Ethics, Privacy and Compliance
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Polling
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Disclaimer
Insurance forms and endorsements vary based on insurance
company; changes in edition dates; regulations; court
decisions; and state jurisdiction. This instructional
materials provided by Insight is intended as a general
guideline and any interpretations provided by the
instructor or the creator(s) of this material do not modify
or revise insurance policy language. In providing these
materials, the authors assume neither liability nor
responsibility to any person or business with respect to
any loss that is alleged to be caused directly or indirectly
as a result of the instructional materials provided.
Copyright 2010 – 2013 All Rights Reserved
www.insurancecommunitycenter.com
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Disclaimer:
 All of the following material is for educational
purposes only. The Contractual Risk Management
area of
 liability and coverage is in a constant state of change.
What is current today can be outdated tomorrow.
 This information is to be understood from a risk
management perspective only. It is not intended as a
 substitute for competent legal advice. You should
check with your legal adviser to determine
suitability,if any, to your specific circumstances.
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Your Instructor Today
Robert J. Marshburn, CRM, CIC, ARM, CRIS, CISC
Founder and Principal
R. J. Marshburn & Associates
www.CertifiedRiskManagers.com
Senior Educational Consultant to
Insurance Community Center/University
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Topics Discussed Today
 Why should we study ethics?
 What is ethics?
 The importance of ethics to the
insurance professional?
 Foundation of Ethics
 Ethics in the Workplace
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Topics Discussed Today




Why have a Code of Ethics?
Managing Ethics in the Workplace
Ethics and the Law
Privacy and the Law
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Why Should We Study Ethics?
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Why Should We Study Ethics
1. High profile cases have raised the
question of ethical behavior across
both the private and public sector in
recent years
2. Enron and WorldCom
3. Spitzer Investigations
4. Clients are aware and have questions
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Scenario #1:
 You are an account executive and are
working on your largest renewal. You
have two quotes from insurers.
 Both meet the client’s needs and
requirements. Both are rated the same
by Bests.
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Scenario #1:
 The renewing company’s quote is 5%
more than the new insurers quote. The
new insurer is a recent addition to the
agency and has written little business
for the agency.
 The client is happy with the renewing
insurer and is willing to pay the
additional 5% if you recommend it.
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Scenario #1:
 The new insurer has stated that if you
write the account with them, they will
send you on an all expense paid
weekend trip to a location of your
choice. What do you do?
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Polling Question #1
21
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Scenario #2
 You are an risk management consultant
under contract with a large
manufacturing firm.
 You have completed your analysis,
developed insurance specifications, and
distributed them to selected insurance
agents agreed to by the risk manager.
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Scenario #2
 The CFO, the risk manager’s superior,
has approached you and asked you to
include another broker and to be sure
that the broker gets a “last look” at all
other proposals.
 You are aware that the CFO’s brother in
law works for the broker. What do you
do?
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Polling Question #2
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Scenario #3
 Over a period of time, you have
observed a coworker, a single parent of
three school age children, taking pens,
pencils and paper clips home for her
children’s use at school.
 What do you do?
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Polling Question #3
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What is Ethics?
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Insurance Community University
What Is Ethics?
 Webster—The discipline dealing with
what is good and bad and with moral
duty and obligation
 Knowing what is right or wrong and
then doing what's right
 Fundamental ground rules of our work
lives
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What Is Ethics?
 Business ethics is a form of applied
ethics; involves instilling into a
company’s employees a sense of
 how to conduct business responsibly
 The Golden Rule—Do unto others what
you would want them to do unto you
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The Importance of Ethics to the
Insurance Professional
1. Insurance is a business of trust
2. Trust anticipates standards of behavior
3. Fiduciary obligation—relating to a
holding of something in trust for
another; one who obligates himself or
herself to act on behalf of another and
assumes a duty to act in good faith and
with care, candor, and loyalty in
fulfilling the obligation
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The Importance of Ethics to the
Insurance Professional
4. What is the standard of care?
5. Higher than my own
6. Some standards of behavior are
governed by statute
7. Statutory obligations should not be the
reason for ethical behavior
8. Ethics are becoming more difficult to
interpret as businesses become more
complex
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Polling Question #4
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Foundation of Ethics
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Foundation of Ethics
1. The philosophical background of ethics
can be traced to Aristotle, who first
made a serious and systematic study of
moral principles that he called ethics
2. Religions (all faiths) establish moral
guidelines that govern behavior
3. Ethics and morality are interrelated
4. Ethical behavior is also embodied in
statutes governing business conduct
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Foundation of Ethics
5. Personal backgrounds provide the
foundations for behavior early in life
6. Greed and power can both influence one’s
perception of acceptable behavior
7. Competition can drive behavior
8. The actions of business associates can affect
patterns of corporate behavior
9. Fear of discovery can adversely affect
individual behavior
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Changing Ethical Behavior
 Can ethics be taught? Can established
patterns of behavior be changed?
 The importance of an ethical code of
conduct in the business environment
 Laws governing business ethics and
behavior must be known and
understood
 Ethical behavior must be enforced
(crime and punishment)
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Ethics and the Workplace
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Ethics in the Workplace
 How can ethics in the workplace be
managed?
 Ethical behavior starts at the top. If
leadership and management are not
ethical, neither will the organization be
as a whole
 Codes of ethics; codes of conduct
 Roles of ethicists and ethics committees
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Ethics in the Workplace
 Policies and procedures
 Procedures to resolve ethical
dilemmas—Medical example
 Ethics training and Education of
employees in ethical conduct is essential
in preventing unethical conduct
 Must determine what constitutes a
conflict
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Polling Question #5
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Ethics in the Workplace
 Group of disinterested experts should
develop guidelines in as much specific
detail as possible as has been done by
many professional societies
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Why Have a Code of Ethics?
42
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Why Have A Code of Ethics
 Reasons and Benefits for having a code
of ethics:
 Honesty, full disclosure, and integrity is
vital for establishing the trust that is the
basis for all successful business
relationships.
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Benefits
1. Promote high standards of business
practice
2. Develop an awareness and sensitivity
to ethical issues
3. Define and communicate accepted and
acceptable behaviors
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Benefits
4. Integrate ethical guidelines into
decision-making and establish
mechanisms for resolving ethical
dilemmas
5. Help to cultivate teamwork and
employee productivity and provides a
benchmark for employees to use for
self-evaluation
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Benefits
6. Enhance conformity to the spirit,
intent, and letter of all laws and
governing regulations
7. Does it pass the smell test?
8. Instill the importance of principles, not
just rules. General codes of conduct;
can always get around rules. Teach the
why and how.
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Benefits
9. Mechanism provides for continuing
feedback, evaluation and update of the
code of ethics
10.Last, and most important, focus
attention on ethics in the workplace as
the right thing to do
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Honesty
 Honesty (Telling the truth; Keeping
promises) establishes trust;
 Trust establishes the foundation for
many good things—
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Polling Question #6
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Polling Question #7
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1. Comfort
2. Optimism
3. Benefit of doubt
4. Growth
atmosphere
5. Confidentiality
6. Deeper “layers”
7. More closeness
8. Satisfaction
9. Fairness
10. Integrity
11. Loyalty
12. Compassion
13. Competence
14. Technical knowledge
and skills
15. Keeping up with
changes (continuing
education)
16. Knowing when to ask
for help
17. Pursuing excellence
18. Productivity
19. Retention
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Examples of Issues that Should be
Addressed in the Code of Ethics
1. Avoid conflict of interest or the
appearance of conflict of interest.
2. Follow the organization’s code of ethics
as it pertains to entertainment and
gifts from third-party service providers.
3. Avoid the intent and appearance of
unethical or compromising practice in
all relationships, actions and
communications.
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Examples of Issues that Should be
Addressed in the Code of Ethics
4. Do not do business with any organization in
which the risk manager or any family
member has an financial interest.
5. Strive to be aware of all cultural differences
regarding business customs and ethical
behavior, and avoid any behavior that is, or
may appear to be, unethical according to
local customs or laws.
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When in Doubt—Ask!
 Wrong: It is easier to ask for forgiveness
than to ask for permission
 Right: It is better to ask for permission
than to ask for forgiveness
 Why? The stakes are too high. One
unethical decision can bring down a
career and possibly a company
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Polling Question #8
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Doing What’s Right—Ethical
action test for ideas and actions:
 Is it legal?
 Does it comply with company rules and
regulations?
 Is it in sync with organizational values?
 Will you be guilt free if you do it?
 Does it match stated commitments?
(Source: George S. May International
Company)
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Doing What’s Right—Ethical
action test for ideas and actions:
 Would I do it to my family and friends?
 Would it be OK for someone to do it to
me?
 Would the most ethical person I know
do it?
 When faced with a situation that you
believe is not ethical or is outright
wrong:
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Doing What’s Right—Ethical
action test for ideas and actions:
 State your objection and concern
without indictment
 Propose an alternative action that you
feel is ethical
 Ask for the person’s help and agreement
 Unless you are the ultimate decision
maker, seek assistance from higher
authority
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Developing a Code of Ethical Conduct
(8 Steps to a Corporate Code of Conduct)
1.
2.
3.
4.
5.
6.
7.
8.
Find a champion
Get endorsement from senior management
Find out what bothers people
Pick a well tested model (websites)
Produce a Code of Conduct
Try it out (on a sample of employees)
Issue to employees
Make it work
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Managing Ethics in the Workplace
60
The bottom line of an ethics program is
accomplishing preferred behaviors in the
workplace.
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Accomplishing Preferred
Behaviors
1. The best way to handle ethical
dilemmas is to prevent their
occurrence in the first place.
2. Make ethics decisions in groups, and
make decisions public, as appropriate.
3. Use cross-functional teams when
developing and implementing the
ethics management program.
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Accomplishing Preferred
Behaviors
4. Note that ethical perfection may not be
realistically achievable but that making
a few mistakes is better than not trying
at all.
5. Include policies and procedures to
address ethical dilemmas to ensure
training of employees about theethics
management program—Medical
example
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Accomplishing Preferred
Behaviors
6. Reward ethical behavior and impose
consequences for unethical behavior
7. Include a grievance policy for
employees to use to resolve
disagreements with supervisors and
staff.
8. May wish to consider establishing an
ethics “hotline.”
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Polling Question #9
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Examples of topics addressed by
a code of ethics/conduct
 Complying with laws and regulations
 Reporting illegal or questionable activity
 Avoiding age, racial or sexual
discrimination
 Avoiding illegal drugs
 Not using organization's property for
personal use
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Examples of topics addressed by
a code of ethics/conduct
 Avoiding conflict of interest
 Not accepting personal gifts from stakeholders
as a result of company role
 Maintaining confidentiality
 Confidentiality versus Secrecy
 Full disclosure
 Following instructions of superiors
 Being reliable and prompt
 Preferred style of dress
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Implementing the Code of
Conduct
1. Make sure senior management endorses
2. Circulate Code to all employees
3. Regularly review Code with employees e.g.
performance reviews
4. Publicize code externally (clients, insurers)
5. Enforce the Code
6. Incorporate as part of new employee
orientation
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Ethical Dilemmas Need to Be
Confronted and Discussed Openly
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Reporting Unethical Conduct
 Factors influencing the reporting of
unethical conduct (whistle blowing)
 Fear of reprisal (by management)
 Fear of reprisal (by co-workers)
 Fear of personal reputation
 Fear of job loss
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Reporting Unethical Conduct
 Not “ratting out”; it is preserving right
standards and results!
 These fears can be mitigated by ethics
procedure, grievance policy, and ethics
“hotline.”
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Conflicts of Interest
 Conflicts of interest and their impact on
ethical behavior
 Actual conflicts
 The appearance of conflict
 Avoiding conflicts
 What to do should a conflict of interest
(actual or appearance of) occur
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Six Basic Guidelines for Ethical
Business Operations
1. Laws – Is the action contemplated
legal?
2. Rules & Procedures – Does the planned
action comply with established norms?
3. Values – Does the planned action
follow both the letter and the spirit of
the law?
4. Conscience – Can you truly justify your
actions to yourself?
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Six Basic Guidelines for Ethical
Business Operations
5. Promises – Will your actions live up to
your commitments?
6. Heroes – Is your action what your hero
would do in the same situation
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Ethics and the Law
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Ethics and the Law
1. Various Federal and State agencies and
laws govern business ethics
2. Unfair competition
3. Unfair trade practices
4. Federal Trade Commission
5. FTC Act
6. Uniform Deceptive Trade Practices Act
(States)
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Ethics and the Law
7. Security and Exchange Commission
8. Anti Trust Laws
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Polling Questions
 Your bosses daughter works for the
agency and has flunked her license six
times. You have overheard her on
several occasions giving insureds
coverage advise and even quoting
additional coverages to upsell. This has
made you very uncomfortable. What
should you do?
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Insurance Specific Regulations
 Regulations governing companies,
agents, and brokers
 Licensing
 Rates, rules, and forms
 Premium trust accounts
 Consumer protection
 Surplus lines laws
 Fair claim practices
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Insurance Specific Regulations
 Broker compensation disclosure
 Regulators and legislatures must address real
and perceived problems of ethics within the
industry
 Industry input is important to this process
 Compensation Disclosure
 Placement Service Agreements (PSA’s) and
contingent commission agreements
 Ethical problems with PSA’s and contingent
commission agreements
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The Texas Instruments Ethics
Quick Test







Is the action legal?
Does it comply with our values?
If you do it, will you feel bad?
How will it look in the newspapers?
If you know it is wrong, don’t do it.
If you are not sure, ask.
Keep asking until you get an answer.
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Business Scandals and Ethics
 Keep in perspective that corporations do
not make ethical decisions – individuals
do.
 A business needs to create an
atmosphere and environment for acting
ethically.
 But in the end, it is individuals that
make or fail to make ethical decisions.
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Current Ethical Issues in
Insurance




The Spitzer allegations
Fraud
Antitrust violations
Fiduciary duties – The invitation to a
lawsuit
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Privacy and the Law
83
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Common Themes from Privacy
Statutes
 Notice
 What collected, why needed, and what
used for
 Individual advised whether mandatory vs.
voluntary
 Relevance
 Accuracy
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Common Themes from Privacy
Statutes
 Nondisclosure to 3rd party unless a
legitimate business activity related to
original collection purpose
 Aggregate information - just the
statistics - may be shared as long as
individual customer identities and
characteristics are removed
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Common Themes from Privacy
Statutes
 Security
 Rules & procedures
 Employee training
 Enforcement
 Personal liability
 Vicarious liability
 No intent to harm need be proven and
punitives are permitted in the federal acts
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Common Themes from Privacy
Statutes
 Access
 Notification of source
 Right to dispute
 Explanation
 Notice of “adverse action”
 Source of original data
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Ethical Use of Information





Pure Market Research
Customer Service
Targeted Promotion
Qualifying clients
Eliminating fraud
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Deciding Whether the Situation
has Ethical Dimensions
 Is it legal but unethical?
 Is it necessary?
 Does it involve a core ethical principle?
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Gathering Information
 Who are the stakeholders and what are
their rights?
 Have I considered the source, reliability,
and accuracy of all relevant
information?
 Who should be involved in this
decision?
 Do I have enough information to make a
sound ethical decision?
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Identifying and Evaluating
Alternatives
 What unethical alternatives can I eliminate
and still solve the problem?
 Am I rationalizing to justify what I want to do?
 Am I “using” anyone for my own personal gain?
Who will be harmed?
 Are there conflicting loyalties to stakeholders?
 What would result in the long term if everybody
did this?
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Reaching the Decision
 Could I defend my position before the
Board of Directors, the CEO or the
media?
 What would __________________do?
 How would I feel telling my children (or
parents) about what I am doing?
 Will this seem to be the right decision a
year from now? Five years from now?
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Monitoring the Decision
 What should I do if new information
changes the picture?
 How can this type of situation be
avoided in the future?
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Conclusion
 Agents and Brokers have a high degree
of Fiduciary responsibility
 Ethics are the right thing to do!
 Ethics have real benefits to the public,
the individual, and the organization.
 Act with a desire to serve and serve well
 Ours is not just a career—it is a mission!
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Attendance Check!!
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