Insurance and ethics—What is the ‘right thing’?

July 20, 2021

Independent agents need to pay attention to business ethics. Remember, if you act unethically, even if it’s unintentional, you could tarnish your credibility as an insurance professional, you could hurt the reputation of your agency’s brand and you even could find yourself facing an errors-and-omissions lawsuit.

What is ethics?

Ethics is defined as the study of right and wrong, based on morals.[1]

Ethics are important because they guide us to act with integrity and consideration for perspectives other than our own.

In the insurance industry, it’s imperative to consider ethics when selling your insureds coverage to ensure that you are protecting them, which can include guarding their personal information, and providing them with the best service. Acting in an ethical manner also helps your agency compete in the insurance market fairly.

Consider these scenarios

The insurer. An insurance producer worked diligently to earn the business of a large account. When the producer was writing the business, he found that the workers’ compensation coverage for the company had to be placed in the assigned-risk plan. The producer’s servicing carrier hadn’t thought it was worth the time auditing the company to find out whether it was insurable, but upon conducting a preliminary audit and reviewing the information that the producer collected, a representative from the carrier made an offer to the company that it couldn’t refuse—effectively stealing the business from the producer. Did the carrier behave ethically?

The public. AM Best has just lowered its score of a small carrier. An independent agent representing the carrier works in a rural area, and has had a difficult time obtaining viable markets. In fact, the independent agent doesn’t even have a market for many of her insureds if they wanted to move their business individually to another company she represents—but her competitors do. The carrier—that just had its score decreased—assures the independent agent that everything is okay, even though there is mounting evidence to suggest the opposite. Should the independent agent tell her insureds that the rating has dropped?

You can learn more

To learn more about the importance of ethics—and how it’s crucial that you are acting ethically and responsibly—register for Insurance and Ethics—What is the “Right Thing”?, which takes place Tuesday, July 27, 2021, 10 a.m.-1 p.m., with Mishell K. Magnusson, CIC, CISR, CPIA, AAI, FIPC. This class has been approved for continuing-education credits in all of PIA Northeast’s state associations. To sign up for this webinar, access your state’s PIA education schedule.


[1] Britannica. (2021) Ethics. Britannica. https://bit.ly/3BefveF

About the author…

Mishell K. Magnusson

Mishell K. Magnusson, CIC, CISR, CPIA, AAI, FIPC, is the owner of KJM Consulting & Training Inc., in Munnsville, N.Y. KJM specializes in providing a broad range of high-quality training programs to insurance agencies, insurance companies and banks in the Northeast. Magnusson is a regular speaker for PIA Northeast and is a nationally recognized leader in the insurance industry.

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