Ethics in insurance

Ethics in insurance sector

Ethics in Insurance Sector

1-OVERVEIW ON BUSINESS ETHICS. Business ethics is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all all aspe aspect ctss of busi busine ness ss cond conduc uctt and and is rele releva vant nt to the the cond conduc uctt of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road r oad tax for higher-emis higher-emission sion vehicles). vehicles). Businesses Businesses can often attain short-term gains by acting in an unethical fashion; however, such behaviors’ tend to undermine the economy over time. Business ethics can be both a normative and a descriptive discipline. As a corp corpor orat atee prac practi tice ce and and a care career er spec specia iali liza zati tion on,, the the fiel field d is prim primar aril ily y normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, toda today y most most majo majorr corp corpor orat atee webs websit ites es lay lay emph emphas asis is on commi commitm tmen entt to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have 1

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redefined their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

2-MEANING OF ETHICS. Ethics in Latin Language is called “Ethicus” and in Greek, it is called “Ethicos”. In fact, this word has originated from “ethos’ meaning character or manners. Ethics is thus said to be the source of morals; a treatise on this; moral principles; recognized rules rules of conduct. The character of a man is expressed in terms of his conduct (ref: Diagram 1) Leads to

Decided by Charter of a Man

Conduct of a Person

Taken together Series of Actions Considered as

By which we can judge again

Good or Bad, Right or Wrong, Moral or Immoral

Known as Moral Judgment Moral Standards

Requirements

Meaning of Ethics










Ethi Ethics cs thus thus can can be cons consid ider ered ed as the the sour source ce of char charac acte terr of a pers person on expressed as right or wrong conduct or action.

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.










3-ADVANTAGES. 1) It builds a value based organization : Ethical behaviour is important for business leaders as they imbibe high degree of trust, integrate and motivate and empower all the stakeholders thereby building a strong organization whic which h can can comp compet etee in a glob global alis ised ed econ econom omy. y. For For e.g. e.g.:: Tata Tata Grou Group p of company has a very good reputation of business ethics.

create atess awaren awareness ess about about the the corpo corporat rates es social social respon responsib sibili ility ty of 2) It cre business: A business is a part of the society and it shares its prosperity by

offering various facilities and services to its immediate community. It also funds important important projects which are for welfare welfare of the community. community. For eg: building garden, hospitals, hospitals, schools.

3) Busine Business ss eth ethics ics is a pract practice ice:: Managers has to study the theory of business ethics and practice it in their professional life as they understand the nature of ethical dilemma and analyzing it they are better equipped to practice business ethics.

4) Practising ethics at work place: It makes the individual associated with the the orga organi nisa sati tion on awar awaree abou aboutt thei theirr divi divine ne natu nature re and and bring bringss peac peacee and and harmony to all of them.










4-INSURANCE - The indication of reforms. IRDA IRDA - cent centra rall to the the insu insura ranc ncee refo reform rm proce rocess ss - is an auto autono nomo mous us,, 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 carr y out several functions, including:

* Promoting and regulating professional organizations connected with insurance & reinsurance * Improving the efficiency eff iciency 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










5-THE SIX STEP INSURANCE PLANNING PROCESS. Insura Insurance nce Planni Planning ng is the proces processs of provid providing ing advice advice and assist assistanc ancee to clients to determine whether and how clients can meet their financial needs and life’s goal through proper management of financial f inancial resources.

♦ Establ Establish ishing ing and def defin ining ing the clien clientt – planne plannerr relat relation ionshi ship: p: 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 inte intere rest sts. s. The The advi adviso sorr shou should ld agre agreee on how how long long the the prof profes essi sion onal al 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.












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.

♦ Developin Developing g and presenti presenting ng Financia Financiall Planning Planning recommen recommendat dations ions 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 also listen listen to the client client’s ’s concer concerns ns and revise revise the the recomm recommend endati ations ons 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.

♦ Monitori planner Monitoring ng the Financia Financiall Planning Planning recommend recommendatio ations: ns: The planner










6-ETHICS IN INSUSRANCE TODAY(PRESENT SCENARIO). According to insurance stakeholders, the issue of compliance with ethics and best practices should govern govern market strategies and operations. operations.

Stakeholders have warned that the sector's efforts at achieving a more robust financ financial ial capaci capacity ty would would be rubbis rubbished hed if steps steps are not taken to address address unethical practices and the prevalence of fake institutions in the industry. Insurance Insurance operators operators need to devote 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. Insura Insuranc nce, e, bein being g a busi busine ness ss that that is base based d on trus trust, t, coul could d only only win win the the admira admiratio tion n and patronage patronage of the buying buying publi publicc when when there there is a widely widely acknowledged effort by operators to operate by the rules laid down by trade bodies and the regulatory 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










Gene Genera rall lly, y, the the fear fear of losi losing ng busi busine ness ss,, rate rate cutt cuttin ing g and and offe offerr of ille illega gall induce inducemen ments ts has compro compromis mised ed insura insurance nce operat operators ors'' compli complianc ancee to the industry's ethics. Indust Industry ry watche watchers rs say experi experienc encee of non complian compliance ce with with ethics 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.










7-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. Insura Insuranc ncee is noth nothin ing g more more than than a pool poolin ing g of mone money y to provi provide de limi limite ted d 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.










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 insurance provides, provides, insurance insurance is one of the most highly 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. economies. Unfortuna Unfortunately, tely, 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. Once Once look looked ed at care carefu full lly, y, insu insura ranc ncee is a wond wonder erfu full and and much much need needed ed product. Insurance, at its core, is a pooling of community risks. It is a forma formali lize zed d way way for for peop people le to come come toge togeth ther er and and help help each each othe other. r. For 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 our clai claim m is paid paid to our our fami family ly from from the the same same pool pool Peop People le in more more












8-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 other busine businesse sses, s, insura insurance nce is based based on mutual mutual trust trust betwee between n insura insurance nce producers and insurance clients. clients. Trust, in turn, is based on the highest highest ethical standards.










9-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.










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










Don'ts - No Marketer shall

1. Soli Solici citt or procu rocure re insu insura ranc ncee busi busine ness ss with withou outt hold holdin ing g a prop proper er 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 incentive with Prospect or with any other person.










10-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 realiz realizee that that the "long"long-ter term" m" will will belong belong to that that compan company y which which rigid rigidly ly 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












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










11-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










BIBLIOGRAPHY.

insurance.about.com/od/inse insurance.about.com/od/inseth/Ethics.htm th/Ethics.htm www.docstoc.com › Education › Graduate www.insurancenetworking.com www.insurancenetworking.com/.../insurance_et /.../insurance_ethics_ethisphere hics_ethisphere_ _

Ethics in insurance

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