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." eniors e!plain that ethics includes the fundamental ground rules by which we live our lives. "hilosophers have been discussing ethics for at least #$%% 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. &alues which guide how we ought to behave are considered moral values, e.g., values such as respect, honesty, fairness, responsibility, etc. 'iscussions around how these values are applied are sometimes called moral or ethical principles.

Business Ethics is now a Management Discipline:

(usiness ethics has come to be considered a management discipline, especially since the birth of the social responsibility movement in the )*+%s. ,n that decade, social awareness movements raised e!pectations of businesses to use their massive financial and social influence to address social problems such as poverty, crime, environmental protection, e-ual rights, public health and improving education. .n increasing number of people asserted that because businesses were ma/ing a profit from

using our country's resources, these businesses owed it to our country to wor/ to improve society. Many researchers, business schools and managers have recogni0ed this broader constituency, and in their planning and operations have replaced the word "stoc/holder" with "sta/eholder," meaning to include employees, customers, suppliers and the wider community. 1he emergence of business ethics is similar to other management disciplines. 2or e!ample, organi0ations reali0ed that they needed to manage a more positive image to the public and so the recent discipline of public relations was born. 3rgani0ations reali0ed they needed to better manage their human resources and so the recent discipline of human resources was born. .s commerce became more complicated and dynamic, organi0ations reali0ed they needed more guidance to ensure their dealings supported the common good and did not harm others -- and so business ethics was born. 4ote that *%5 of business schools now provide some form of training in business ethics. 1oday, ethics in the wor/place 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 o !e o!ms

,6'. - central to the insurance reform process - is an autonomous, regulatory authority endeavoring to protect the interests of policy holders7 and regulate, promote 8 ensure orderly growth of the insurance industry. 1he ,6'. has been empowered to carry out several functions, including9 : "romoting and regulating professional organi0ations connected with insurance 8 reinsurance : ,mproving the efficiency while conducting the insurance business : Establishing a code of conduct for players in insurance : 'etermining the specification of accounts, and the manner in which funds are invested : ;aying down prudential norms for investment for both life and general insurance companies

T"E SI# STE$ INSURANCE $%ANNIN& $R'CESS

,nsurance "lanning 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.

= Esta(lishing and de ining the client ) planne! !elationship: 1he 2inancial advisor should clearly e!plain or document the services to be provided and define the responsibilities. 1he advisor should e!plain fully how he will be paid and by whom. 1he advisor should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests. 1he advisor should agree on how long the professional 6elationship should last and how decisions will be made.

* &athe!ing client data+ including goals: 1he 2inancial advisor should as/ for information about the financial situation. 1he planner should mutually define the personal and financial goals, understand the time frame for results and discuss, if relevant, how one feel<s about ris/. 1he 2inancial "lanner should gather all the necessary documents before giving the advice. = Anal,-ing and e.aluating the inancial status: 1he 2inancial advisor should analy0e the information to assess the current situation and determine what one must do to meet the goals, depending on what

services have been as/ed. 2or this one could include analy0ing the assets, liabilities and cash flow, current insurance coverage, investments or ta! strategies. = De.eloping and p!esenting /inancial $lanning !ecommendations and0o! alte!nati.es: 1he 2inancial "lanner should offer 2inancial "lanning recommendations that address the goals, based on the information provided. 1he planner should go over the recommendations with the client to help and understand them so that one ma/es informed decisions. 1he planner should also listen to the client<s concerns and revise the recommendations as appropriate. = Implementing the /inancial $lanning !ecommendations: 1he planner and the client should agree on how the recommendations will be carried out. 1he planner may carry out the recommendations or serve as your >coach<, coordinating the whole process along with professionals such as solicitors or stoc/bro/ers. = Monito!ing the /inancial $lanning !ecommendations: 1he planner should agree on who will monitor the progress towards the client<s goals. ,f the planner is in charge of the process, he?she should report personally to review the situation and ad@ust the recommendations, if needed.

Ethics in insu!ance toda, 1p!esent scena!io2:

.ccording to insurance sta/eholders, the issue of compliance with ethics and best practices should govern mar/et strategies and operations. ta/eholders have warned that the sector's efforts at achieving a more robust financial capacity would be rubbished if steps are not ta/en to address unethical practices and the prevalence of fa/e institutions in the industry. ,nsurance 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. ,nsurance, being a business that is based on trust, could only win the admiration and patronage of the buying public when there is a widely ac/nowledged effort by operators to operate by the rules laid down by trade bodies and the regulatory authorities. 3ne would agree that the level of capital companies have had to raise within the last few years is -uite challenging. 1hat is why there must be a collective resolve by underwriters, bro/ers, loss ad@usters, and agents to ensure that the additional funds in@ected into the sector are safeguarded and used optimally through strict adherence to ethics of the profession. 3perators are usually e!pected to display more commitment to ethical standards in all the operations. 1here should not be any room for unprofessional and unethical practices in the dispensation. Aenerally, the fear of losing business, rate cutting and offer of illegal inducements has compromised insurance operators' compliance to the industry's ethics.

,ndustry watchers say e!perience 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 /ey attributes of the sector.

Insu!ance and Ethics ,nsurance, by definition raises ethical -uestions. ,nsurance might be viewed as man<s attempt to control and influence an environment that we all /now is in Aod<s hands. Man<s attempt to insure anything is, at best, limited. ,nsurance is nothing more than a pooling of money to provide limited reassurance for a limited set of assets or circumstances. Many people loo/ to insurance to provide them with a complete sense of security and assurance. When they buy insurance some people thin/, B3h, now , don<t have to worry, everything will be ta/en care of.C Dnfortunately, over the years, the insurance industry has often nurtured this paternalistic and incorrect notion. (ecause they do not control the world, insurance is only a partial or stopgap measure to deal with the uncertainties that the world presents. ,nsurance does not provide the /ind of universal coverage and assurance that many people loo/ for. Many ethical concerns with insurance e!ist because of this gap between consumer e!pectations and genuine insurable ris/. 2or e!ample, people are often disappointed, angry or disillusioned to find that the insurance they have been paying for does not cover a particular situation. 1his can leave consumers feeling that insurance is a poor economic value or a Brip-offC. ,n this business managers fre-uently hear statements li/e, B,<ve paid thousands of rupees of premiums, and this small claim isn<t coveredC or B(ecause , forgot two payments, my coverage was cancelled. 4ow my claim won<t be paid after paying premiums for many yearsC, or B, didn<t understand what , bought, , thought everything was covered.C 4ot meeting a customer<s e!pectations can feel frustrating and dissatisfying to them. (ecause of this difference

between what people e!pect and what insurance provides, insurance is one of the most highly regulated industries in our country. .lthough it is national in scope, it is one of the few industries of its /ind that is primarily regulated at the state level with $% different sets of laws and regulations governing insurance. Eistorically, insurance has played an important role in the development of world economies. Dnfortunately, there are times when the industry has not been a good corporate citi0en. ,n some cases, the insurance industry has a history of discrimination, usurious prices, and dishonest business practices. ,s insurance a good business after all? 'oes it raise so many ethical -uestions that we should @ust avoid or eliminate it? 3nce loo/ed at carefully, insurance is a wonderful and much needed product. ,nsurance, at its core, is a pooling of community ris/s. ,t is a formali0ed way for people to come together and help each other. 2or e!ample, when we pay life insurance premiums, we are putting our money together, not @ust 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. "eople, in more informal ways, have done this for centuries. When someone dies, those remaining help the family. 1his may appear very basic, but insurance is much more powerful than @ust survivor benefits. ,nsurance allows us to ta/e ris/s and therefore fully live our lives. ,nsurance is re-uired in most industries and professions. 1his gives us some assurance of the -uality of goods and services that we use. Fommercial insurance for industries and professions has underwriting standards that re-uire certain practices, safeguards, licensing, and so on. ,n 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. &ery few of us would have surgery, ride in an airplane, get on an elevator, eat in a 6estaurant, 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 mista/e could ban/rupt the business and shatter customer confidence. ,nsurance not only provides protection to the consumer, but also frees us to conduct business. ,nsurance, @ust li/e money, is not an evil unto itself. ,t is a channel that can be used in very good and helpful ways. 3nce we accept the proposition that insurance actually is a good business, the ethical concerns do not end. ,n fact, in many ways, they @ust begin. Every day in running an insurance business, ethical considerations arise. . few of the -uestions insurance corporatists confront daily are9 ). What is a fair price to charge? hould we charge as much as we can, as little as we can, or something in-between? #. What is the proper level of customer service? Gust enough to get by, more than the customer has bargained for, or something in-between? H. What /inds of policies and procedures should govern the running of the company? both? hould we follow the letter of the law, the spirit of the law, or

I. Which laws are we tal/ing about, man<s laws, Aod<s laws, or both? When can and should we ma/e e!ceptions to our policies and procedures? $. Eow should we contract with other companies? hould we get as much as possible, give as much as possible, or something in-between? +. What should our benefits and compensation be for the people wor/ing within the company? hould we pay them as little as possible, as much as possible, or omething in-between? J. What should be done when someone is not doing the @ob? address these ethical dilemmas? hould we help them, get rid of them, or /eep them no matter what? Eow can we best

1here are no hard and fast answers to any of these -uestions. (ased upon the situation, any of the answers may be right. ,t is possible to face the changing -uestions, and the changing answers, every day depending upon the individualistic views and ethical followings.

Institute o! Insu!ance Ethics Mission and Purpose 1he mission of the ,nstitute for ,nsurance 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. . primary purpose of the ,nstitute will be to consider the role of ethics as an alternative to additional regulation of the insurance and financial services industry. Dnli/e many other businesses, insurance is based on mutual trust between insurance producers and insurance clients. 1rust, in turn, is based on the highest ethical standards. Vision of the Future 1he ,nstitute for ,nsurance Ethics will be a highly visible advocate for ethics and ethical behavior in the life insurance and financial services industry. ,t will be a strong, clear voice for ethical conduct and social responsibility within the insurance industry. 1he leadership shown by the institute will create ever-growing awareness of ethical issues among insurance and financial services professionals. 1hrough 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. 1hrough that training and awareness, consumers will continue to gain trust and confidence in insurance professionals and in the insurance industry.

C'DE '/ ET"ICS

elling ;ife ,nsurance is li/e selling intangible product. which ma/e him ? her worthy of trust and faith. 1he Fode of Ethics for the life insurance, mar/eting staff ). 1o perform his ? her duties in high esteem. #. 1o give utmost priority to the client's interest. H. 4ot to disclose client's confidential and personal information I. 1o ensure prompt and sincere service to the client and his or her family. $. 1o use appropriate methods in convincing clients to protect their insurable interest. +. 1o ma/e truthful and accurate presentations. J. 1o improve his ? her /nowledge of life insurance through constant study. K. 1o set a plan and wor/ accordingly. *. 1o maintain fair relations with colleagues. )%. 1o strictly follow the concerned laws and regulations. )). 1o obtain proposals only on the lives of persons who fits in the physical, moral and financial standard defined by the Fompany. )#. 1o be loyal to the 3rgani0ation. o, the mar/eting

staff needs to observe a set of norms in his ? her professional conduct,

1he ,6'. has formulated a Fode of Fonduct for the mar/eting staff which comprises two broad group heads vi0. "'o's" and "'on'ts". 1hey are listed herewith9

Do3s
). ,dentification of mar/eting staff and the insurance agency - certificate of ;icense to be shown to the prospect on demand. #. Match the needs of his ? her client with various products available with his insurer. H. Wor/ 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. I. (ring to the notice of his ? her client the implication of various -uestions in the proposal form and other documents and advise the client to disclose all the material information. $. 'isclose to the insurer all relevant information. +. ,nform the prospect about acceptance or re@ection of the proposal by the insurer. J. 3btain all documents from the prospect for the completion of the case. K. .ssist the policy holder in matters of9 Flaim settlement, Effecting nomination?assignment, 6evival, change of address, E!ercise of various options.

Don3ts - No Ma!4ete! shall

). olicit or procure insurance business without holding a proper

authori0ation #. ,nduce the prospect to omit to disclose the material information in the proposal form H. ,nduce the prospect to submit wrong information in the proposal form or in the documents submitted to the insurer for acceptance of the proposal I. (ehave in discourteous manner. $. ,nterfere with any proposal introduced by any other insurance mar/eters. +. 3ffer different terms and conditions other than offered by the insurer. J. "art with or share his incentive with "rospect or with any other person. K. 6eceive a share of the policy proceeds from the beneficiary. *. Fompel 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. )%. .pply for fresh license to act as an insurance mar/eter if his ? her earlier license ? authori0ation have been terminated with in five years from the date of termination. )). 6emain or become a director of any insurer carrying on insurance business in ,ndia.

Ethics in insu!ance: Building !elationships th!ough t!ust

1he momentum of the private insurance sector leaves no doubt in one<s mind that it is amongst the foremost growth sectors of our country. . mar/et share of #+.)K per cent in five years is testimony to this. (ut even while one braces himself to avail of the numbers within his?her sight, they need to reali0e that the "long-term" will belong to that company which rigidly benchmar/s ethics for itself and for the industry. ,n a business, where the customer entrusts the company with his ? her financial savings, ethics has a direct relation to sales. 1he greater the trust, the more the sales. 1here are many ways to build trust through ethics, the most fundamental being the way the product is designed. ,t should offer complete clarity and transparency and the literature supporting the product should not overpromise the benefits or understate the ris/s. 2or eg9 .t (irla un ;ife, the use of the sales illustration, the inclusion of the policy proposal form, and the free loo/ period they offer have served to win their customers' trust. (y giving customers the option to trac/ investments online and by publishing the performance of the funds against benchmar/ indices, specifically prepared for (irla un ;ife by F6, ,;, they prove that they are an open and reliable organi0ation. Ethics is an attitude that needs to touch every aspect of the customer relationship. ,t 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 fle!ibility options that address these needs, providing assistance and clarity in documentation and upgrades, and settling claims on time. Ethics means being fully accountable, not @ust to the company and to its customers, but to the industry they serve. 1he

inspiration for ethics thus comes from the highest source L from a need to impact the industry. 3n the flip side, a lac/ of ethics can have serious conse-uences. ;itigation 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. ,t's a fact that good ethics ma/es good business sense. 3f course, the mandate for good ethics always stems from the top. Which e!plains, why at (irla un ;ife, they have introduced a system of chec/s and balances that guards against concealment and why they follow norms of compliance and adhere to ,6'. regulations so scrupulously that their boo/s and processes are open to audit at all times. While top management can lay down a code of ethics and re-uest adherence, its implementation depends on the individual. .s .lbert Einstein said, "Ethics is an e!clusive human concern without any superhuman authority to bac/ it.C. Ethics is that discipline, that momentum that challenges a company to rise above themselves and raise the bar each time they interact. ,t is the means by which they measure themselves, the strength by which they progress, and the light by which they shall be remembered. ,t is the way ahead - for each individual and for his industry.

CASE STUD5:
F3'E 32 E1E,F .4' "632E ,F,F, ;3M(.6'-FEE.1 6ahul a!ena is a policy holder who is an unsatisfied consumer of ,F,F, ,34.; F34'DF1

;3M(.6'. Ee shares his personal e!perience with us. Member's 6ating of this "roduct9 Member's 6ecommendation of "roduct9 Fustomer ervice9 Flaims ettlement9 6ates?"remium9 6ange of "lans9 taff .ttitude9 "ros9 4one Fons9(usiness ethics

this

No

The Cheating (, ICICI 4ow if things could not get any worse, , am currently going through what can only be termed as the blatant cheating of a customer from one of ,ndia<s largest Fompanies M ,F,F,. 1he following is a timeline as to what happened and continues to happen. )#-))-%$9 .ccident too/ place. "olice report was made. ,nsurance company was notified and claim number received.

)+-))-%$9 .fter chec/ing the list of cashless garages on their company website, 3fficial and verifying the same with your customer service representatives as well as the garage of choice M .utograph /oda, /oda dealers, , towed the car to the wor/shop. .ll papers as desired by ,F,F, were handed over to the garage to produce to the ,nsurance agent at the time of the survey. 1he only reason , pic/ed an authori0ed garage. )*-)#-%$9 .t J9H%pm, , get a call from Mr. .bhay stating that ,F,F, cannot process my cashless claim as a third party has been in@ured and a case has been filed. Ee instructed me that if , want my car , could pic/ it up after paying the full amount. , then spo/e to Mr. uresh hetty, who stated, Bthe ,F,F, legal department had advised them not to pay the claimC. , as/ed 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. , also spo/e to my long time insurance agent from 4ew ,ndia .ssurance who confirmed that there is no such re-uirement and that ,F,F, is /nown to harass its customers on large claims. , was put on the line with Mr. Napil Madgar who stated that he was the 6egional Manager. , as/ed him to provide me with the clause as mentioned above. Eowever he rudely told me that he does not /now and even though he was sitting in the office, he did not ta/e the bother to atleast try and assist me. 1ill date, Mr. .bhay and Mr. hetty were well mannered and helpful to the e!tent they could be, but , must say that the manner of spea/ing of Mr. Napil leaves a lot to be desiredO .s it was /oda garage, even after /nowing the ridiculous prices they have, was because ,F,F, told me they had a cashless facility for that

obvious that , was not going to get an accurate answer on the phone, , have as/ed for a written statement by fa! from the company showing me where this clause is mentioned. , was assured that it would be with me by )%am the ne!t day. 4othing came. 3n #%?)#?#%%$, , receive the biggest shoc/ of my life. , get an unsigned fa! from ,F,F, stating that they will 431 E343D6 my insurance at all stating the limitation in the policy of B".FEM.N,4AC. 4o e!planation was given as to what they mean by pace ma/ing, and my agent at 4ew ,ndia told me that this is a motor sport activity and does not apply to my case at all. .ll further attempts to get a proper reply from ,F,F, has fallen on deaf years, and a fa! sent on the #%th to their M' M Mr. not been replied too till date. 1here is no-one at ,F,F, who is willing to ta/e responsibility, all their written correspondence is unsigned, and there is no-one you can spea/ to who will give you a straight answer. 1his from a company who<s slogan is BEaam hai naOC , should ta/e them to court for false advertising aloneO , have now approached the W,.. who are supporting me completely. 1his battle will now move to the ,nsurance 6egulatory (oard. 2rom there , can move the Fonsumer Fourt if , am not happy with the verdict. Eowever this will now ta/e time and , have no choice but to fund the entire repair costs myself. (ut, from all the legal opinions , have ta/en, , am in very good standing legally and , should win my case plus penalties and other e!penses paid to me. andeep (a/shi has

, am putting this topic up here now to W.64 all other members Pand the thousands of non-members who view this thread everydayQ that ,F,F, are F3M";E1E FEE.1 .4' '3 431 A,&E . '.M4 .(3D1 1EE,6 FD 13ME6 . 1hey will try anything in their power to wriggle out of paying a large claim, which they are rightfully entitled to pay. 1his 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. .nd hopefully it will serve as a lesson to ,F,F, and other insurance companies that the Fustomer is no longer @ust going to lie down and ta/e the F6." that is meshed out to them. My 2inal notes M '3 431 'E.; W,1E ,F,F,, whether it<s their ban/ing, insurance or loans. 1hey will gladly ta/e your money with a smile, but when it comes to actual customer service, they are the W36 1 , have ever had the displeasure of dealing with.

Conclusion:

1he ethical and spiritual path in insurance, and in life, is an individual one. .t times, it can feel li/e a solitary path. Ethics is not reached by consensus but by conviction. 1he 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. .bove all, ethics and the spiritual compass that underlies our individual ethical code, is not a destination, it is not even a @ourney, it is the @ourney. What is good, right and true usually stands the test of time and may not always be immediately apparent. 1he ethical Bsta/e in the groundC will always be scrutini0ed and critici0ed by someone.

Presented by:
Faiza Ishaq 12

Divya Kamath 23

Nahid Potrick 3

!anish Pun"#ani $ 3%