Keeping Current

The Business of Insurance

Table of Contents

Chapter 1: Legal Principles of Insurance Professionals	1
Your Role as an Insurance Professional	1
The Duty of Good Faith – Why It Matters	2
Standard Contracts Versus Insurance Contracts	2
Offer and Acceptance	3
Consideration	3
Legal Purpose	4
Competent Parties	4
A Brief Historical Review of Uberrimae Fidei	4
Utmost Good Faith: Promoting Trust and Transparency	6
Duty of Performance	6
Duty of Cooperation	6
Applying the Principle of Utmost Good Faith	7
What information must be disclosed?	7
What information may not need to be disclosed?	7
Table 1.1 – Areas in Insurance Applicable to the Principle of Utmost Good Faith	8
Utmost Good Faith: Breaking the Trust	9
Misrepresentation:	9
Non-Disclosure	9
Table 1.2 – Examples of a Breach in the Principle of Utmost Good Faith	10
The Concept of Information Asymmetry and Adverse Selection	11
The Role of Insurance Regulation	13
The Purpose of Insurance Regulation	13
A Brief History of Insurance Regulation in the United States	14
Paul v. Virginia (1869)	14
US v. The South-Eastern Underwriters Association (1944)	15
McCarran-Ferguson Act (1945)	16
Reverse Preemption	16
Table 1.3 – Examples of Congress’ Intervention on Insurance Regulation	17
Insurance Regulation and You	18
Determining Licensing Requirements	18
Insurance Agents	18
Insurance Brokers & Insurance Adjusters	19
A Closer Look at the Legal Principles for Insurance Agents	20
Principles of Common Law: The Concept of Agency	20
Binding Authority	21
General Binder	21
Conditional Binder	21
Actual Authority	22
Implied Authority	23
Apparent Authority	23
The Doctrine of Waiver and Estoppel	24
Ratification	25
Principles of Insurance Contract Law	25
The Principle of Utmost Good Faith	26
The Principles of Insurable Interest	26
The Principle of Indemnity	27
The Principle of Subrogation	28
The Principle of Contribution	29
The Principle of Proximate Cause	29
The Principle of Loss Minimization	30
Concepts of Civil Law: Legal Liability	31
What is the Basis for Legal Liability?	32
Tort Liability: Negligence, Strict Liability, and Intentional Liability	32
What is a tort?	32
Negligence	32
Strict Liability	33
Intentional Torts	34
Contractual Liability: Assumed Liability and Warranties	34
Assumed Liability	34
Warranties	35
The Future of Insurance Regulation and Litigation and You	36
The Effects of COVID-19-Related Insurance Litigation	36
The Potential and Availability of New Forms of Pandemic Coverage	38
Conclusion: Significant, but Not Radical	39
Chapter 2: Discrimination in the Insurance Industry	41
Identifying Systemic Discrimination in Insurance	41
An Analysis of Racial Discrimination in America and Insurance	41
Residential Security Maps Introduces Redlining	42
Legal Cases Affecting the Insurance Industry	43
Historical Legislative Acts Against Racial Discrimination	44
Discrimination In America Today: A Relevant Topic	45
Beliefs and Experiences of Racial Discrimination in America	46
Housing – Health Care	46
Racial Discrimination in Unprecedented World Events	47
Defining Unfair Discrimination in the U.S. Insurance Industry	48
The Standard of Unfair Discrimination	49
Revisiting The McCarran-Ferguson Act of 1945	49
Revisiting The NAIC’s Unfair Trade Practices Act	50
Unfair Discrimination: Theory Versus Reality	51
A Federal Definition with a State Interpretation	51
Disparate Impact and Proxy Discrimination in Insurance	53
Disparate Impact: A Question of Unintended Effect	53
Proxy Discrimination: Finding Evidence That Discrimination is Intentional	54
How could unintentional proxy discrimination occur?	56
How could intentional proxy discrimination occur?	56
Identifying Subtle Forms of Discrimination in Insurance Practice	57
Critical Analysis of Discrimination in the Insurance Industry	58
Subtle Forms of Discrimination	60
Credit Cards	60
Zip Codes	62
Big Data	66
Why would this be a problem for the insurance industry?	67
What does this mean for insurance professionals?	68
Representation	69
What is the current situation regarding diversity and representation in the insurance industry?	70
What could be done to increase diversification in the insurance industry?	71
Canada	73
The Bates v. Zurich Decision	73
The Canadian Charter of Rights and Freedoms: Theory Versus Reality	76
Individual Treatment & Causation	77
Intrinsic Fairness	78
The Conclusion of the Matter	78
Chapter 3: Reinsurance	80
The Impact of Natural and Man-Made Disasters on the World Scene	81
A Worldwide Problem – Understanding the Disaster	81
What is the criteria for classifying a disaster?	82
The Cost of Natural Disasters on the Insurance Industry: A Challenging Problem	83
Table 3.1 – Top Ten Global Insured Loss Events in 2022	84
California: The State on Fire	85
The Frequency of Wildfires in California	85
Proposition 103 and the Limitations of Underwriting Regulations	86
The Challenge of Construction Costs, Supply Issues & Inflation	86
The Results: What Are Insurance Companies Doing in California?	87
Learning From the Past: The Insurance Industry and Flood Coverage	87
A Vicious Cycle or a Natural One?	88
What are hard and soft markets?	88
Graph 3.1 – Number of recorded natural disaster events from 1900-2022	89
Explanations	90
Conclusion: Looking Towards the Future	93
Table 3.2 – Losses Comparison	93
Key Points	93
The History of Reinsurance	94
What can insurance companies do?	94
The History of the Reinsurance Industry	94
Reinsurance in the 1300s – 1600s: Early Mentions of Reinsurance	95
Reinsurance int the 1900s: The Emergence of Reinsurance Companies	95
Reinsurance in the 20^th Century: Adapting to a Changing World	100
Risk Management	101
Reinsurance in the 21^st Century: A Fight Against Overwhelming Odds	103
Figure 3.1 – Loss Distribution By Insurance Type for September 11^th, 2001	103
Risk-based pricing	106
Subprime borrowers	106
“Securitizing” mortgages	107
How did the Insurance Industry fair during this time?	107
Credit default swaps	107
Key Points	108
Reinsurance – Managing Catastrophic Risk in a Dangerous World	109
Types of Catastrophic Events: Geophysical, Meteorological, Hydrological, and Climatological	109
Geophysical Events	110
Table 3.3 – Notable Geophysical Events Within the Last Two Decades	110
Meteorological Events	111
World Meteorological Organization	111
Saffir-Simpson Hurricane Wind Scale	111
Table 3.4 – Notable Meteorological Events within the Last Two Decades	113
Hydrological Events	114
Table 3.5 – Notable Hydrological Events within the Last Two Decades	114
Organization of Economic Cooperation and Development	115
Climatological Events	115
What are climatological events?	115
Droughts and Wildfires	115
Figure 3.2 – The Fire Triangle	116
Fuel – Oxygen – Heat Source	116
Table 3.6 – Notable Climatological Events within the Last Two Decades	116
Reinsurance: Dealing with the Concept of Risk	117
The Perception of Risk has Evolved Over Time: Information at Our Fingertips	118
More Money, More Problems	118
The Decline of a Religious Perspective of Risk	119
An Externalization of Guilt and Responsibility	120
The Perception of Risk in the New Millennium	120
Table 3.7 – Top Five Global Risks Over the Last Five Years	121
“Panic-neglect” Cycle	122
What caused this so-called “Panic-neglect” cycle?	122
Insurance Changes the Perception of Risk	123
Reinsurance: Experts at Risk Management	124
Taking Control of Risk: A Framework of Strategy and Function	124
Risk Tolerance and Risk Appetite	124
Assessing and Pricing Insurance Risk with Poper Underwriting	125
Randomness – Accessibility – Mutuality – Economic Viability	126
Managing Assets: Setting and Investing Expectations	126
How do reinsurers handle such a delicate operation?	127
Economic Value	127
Managing Capital: The Buffer Against Unexpected Losses	127
Insurance Vs. Reinsurance: An Analysis of Two Distinct Industries	128
Reinsurance contracts are written for insurance companies	128
Reinsurance companies are not regulated in the same way as insurance companies	128
Reinsurance protects against natural calamities or catastrophes	129
Reinsurance companies focus on different risk factors	129
What Are the Similarities of Reinsurance and Insurance?	129
The law of large numbers	129
What Are the Benefits and Advantages of Reinsurance?	130
Capacity	130
Stabilization	131
Financial Results Management	131
Catastrophic Protection	131
Advice	131
Basic Types of Reinsurance	131
Treaty Reinsurance: Covering Broad Groups of Policies	132
Facultative Reinsurance: Assessing Risk on a Case-By-Case Basis	133
What are the advantages of facultative reinsurance?	133
Proportional Vs. Non-Proportional Reinsurance: Who Gets the Share?	133
Table 3.8 – Proportional Reinsurance	134
Table 3.9 – Non-Proportional Reinsurance	135
Loss Cap	135
Annual Aggregate Limit (AAL)	135
Event Limit	136
A Practical Example of a Reinsurance Contract	136
Figure 3.3 – Practical example of a reinsurance contract	137
Automatic, Facultative, and Facultative-Obligatory Reinsurance	140
Figure 3.4 – Practical example of a reinsurance contract – Article IV	141
Figure 3.5 – Practical example of a reinsurance contract - Exhibit A	143
Applying Lines & Layers to Reinsurance Treaties: A Look at the Balance Sheets	148
What happens if a claim exceeds the amount covered by the lines?	149
Retrocession: Reinsurance For Reinsurers	150
New or Alternative Forms of Reinsurance	152
Insurance-Linked Securities (ILS)	152
Table 3.10 – Alternative Reinsurance – Catastrophe Bond	153
Table 3.11 – Alternative Reinsurance – Industry Loss Warranty (ILW)	153
Table 3.12 – Alternative Reinsurance – Collateralized Reinsurance	154
Table 3.13 – Alternative Reinsurance – Sidecar	154
A Closer Look at the Catastrophe Bond	155
Special Purpose Reinsurance Vehicle (SPRV)	155
Indemnity Triggers	156
Parametric Triggers	157
Industry-loss Triggers – Modeled-loss Triggers	158
A Closer Look at the Industry Loss Warranty (ILW)	159
Key Points	161
Theory Versus Reality – Coping with the Problems of the World	161
What can the reinsurance industry do to continue managing the worldwide insurable risks?	161
The Real-World Challenges	162
How Does Inflation Affect Reinsurance?	162
Higher Claims Payments – Lower Investment Value – More Risk Taking	162
How Do Catastrophe & Secondary Perils Affect Reinsurance?	163
How Has Investor Concern Affected Reinsurance?	164
What are Reinsurance Companies Doing to Mitigate These Problems?	164
Reinsurers are raising primary insurers’ rates	164
Reinsurers are focusing on enhancing catastrophe models for secondary perils	165
Reinsurers are reconsidering where they do business	165
Expert Advise – Not Solving Problems, But Creating Solutions	165
The Regulatory Side	166
Principle 1 – 4	166
The Market Side	167
The Professional Side	167
What is the Future of Reinsurance?	169
Harnessing Data and Investing in New Technology and Analytics Capabilities	169
Differentiation and Designing New Products and Services	170
Collaboration	170
Conclusion: Looking Towards the Future	171
How have reinsurance companies been able to accomplish this?	171
What does all of this mean moving forward?	171
Chapter 4: Underwriting	172
The Underwriting Process	172
What exactly must be reinvented?	173
What is the point?	173
The Underwriter	173
Mortality tables	174
Numerical rating system	174
What is an Underwriter?	175
Table 4.1 – Types of Underwriters	176
What is the Purpose of Underwriting?	179
Physical Hazard & Moral Hazzard	180
Table 4.2 – Factors in Underwriting	181
What Types of Decisions Does an Underwriter Make?	182
Issuing a Polic with Higher Premiums	182
Issuing a Policy with Limited Policy Benefits	183
Issuing a Policy with Certain Exclusions	183
Standard or Preferred basis	183
Issuing a Policy That is Equitable	183
Issuing a Policy That is Deliverable	184
Issuing a Policy That is Profitable	184
What Kind of Underwriting Behaviors are Vital for Underwriters?	185
Table 4.3 – Value Builders Vs. Value Destroyers	185
Table 4.4 – Overview of the Differing Characteristics in Underwriters	186
The Underwriting Process – What is Involved?	187
The Insurance Application: Gathering Pertinent Information	188
General Information – Medical Information – Replacement	188
Selecting Features and Options - Applicant’s Occupation and Hobbies	189
Disclosures – Receipt – Submission to Underwriting	190
Table 4.5 – Typical Application Information for Health, Auto, and Homeowners Insurance	190
The Rating System: Determining Risk Classification	194
The Underwriting Manual: Evaluating and Rating Risks	195
What is an underwriting manual?	195
1^st Sample Underwriting Manual Excerpt – Emphysema	196
2^nd Sample Underwriting	198
What differences did you notice in the two samples?	198
The Underwriting Process: Preliminary Processing	199
Insurable Interest	200
Valid Contract	200
Offer and Acceptance	200
Consideration – Legal Purpose – Competent Parties	201
Insurable Risk	201
Arise From a Pure Risk	201
Definable and Measurable – Not A Catastrophic Risk	202
Why are catastrophic risks not considered insurable?	202
Statistically Predictable	202
The Underwriting Process: Evaluating the Information and Making a Decision	202
Evaluating Loss Exposures	203
Determining Underwriting Decisions	203
Selecting An Underwriting Decision	204
Identifying The Appropriate Premium	204
Implementing The Underwriting Decision	204
Monitoring The Insured	204
Additional Factors to Keep in Mind: When Reviewing the Application	205
Additional Factors to Keep in Mind: Case Approval Authority	206
What delineates underwriting authority and responsibility?	206
Table 4.6 – Sample Approval Authority Chart	207
Additional Factors to Keep in Mind: Utilizing Underwriting Software	208
Artificial Intelligence (AI) – Machine Learning (ML)	208
Predictive Analytics	208
Benefits 1 – 4	209
Benefit 5	210
Maintaining Profitability and Solving Problems	210
Underwriting and the Underwriting Cycle	211
What typically happens during the underwriting cycle?	211
Probability and Insurance	212
Theory of Probability - Events	212
Probability Scale – Compound Events – Compound Probability	213
Ratemaking and Underwriters	215
Loss Ratios – Expense Ratios – Combined Ratios	215
Table 4.7 – Summary of the Ratemaking Principles	216
What does all of this mean for profitability?	217
Reinsurance and Profitability	217
Reinsurance Contracts Are Written for Insurance Companies	218
Reinsurance Companies Are Not Regulated in the Same Way as Insurance Companies	218
Reinsurance Protects Against Natural Calamities or Catastrophes	218
Reinsurance Companies Focus on Different Risk Factors	218
Large-Line Capacity	218
Catastrophe Protection – Stabilization	219
Withdrawal – Underwriting Advice and Guidance	220
How Legislation Affects Underwriting	221
Anti-Discrimination Statutes	221
Discrimination Based on Sex	222
Discrimination Based on Physical or Mental Impairments	222
Table 4.8 – ADA Technical Assistance Manual, Section III – 3.11000 Ins.	223
Discrimination Based on Genetic Characteristics and Information	225
Discrimination Based on Marital Status	225
Discrimination Based on Sexual Preference	225
Personal Information & Privacy Laws	225
The Fair Credit Reporting Act (1971)	226
The Fair Credit Reporting Act (FCRA)	226
Consumer Reports – Investigative Consumer Reports	226
Consumer Reporting Agency	226
Pre-Notice – Supplementary Notice – Post-Notice	227
The Privacy Act (1974)	228
Table 4.9 – Definitions for medical record, personal, and privileged info.	228
Table 4.10 – Some Procedures under the NAIC Model Privacy Act	229
Table 4.10 – Section 4	229
Table 4.10 – Section 6	230
Table 4.10 – Section 9	231
Table 4.10 – Section 10	232
The Gramm-Leach-Bliley Act (1999)	234
Why does the business of insurance come under the provisions of (GLBA)?	234
Non-Public information (NPI)	235
Table 4.11 – A Summary of Notice Requirements under the (GLBA)	235
So, what is the overall lesson?	236
Chapter 5: Business, Insurance, and the COVID-19 Pandemic	237
Introduction	237
Worl Health Organization (WHO) - Center for Disease Control (CDC)	237
The State of Insurance Before the COVID-19 Pandemic	239
Business Interruption (BI) Insurance	239
Business Owner’s Policy Insurance (BOP)	239
Business Income Coverage	239
Extra Expense Coverage – Contingent Business Interruption Coverage	240
Civil Authority Coverage	240
The Effect of the COVID-19 Pandemic on Businesses	241
Essential – Non-Essential	242
Organization for Economic Co-operation and Development (OECD)	242
The Big Issues Surrounding Business Insurance and the COVID-19 Pandemic	243
Business Income and Extra Expense (BIEE) coverage	243
Direct Physical Loss or Damage to Property	244
Covered Causes of Loss and Exclusions	244
Open Perils – Named Perils Form	244
Civil Authority	245
The Limitations of Insurance During the COVID-19 Pandemic	246
Risk Mitigation with Business Insurance	247
Understanding Risk Management	248
Table 5.1 – The Benefits of Proper Risk Management	248
Avoiding Risk	248
Reducing Risk	249
Coalition Against Insurance Fraud (CAIF)	249
Predictive Modeling – Text Mining – Photo Recognition Analytics	249
Accepting Risk	250
Risk Retention	250
Transferring Risk	251
Hold-Harmless Clauses & Reinsurance	251
Understanding Business Insurance Strategies	251
Business Insurance Strategy	251
Conducting Risk Analysis	252
Table 5.2 – Situations That May Be Included in a Risk Analysis	252
Measuring the Risk Value	253
Business Insurance Strategies: A General Overview	254
General Liability Insurance	254
Commercial General Liability (CGL)	254
Non-Professional Negligent Acts	255
Scenario 1-6	255
Table 5.3 – Types of Legal Damages that are Covered by CGL Policy	256
Commercial Property Insurance	256
Replacement Value – Actual Cash Value	257
Table 5.4 – Common Types of Property Insurance Plans	258
Business Owner’s Policy (BOP)	258
Table 5.5 – Types of Claims Covered by BOP Liability	259
Required Coverages: Commercial Auto Insurance and Worker’s Comp	260
Commercial Auto Insurance	260
Auto Insurance for a Home-Based Business	261
Business Auto Insurance Policy	262
Worker’s Compensation	262
Wisconsin Worker’s Compensation Act	263
WI Who is covered and who are the exceptions?	263
California’s Labor Code	264
CA Who is covered and who are the exceptions?	264
Table 5.6 – Benefits Payable Under Worker’s Compensation Insurance	265
An Additional Business Insurance Strategy: Life Insurance for Business Owners	266
Insure Key Employees - Equalize Estate Distributions	266
Acquiring Buy-Sell Agreements	267
Benefits of Insurance for Businesses	267
Business Insurance is a Legal Requirement	268
Business Insurance Minimizes Financial Losses	268
Business Insurance Protects a Company’s Employees	268
Business Insurance Protects Assets and Property	268
Cloud Kitchens	268
Business Insurance Protects a Company’s Customers	268
Business Insurance Assists After a Natural Disaster	269
Business Insurance Builds Credibility	269
Business Insurance May Help Sustain Growth	269
Business Insurance Protects Management	269
D&O Insurance	269
Business Insurance Offers Peace of Mind	269
Special Risks Facing Business Today	270
Cyberattacks and Other Cyber-Related Events	271
Cybersecurity	271
Table 5.7 – Types of Cyber-Related Risk Exposures	272
The Problem: The Question of Insurability	273
The Solution: Going Beyond Risk Transfer	274
Small or Medium-sized Enterprise (SME)	274
Table 5.8 – Risk Services Beyond Risk Transfer	276
The Benefits: The Coverage Needed	277
Table 5.9 – Coverage Benefits of Cyber Insurance	277
Natural and Man-Made Catastrophes	279
Catastrophe Insurance	279
Table 5.10 – Estimated total economic and insured losses in 2023 and 2022	279
The Problem: Trying to Cope	280
Delayed Claims Payouts - Limited or Canceled Coverage Options	280
Increased Premium in High-Risk Areas - Lack of Business Resources	280
Supply Chain Instability	281
The Solution: A Multi-Point Strategy	281
Point 1: Review the Options	281
Business Interruption Insurance	281
Parametric Insurance Solutions	282
Point 2: Take Practical Measures	283
Point 3: Develop a Disaster Recovery Plan	283
Table 5.11 – Preparedness Frameworks for Disaster Recovery Plans	284
Set up an emergency response plan and train employees how to carry it out	284
Compile a list of important phone numbers and addresses	284
Decide on a communications strategy to prevent loss of customers	285
Consider the things the business may need initially during the emergency	285
Human and physical resources – Keep duplicate records	285
The Benefits: Filling the Gaps	286
Supply Chain Disruptions	286
Table 5.12 – Some Examples of Supply Chain Disruptions in N. America	287
Supply Chain Insurance	288
The Problem: Gaps in Conventional Insurance	288
Contingent Time Element Insurance	288
The Solution: Achieving Supply Chain Resilience	289
Supply Chain Planning	289
Understanding and Leveraging Data	290
Utilizing Alternative Risk Transfer Solutions	290
Trade Disruption Insurance (TDI)	290
Enhancing Capacity and Inventory Buffers	291
The Benefits: Having What is Needed	291
Table 5.13 – Three Benefits to Supply Chain Resiliency	291
Chapter 6: Claims Handling	293
The Role of the Claims Department	293
The Function of the Claims Department: Balancing Goals	293
Ensuring the Insured’s Policy is Upheld	294
Table 6.1 – J.D. Power’s Top 10 Worst Car Insurance Companies Based on Claims Satisfaction	296
Table 6.2 – J.D. Power’s Top 10 Worst car Insurance Companies Based on Customer Satisfaction	296
Supporting the Insurance Company’s Business Profit Goals	297
Controlling Claims Expenses - Paying Only Legitimate Claims	297
Avoiding Unnecessary Litigation	297
The Structure of the Claims Department: Personnel that Promotes Success	298
The Chief Executive Officer (CEO)	299
The Chief Finance Officer (CFO)	299
The Chief Underwriting Officer (CUO)	299
A Claims Manager and A Claim Supervisors	299
Claims Adjuster Vs. Public Adjuster: What is the Difference?	300
The Claims Adjuster - The Public Adjuster	300
Review and Organize Claims - Gather Information	300
Assess Coverage – Investigate Claims – Evaluate Damages	301
Communicate with Policyholders – Make Decisions	301
Document and Process Claims	301
The Claims Handling Process – A Closer Look	302
Basics of Claims Handling: What is a Claim?	303
Homeowners – Renters – Health – Life Insurance	303
Auto Insurance	304
Basics of Claims Handling: The Process	304
Six Activities in Every Claim Handling Process	304
Receiving, Acknowledging and Assigning the Claim	305
Identifying the Policy	306
Example Scenario	307
Communication with the Policyholder or the Policyholder’s Representative	316
General Questions to ask oneself	317
A Word of Caution	318
Investigating the Claim	318
Claimant Investigation	318
Witness’s Investigation	319
An investigation of the scene of the incident	319
An investigation of the property damage	319
Medical investigation – Prior claim investigation	319
Documenting the Claim	320
Determining the Cause of the Loss and Other Important Information	321
The Cause of Loss - Liability	322
Are the Persons Involved Covered?	322
The Loss Amount	325
Concluding the Claim	326
Facing Challenges, Creating Solutions	326
The Unexpected Consequences of the COVID-19 Global Pandemic	327
Facing a Post-COVID-19 World: Challenges	329
Challenge 1: The Definition of Post-COVID-19 Condition	329
Challenge 2: Insurance Fraud	330
Challenge 3: Regulatory Compliance	331
Challenge 4: The Expense of Claims Denials	332
Facing a Post-COVID-19 World: Solutions	333
Solution 1: Utilizing Effective Claims Management Tools	334
Solution 2: Incorporation Digital Claims Handling Technologies	335
Faster claims processing – Faster payment reconciliation	336
Less manual intervention	336
Increased data accuracy	337
More time for Internal resources – Improved relationships - Telematics	337
Driver Behavior Modification	338
Advanced Driver Assistance Systems (ADAS)	339
Solution 3: Improving Interpersonal Communication Skills	340
Active Listening	341
Things for claims representatives to remember 1	341
Things for claims representatives to remember 2-4	342
Things for claims representatives to remember 5	343
Table 6.3 – The Do’s and Don’ts of Active Listening	343
Chapter 7: Ethics	344
What is Ethics and Why is it Important	344
Defining Ethics: A Question of Morality and Legality	346
Moral Decisions: Developing an Ethical System	349
Values	349
Laws – Rules and Standards – Social Norms – Principles	350
Standards of Ethical Conduct	351
Legal Decisions: Maintaining Compliance	352
The Differences and Similarities between Morality and Legality	352
Criminal Law – Civil Law	352
Building a Solid Foundation with Business Ethics	354
Ethical Behavior Gives Confidence to Stakeholders	354
Ethical Behavior Promotes Responsibility and Accountability	354
Ethical Behavior Provides Guidance for Sound Decision-Making	354
Establishing a Standard of Compliance for Corporations	355
ESG & DEI	356
Establishing a Standard of Compliance in Insurance	357
Scenario / Questions to Consider	358
Zip Codes as a form of Redlining	359
Putting it into Practice: Solving Ethical Dilemmas	361
The Ethical Behavior of an Insurance Agent	361
The Fraud Triangle	362
Pressure – Opportunity - Rationalization	362
Scenario 1-3	363
Ethical Responsibilities: Agents to the Insurer	363
Actual Authority	364
Implied Authority	365
Apparent Authority	365
Scenario	366
Questions to Consider from the example	368
Loyalty – Skill and Performance – Full Disclosure	369
Prompt Actions and Follow-up – Handing Premiums	369
Avoiding Conflicts of Interest – Careful Consideration	369
Competitive Integrity	370
Ethical Responsibilities: Agents to Policyholders	370
To the Insurer	370
To the Policyholder	371
Scenario	371
Questions to Consider from the example	373
Selling to Needs	374
Table 7.1 – Sample Life Insurance Needs Analysis	374
Table 7.2 – American Institute for the Chartered Property and Casualty Underwriters Sample Code of Professional Ethics	377
Servicing the Sale	380
Table 7.3 – Tasks in a Customer Care Strategy	380
Ethical Responsibilities: Agents to the Public	383
Informing the Public	384
False Advertising	384
Table 7.4 – Important Areas Under the Unfair Trade Practices Act	385
Scenario	386
Questions to Consider from the example	387
Building Public Perceptions	387
Developing Skills and Competency	387
Remaining Committed to Professionalism	388
Upholding a Personal Code of Ethics	388
Ethical Responsibilities: Agents to the Government	389
The National Association of Insurance Commissioners (NAIC)	389
Table 7.5 – A Brief Summary of NAIC Regulatory Activity	389
State and Federal Laws Governing Insurance	390
Insurer Licensing – Producer Licensing - Product Regulation	391
Financial Regulation – Market Regulation	391
Consumer Services	392
Table 7.6 – Significant Areas of State Insurance Regulation	392
Scenario	393
Questions to Consider from the example	394
Putting it all Together – A Call to Action	394
Cultivation Ethical & Personal Characteristics	395
Avoiding Ethical & Professional Obstacles	396
Careless Documentation – Unclear Communication	396
Procrastination – Disorganization	396
Last page	397

United Insurance Educators, Inc.

PO Box 1030

Eatonville, WA 98328

Phone: (253) 846-1155

Email: mail@uiece.com