Dollars and Sense
Chapter 8
Sensible Ethics
What Ethical Agents Know
Selling insurance is not for the weak-minded, but it can be very enjoyable with the right outlook. Hello, my name is Harry Bobs and I will be your “ethical” narrator for this course. I have been in the insurance field longer than you may have lived. I’ve seen it all: agents who lie, cheat, and steal. I have also seen agents who truly care about their clients, becoming lasting friends with many of them. The latter is certainly more enjoyable for both parties. I do not believe most agents are unethical; on the contrary, my experience tells me the opposite is true. Unfortunately, we ethical agents jump through many legal hoops due to the few unethical among us.
Each state has an insurance department whose job is to look out for their state’s citizens. This is not an easy task. The “he-said-she-said” scenario is often what they have to work with; not hard proof. As a result, their only avenue is often consumer legislation. Such legislation, while often necessary, means that the ethical agent must jump through numerous hoops. Typically the unethical agent is only selling insurance for a short time, but he leaves behind financial damage that must be straightened out by the ethical agent that follows. If the damage is never straightened out the consumer may find themselves in a financially devastating position at some point – often at retirement age.
Insurance is necessary. It protects property, people and futures from financial ruin. In many areas, it would be impossible to open a new business if insurance were not available because the banks that loan the money wouldn’t loan to them without insurance protection in place. Banks would not loan money for a new car if the buyer did not also purchase insurance to protect the bank’s investment. Without insurance, home loans would not be possible in most cases. Without insurance, families would face years of poverty because the major breadwinner died prematurely. Those who sell insurance need to realize the important position they hold and be proud of the industry they represent. Realizing the importance of insurance is only the first step, of course. From there the field agent must gain the knowledge and communication skills necessary to perform not just an adequate job, but a professional job. The financial futures of their clients are often in the agent’s hands.
Insurance Perceptions
If you tell a man that he has a one in five chance of entering the nursing home (and you are selling nursing home policies) he will tell you that means he has a greater chance of never needing to go there – and he’d be right.
Tell that same man that he has a one in five chance of winning his state’s lottery and he will be in his car heading to the nearest store to buy lottery tickets before you can even finish your sentence.
It is all a matter of perspective: we will rationalize our reasons to buy what we want as well as why we don’t need to buy something as mundane as insurance. In this case, he had no desire to enter a nursing home but he wanted to win the lottery. He will not spend his money on a nursing home premium but he will spend it on lottery tickets – even though our example gave the exact same odds in both cases.
Of course, we know that the odds of winning the lottery are more like a million to one than five to one, yet people buy lottery tickets every day. Insurance is a non-tangible. It cannot be driven down the road, washed proudly every Sunday, or shown off to the guy next door. Furthermore, your friends are not interested in looking at your policy but they will study the engine in your new car. Let’s face it: buying something tangible is just more fun than buying insurance.
Most Americans are poor savers. The declining stock market has actually boosted the percentage of savings we make, but it still is not enough for the many years we will spend in retirement.
Behavioral economists (researchers who mix psychology and economics) have found three reasons why people seem to find it so difficult to save:
Someone may well be forced to support those who did not save for retirement – the taxpayers, which equates into our children and grandchildren and all the other people who work each day trying to raise their own children and pay their own mortgages. The support received through those taxpayers will not be adequate however. There won’t be much traveling; there may not even be adequate money for medical needs. The non-savers will merely survive.
There is good news. Researchers have found that merely visualizing a purchase brings the same “feel good” response as actually making the purchase. They also found that visualizing saving for a future reward brought about the same chemical “feel good” response in the human brain. So maybe having a secure retirement is more a matter of training people to focus on the goal: with retirement activities like golfing or travel as the bait.
The fact that, like saving for retirement, buying insurance is seldom considered recreational means agents must be masters of the product and excellent communicators in the field. There is no room for sissies.
Establishing Goals
Everyone needs to have a goal, even insurance agents. In this case, I am referring to an ethical goal. I know from experience that ethical agents are just as successful as the unethical agent is – over time, more so. Ethical agents build a sound foundation for their business through moral standards. Just as a building needs a sound foundation to withstand the elements, agents need a sound foundation to withstand the ups and downs of the insurance markets. Those who built their business on a sound moral foundation will have clients that refer them to their friends so even the “down” times in the market do not adversely affect them.
At one time there was a billboard in Houston, Texas that asked: “Whatever happened to personal responsibility?”
The answer is simple: each of us still has responsibility – even those who refuse to acknowledge it. Refusing to accept personal responsibility does not mean it goes away. Parents are still responsible to raise their children with love, government is still responsible to those who hired them (our citizens and taxpayers), and insurance agents are still responsible to their clients and insurers. Refusing to act responsibly does not remove the requirement.
As an agent you are responsible to treat your clients fairly, to provide the services they deserve, and to fulfill other professional responsibilities. Isn’t that why you are completing this course? Like many agents, you are doing this course because it is your professional responsibility to do so. Even without such requirements, however, professional agents would still read product brochures, news articles, and industry magazines, striving to learn more about their chosen industry. That’s what personal responsibility is all about: accepting and doing what we are responsible for. Our mamas are not responsible for what we do or fail to do; our boss is not responsible; our spouse is not responsible. Each of us has a duty to complete what is necessary for our profession and our personal lives, whether it happens to be completing our continuing education in a timely manner or mowing the lawn before it gets knee high.
All of us know someone who, in their own mind, is never to blame for anything. It is his manager’s fault that his leads aren’t good; it is his accountant’s fault that he failed to pay his taxes; it is his wife’s fault that his bills aren’t paid. We expect this attitude from our teenager who has not yet matured, but it is frustrating to see an adult refuse to accept personal responsibility. Whether it is failure to comply with state education requirements in a timely manner, failing to refund a premium within time requirements, or simply placing an inadequate policy, some people just never seem to accept their own responsibility for life’s mistakes and shortcomings. The responsible agents accept their mistakes and strive to correct them, and then learn from the error so it is not repeated. Mistakes become learning tools.
When I was a green agent I mistakenly told a new client that her policy would cover something it did not. When I realized my mistake I returned in person (totally embarrassed) to tell her of my error. I expected her to cancel the application immediately. Being a lady of quality she accepted my apology but also kept the policy. As she explained it: “I can probably get any policy I need from any agent, but it is not possible to get integrity with any agent.” She remained my client until her death some years ago.
Responsibility is really just another word for accountability – especially in our industry. It is easy to profess accountability when no mistake has been made. The truly ethical agent demonstrates accountability, however, when fault must be accepted. It is not just given lip service. Like my experience, an error may even have unexpected results.
I personally believe that “accountability” is a trickle down effect. If the company owner or manager is accountable, his or her employees are much more likely to be as well. Sit in any diner in America and you can quickly tell the mentality of the staff. Does the waitress take care of everyone, even when the table is not in her service area? Will the hostess help clear a table so their customers are seated quickly? Is the manager willing to pick up the pot of coffee and fill cups to help out his staff? Everyone has seen examples of outstanding service and attitude and everyone has also seen the complete opposite – employees waiting for someone else to take responsibility.
Whoever the leader is, his or her actions and accountability will be taken up by those who follow. Agents often work alone so they must be accountable on a personal basis, but there are still actions that follow their lead. The accountable agent returns telephone calls as soon as practical, they follow up problems to see if they were solved, and they demonstrate they are interested in their client’s financial well-being.
Who would be the followers in this case? Everyone the agent comes in contact with in his business day. That includes his customers who will either brag on their agent or complain to others when the agent has not been accountable.
It is partly attitude, of course. The person who likes his job will automatically want to do a good job but that doesn’t mean it is always easy to stay accountable. After a long day it would be easier to ignore the telephone messages that wait for us, for example. It takes a mental discipline to stay focused on our accountability – tired or not.
Since we must also be accountable to our families where is the line drawn between work and home? Being professionally accountable does not mean clients must absorb every waking hour. Many agents have set times for returning messages, following up on claims, and the countless other tasks that take up our time as agents. Perhaps it is between four and five each afternoon; perhaps it is every Monday and Wednesday morning – whatever time frame is used, the agent does follow up ensuring his clients are taken care of. As long as clients know the time table, it goes smoothly. In short, the agent is accountable.
Regardless of the situation, our choices are our own. Yes, sometimes the right choice is the difficult choice; it could even cost us our job in some situations. However, for most of us making the right choice will not affect our job, except perhaps to make it better. Being accountable does not mean our life is more difficult; in fact, it usually makes it easier. For example, it is easier to mow the lawn before it grows knee high. It is easier to complete required education before the last week it is due. Being accountable makes our lives easier more often than not. Besides being accountable for the choices we make, we have the freedom to make better choices, like saving for retirement or returning that client’s call (which turns out to be a referral). Those who refuse to accept personal accountability often make their lives harder than it needs to be.
For example:
Andrew Agent failed to complete his continuing education earlier in the year. Now it is due in ten days. He has a several choices:
While it may well be a chore of office staff to follow agent license renewal dates, it is the agent’s responsibility to know not only when his or her license renewal takes place, but also what is required to renew that license. This includes keeping a list of previously completed CE courses, with the course ID number listed. This prevents an agent from duplicating a course that might then be refused by the state when renewing his or her insurance license. In any profession that requires a state license of some type, it is the individual’s responsibility to do what is expected to allow a smooth license renewal. Even when another person normally reminds the agent of a pending need for continuing education, professionals always track their own requirements.
Andrew Agent may work for a company that will take on all his responsibility, but ultimately he is an adult, with adult accountability. The continuing education company is not responsible to remind him of a coming license renewal or even the renewal requirements of his state. Most companies will make recommendations if asked. Accountability nearly always makes our lives easier because others are more likely to extend a helping hand.
Why Be Ethical?
In the long run, it pays financially as well as personally to be ethical. Those who plan to have a career as an insurance agent will do better financially if they are ethical. The unethical individual may do better financially for a short period of time, but for those who consider this their career it is vital to be viewed as ethical. When clients realize their agent cares about them and their financial welfare they will refer their agent to their friends. There is no better way to keep business and grow than through referrals.
Of course another very important reason to be ethical is a no-brainer: it is the law. Agents must follow their state and federal guidelines. The majority of insurance law concerns consumer protection, not protection of field agents. You’re on your own baby!
For myself, being ethical is just as important as showing my father that I am successful in my career choice. It is a matter of pride. My actions are a reflection of who I am as a son, father, and grandfather; I want to be proud of the choices I have made. I want my family to be proud of who I am. Each person will have their individual reasons for their own code of ethics. You cannot sit on the fence when it comes to ethical behavior; you either are or are not ethical – there’s no in-between on this. Your actions will also define who you are to your friends (and whether they will recommend you to their friends), but they are seldom the important people in your life unless you have no family members. It is our family that truly counts in our lives. We show off for our friends, but we live for our family.
Our families know who we really are; our friends just think they know us. Your wife knows you lay around Sunday morning in your boxers; you want your friends to believe something else. Your children know when you are cranky (and they know when to avoid you); your friends only see the cheerful side you present. You can’t fool your family; they see who you really are. Your spouse may support or oppose you on your ethical issues but she knows what you really think better than your friends or colleagues do. Your children may not say what they think but they do observe you. It is likely they will become the same type of adult they see in you. Whatever you tell your children will be totally overshadowed by what you demonstrate with your behavior. When you lay in your grave at the end of your life, your friends will all slap each other on the back and proclaim what a great guy you were. Your family will know the truth of your life; your family will remember the truth you demonstrated behind closed doors. It is this truth that actually lives on when your life ends, not what your friends thought they knew.
Does this seem a bit too dramatic when all we are talking about is selling insurance? I guess it is a matter of perspective; my actions matter to me all the time, even when I sell insurance.
Following the Law
From a purely practical standpoint, each agent must know and follow their state’s insurance law. If any federal laws exist, of course that must also be followed. The insurance companies an agent writes for will monitor such requirements: the forms will be correct for the issuing state, the manner in which new business is submitted will be molded to the appropriate laws, and the insurer will notify agents if they fail to follow the applicable requirements. Of course, the insurer cannot monitor an agent’s every move. They don’t know if you represented the products correctly; whether you obtained all the required signatures or how you treated the applicants. They must be able to trust their field force to some degree. They must assume their field force will represent their products fairly and comply with state and federal laws regarding the products they sell.
Many states are implementing specific educational requirements in an attempt to dispel the old “I didn’t know” response when caught disobeying the law. Laws are also beginning to place more responsibility on the insurers, requiring them to monitor the agent’s acquired education in specific fields, such as federal Partnership LTC policies and anti-money laundering. Specifically, the Deficit Reduction Act of 2005 opened up asset protection nursing home policies to all states; insurers marketing these products must be able to prove their agents acquired the proper education prior to selling them. Most states already have or will adopt the NAIC Partnership format, meaning as long as the acquired education was based on the NAIC guidelines it satisfies the federal requirements. Therefore, an agent taking the NAIC Partnership format in any state that has adopted that education format may use it to meet the requirements in any other NAIC Partnership state. The insurers have the responsibility of verifying the education was appropriately completed. This becomes increasingly easier as all the states eventually become uniform in the continuing education courses they approve. In a few states, the Partnership nursing home continuing education must be acquired only in classroom formats, so insurers may have an easier time of monitoring agent education in those states.
Ethics in the Workplace
Regardless of our occupation, each of us faces ethical issues every day. When any given profession deals with a commission base, this seems to be especially true. Ethics could be talked to death and frankly, talk is not worth much. It is actions that really tell the true story. The bottom line, however, is fairly simple when it concerns industry ethics: what is right and what is wrong?
Consider the definition of ethics:
eth'ics (eth'iks) n. pl. (1) the principles of honor and morality. (2) accepted rules of conduct. (3) the moral principles of an individual. - eth'ic, adj. pertinent to morals.
The New American Webster Dictionary
Ethics: the principles of honor and morality. That seems like a fairly simple statement, but what does it mean to an insurance agent? Who determines what is or is not ethical behavior? Must religious beliefs be a part of ethical behavior? Is it possible to make your living in commission sales and still be ethical? Perhaps more to the point, is it possible to make a good living in commission sales and still be ethical?
While the study of ethics is actually a complex matter with many shades of right and wrong, basically ethics is about the meaning of life. It is the abstract view of what is right and wrong. There are few absolutes and many varied definitions. Even those who make their lifework the study of ethical behavior often do not come up with the same conclusions.
The purpose of this course is not necessarily to give any answers to the ethical questions. Rather, it is our intent to promote thinking. A thinking individual is a powerful person. The point of this course is to promote ethical thinking. It is our desire to provide a few "tools" of logic. Accepting personal accountability is actually empowering because it recognizes our ability to improve on the decisions we make. Maybe we have not saved to this point for retirement, for instance, but accountability recognizes our ability to change that and begin saving for our future. This change may mean we stop foolish spending in order to begin saving; certainly an empowering move.
The Same by Any Name
Ethics may sometimes be referred to as values. It may also be referred to as morality. It really does not matter what label we give it because the term is merely a word. What matters is how we make our decisions, how we respond to others, and how we view ourselves and our lives. Regardless of whether our ethics are stated or implied, they are always present. The decisions that are made, with or without ethical considerations, have profound effects on our own lives and those of others.
Businesses do, of course, base many of their decisions on financial aspects: What will bring a profit? How can costs be cut? How can taxation be minimized? There are always many aspects to a business and we often assume that a business is neither moral nor immoral. After all, the goal is profits. However, companies do have a moral or ethical responsibility to the community, its employees, and even to itself. Many companies have demonstrated that it can make large profits while performing ethically.
A background of ethics or values form the foundation of the decisions made. A company trying to minimize taxation may not think they are considering ethical issues, but ethics will be part of the final conclusion. If the company faithfully follows all lawful procedures while minimizing taxes that is an ethical decision. If the company makes misrepresentations to minimize tax payments, that is also an ethical decision. It just isn’t labeled as such by the company.
Because values become an integrated part of both personal lives and business conduct, individuals are often unaware that decisions are made with an ethical context. A person who has formed an ethical core in early life will continue to make the majority of their decisions based on that early training (even if they are unaware of it).
For example, a salesperson that formed their early sales presentation on the basis of honesty and ethical conduct will, over the months and years, make a habit of saying their presentation in a certain manner. Court cases have been won and lost on this concept of "repeat actions." As time goes by, this sales presentation becomes a "habit" with little variation. Eventually, the salesperson may well forget how the original presentation was formed, but if ethics played a part in the original presentation, ethics will continue to play a part as time passes.
The same may be said of driving a car, riding a bicycle, and other daily habits that were initially "learned behavior" but become "reflex behavior."
Ethics began as society's code of unwritten rules. From the time humans began living together, such codes of unwritten rules were necessary simply to survive. Survival could not continue if the strong (typically males) took everything, including food and shelter, from those who were weaker. The weaker individuals were likely to be women and children. If women and children did not survive, the species could not have survived either. These rules established the way in which others were to be treated for the benefit of all.
For centuries, societies have argued over what is ethical or moral. It was during the fifth century B.C. in Greece that the philosopher Socrates gave ethics its formal beginning. The word ethics comes from the Greek word ethos, which means "character."
Each country will have ethics that are unique to its people and ethics that are common everywhere. In America, we have many variances in what is believed to be ethical because we have a varied population with a varied background. Our laws require each individual to conform to the laws of our country, even if they differ from the country of origin.
Other ethical values have been brought in by immigrants, both in the early days and continuing into today. One that is commonly thought of (and which many Americans now take for granted) is education. We often forget that obtaining education is, in fact, an ethical standpoint. It is not always easy to become educated. Like so many values or ethics, it requires concentration and hard work. Immigrants who come from lands where education is given only to select groups find our open education system a wonderful opportunity. Often immigrants take greater advantage of education than do established Americans. When opportunity is widely available, it is easy to forget its importance.
Early Americans considered religious freedom highly important. Since values are often defined as a criteria upon which important choices are made, religious freedom must be considered a value or ethical consideration. Many early immigrants came to America, despite the harsh circumstances of the New World, looking for religious freedom. The men and women who settled along the Eastern coasts came from Europe and brought with them their religion of choice: Christianity. Of these people, the Puritans probably had the greatest influence on early American values and ideology. To the Puritans, work was their most effective means of giving glory to God, so the work ethic had a strong effect on their lives. It was this early Puritan ideology which strengthened the importance of working hard. The Puritan businessman fully integrated his particular line of work with his religion.
Putting the Past into the Future
Every individual is a product of their past. In some way, each of us has been affected by the past. Even when society changes rapidly, current attitudes are formed from past experience. Whether how we live today is a reflection of what we enjoyed or liked in the past or a rejection of what occurred in the past, we are still affected by it. Perhaps it is impossible to understand current ethical considerations without having some understanding of the past and how it brought us to this point.
Our values, our thinking, and our actions are often directly related to the availability of education in America. Societies that wish to restrict the freedoms of others nearly always limit their access to education. The individual who does not have the ability to learn is less likely to understand human rights and resist oppression.
Higher levels of education naturally lend themselves to questioning. It is probably this questioning that has brought about much of the beneficial change in America. If certain groups had not questioned the use of child labor in factories, women’s right to cast a political vote, or a minority’s right to education in any school building, change would never occur.
Ethics may not be what we think brought about wide social change, but it always plays a role. While education involves the questioning of why certain things are done or thought, that education often has a moral edge to it. Child labor was used because it was cheap. That meant that the products they produced were less expensive to buy. It was not just education that prompted many to view the cheap labor as wrong; it was the moral view that children should not be economically exploited. Ironically the factories countered with the suggestion that allowing children to work helped their families economically. They gave little value to the quality of the children’s lives in those factories.
In the sixties, two major movements swept America: civil rights and antiwar sentiments. Though primarily led by our youth, the movements were backed by the majority of our mainline churches and other organized groups.
Who can forget the images we saw of Martin Luther King, groups of protesters, and the numerous conflicting views brought into our lives. For many people, this meant a new look at what we must perceive as right and wrong.
Although the seventies saw an almost immediate decline in the revolution for change that does not mean that we have been unaware of what is around us. Every day we are faced with starvation in many countries (some of it even in our own), energy problems, conflicts over environmental issues (jobs versus nature), inflation, run-a-way government spending and waste, high crime and drug problems, plus many more issues that affect our lives on a daily basis.
Much of the issues that America and her citizens have wrestled with are basically related to one issue: what is the right thing to do? This simple question often has multiple answers. This simple question often involves the decisions made by business.
As insurance representatives, we do not have the answers to the big problems, but we are often a mirror of what is going on in our neighborhoods. If, as individuals, we are surrounded by people who are primarily concerned with themselves, it is likely that we will have that same attitude. Therefore, if the agency in which we were trained stresses SALES, SALES, SALES without any other input, we could lose sight of the role ethics should play. When ethical behavior is not deemed important by our management and immediate peers, it is not surprising that problems eventually materialize.
It could be said that ethics are a recipe for living. Our code of ethics gives each of us our personal rules and values, which determines the choices we make each day of our lives. These choices affect not only ourselves, but everyone around us. Some types of ethics tell us what not to do (it is wrong to steal, so we must not do so). Others tell us what we ought to do (be kind to animals). In addition, there are those ethics or morals that actually take us beyond the basics of moral obligations. Mary Mahowald, a medical ethicist at the University of Chicago, calls this added ethical stand virtues. Virtues might be referred to as going beyond the call of duty. It may also be referred to as moral excellence. Such moral excellence would include those who have no legal or moral duty to another, but go to extremes to help them anyway. It refers to the person who gives their life for a stranger or goes to other countries to work for people they do not know, even though there will be no financial rewards at all. Virtue is going beyond what we are obligated to do.
Ethics is never a separate part of our lives. It is part of everything we do and everything we say. Ethics determine how we treat those we know and how we treat strangers. Ethics determine our actions in financial and public matters. Ethics belong in every profession and are especially needed in some. Because ethics, as a subject, is so broad and complex, it may sometimes be divided into sections such as personal ethics, religious ethics, legal ethics, professional ethics, medical ethics, business ethics and so forth. Ethical neutrality is not possible. Rather, when ethical neutrality is stated by an individual, it seems to be a way of avoiding some particular issue.
In today's lawsuit prone society, the wise insurance agent or brokerage will make a point of following state regulations, but ethics actually goes beyond what is simply mandated by state or federal governments. Ethics define who we are. A man who tells constant lies is known to others as a "liar" (although studies show that 90 percent of us lie regularly). A man who steals is known to others as a "thief". An insurance agent who is unethical will also earn a reputation for such.
It has been said that legal authorities may be able to mandate behavior, but not ethics. Technically, this is probably correct. A person who would like to steal may not do so because of the consequences such behavior would bring about. Therefore, his behavior is controlled, but his ethics are not. Although he does not steal, he would still like to.
Controlling a person's behavior may, however, eventually lead them to an understanding of ethical behavior. It is not unusual for an individual to become the person they pretend to be. A person who acts ethically, even if they do not desire to be, may eventually soak in the ethical behavior and adopt some of that potential. In fact, since morality is about the way we live, we do learn it over our entire lifetime. To think that a person who is not ethical today will never be ethical is simply wrong. In fact, it could go the other way as well. The person who is behaving ethically today may not do so tomorrow. Even so, it seems to be true that most of our ethical behavior is learned during childhood and adolescence. Perhaps that is why ethical parenthood is so vitally important in the eventual outcome of our children's lives.
Children learn from what they see and hear. Children and animals tend to be very good at sensing adults as they really are. Children also tend to imitate the behavior they see, especially if it is coming from the adults that are close to them, such as parents. As a result, parents who set good moral or ethical examples are teaching their children to do the same. Unfortunately the reverse is also true. In homes where prejudice, racism, sexism and other immoral codes are practiced by the parents, children from those homes are very likely to act in the same manner. Children learn from what they see, good or bad. We have all heard adults say "Do as I say, not as I do." The chances are, however, that the children will do as they do.
It seems to be a popular notion that toughness is needed in the business world. Ethics may be perceived as a quality that does not belong to toughness. This is actually far from the truth. As many religions will be quick to confirm, toughness is often a vital part of ethical behavior. Children are the first to realize this. Peer pressure often demeans behavior that is ethical. Certainly the child that can withstand the stress of peer pressure is displaying toughness.
To some measure, toughness is probably necessary to succeed in business. The insurance salesperson that cannot take repeated rejection will not likely stay with the insurance industry; at least not as a salesperson.
Toughness that is coupled with a code of high ethics may not always experience smooth sailing, but it is likely that the combination will produce an atmosphere that promotes business and that is always desirable. Toughness with ethics gives a passion for productivity and efficiency, along with the spirit of competition, all of which contributes to the traditional measures of economic success.
America was founded on the beliefs of many people who questioned the actions of the countries they came from. Those looking for freedom, religion, the right to work, the right to own possessions and land, and the right to make their own decisions all came together to form America.
Many Americans at least partially arrive at their code of ethics through their religion. In fact, the Bible sets down many prescriptions for ethical behavior. The Bible is probably the best known source of sound ethical advice. Even so, not all have agreed with the concepts stated there. Karl Marx, the father of communism, called religion the "opiate of the masses." Even Sigmund Freud, the father of modern psychology, regarded organized religion as institutional "wish-fulfillment."
It is doubtful that any person is only good or bad; each of us has shades of each. We continue to learn as new ideas are presented and new experiences encountered. Unfortunately, if we have been poorly educated on ethical conduct, we might be faced not only with leaning the basics of ethical behavior, but unlearning bad conduct as well. We typically refer to our ethical code as our conscience, saying such things as “he has no conscience.” What we are really saying is that the person has no ethical code or that his code of conduct is opposite from ours.
This brings up another issue. Of course each of us believes our code of ethics is the correct one. Branding another as unethical is sometimes merely a disagreement as to what is right and wrong. Ethics are based on personal perceptions, not on scientific fact or the views of the majority.
Ethics are not always just a matter of how we think and act. Often it is also a matter of character. So many things come together to form our character that all must be taken into consideration. Values, principles, emotions, plus many other factors all contribute.
There is little doubt that each of us is influenced by others. Even so, for each path chosen, we alone must take responsibility (again, it comes to personal accountability). Each of us has the ability to build, change, or destroy our own character. Part of our character is, of course, our ethical guidelines.
It should be noted that no single act defines our personal character. Each of us has likely participated in an act that was wrong. We may even have acknowledged to ourselves that it was wrong at the time of participation. That one action does not define our total character just as one kind act does not build our entire character. Character is more a matter of adding and subtracting our actions and thoughts. A good person can do something unkind, yet still be a good person. A person who normally behaves badly can do something kind for another and yet remain basically an immoral person. We refer to these isolated deeds as being "out of character." An action that is not consistent with one's normal behavior is not likely to form or change the character of a person (although that single action can affect another in either a positive or negative fashion).
Companies Set Guidelines
No business can exist without establishing guidelines. Every aspect of business does so. Guidelines include, of course, office procedures, sales procedures and simple conduct. They also include a code of ethics, whether that code is written or merely implied. Every business tells their employees what actions are right and wrong. It may be as simple as stating that overtime will not be paid unless properly authorized, or it may be as complex as a manager who turns his head when a forgotten signature is forged on an insurance form.
Ethical decisions are made every day in the workplace. These decisions will affect the quality of work performed, employment opportunities, safety of workers and products, advertising, and simple day-to-day operations.
It is encouraging to note that businesses across our nation are responding to ethics and community values. Most large corporations in the United States now have a written code of ethics. This trend is growing. Additionally, speeches of chief executive officers and annual reports are containing talk of ethical needs and approaches in business. Whether this is window dressing for the public or a real move to business values may be debated, but certainly the knowledge of ethical actions exists.
Some of the open talk of ethics in business has to do with money: companies have been sued over negligent actions with increasing court awards. Companies can no longer afford financially to ignore ethical issues.
A business owner must be aware that without employees who are ethical, the only restraint is the law. Without ethics, any business transaction that was not witnessed and recorded could not be trusted. This would certainly cripple a business if employees could not be trusted. On the other hand, when employees cannot trust their employer to be fair, problems can also develop. Those who own and manage the business must demonstrate ethics, fair play, and community involvement to financially protect themselves and their company.
Sometimes, unfortunately, it is the business owners themselves that turn out to be untrustworthy. There have been some American businesses (although a significant minority) that have been involved not only in unethical activity, but illegal activity as well.
We are almost at the point of expecting unethical behavior in some areas, such as the government, which is probably the first step in allowing it to continue. If we believe it can’t be changed, then it won’t be changed.
Government fraud is usually called public corruption and it is becoming an accepted part of life by too many people. The most common types of government fraud is awarding contracts to workers who offer bribes or providing political favors of some sort, voter fraud issues, embezzlement cases, subsidy fraud, and accepting illegal kickbacks.
Too often such government corruption has the potential of affecting public safety. For example, a former contract employee of the U.S. Army Corps of Engineers and a dirt, sand, and gravel subcontractor were both convicted of conspiracy and bribery in connection with a $16 million hurricane protection project for the reconstruction of the Lake Cataouatche Levee south of New Orleans. This levee is an eight mile section that is the systems lowest and most vulnerable stretch protecting citizens of Jefferson and St. Charles Parishes. The convictions were the result of fraud investigations in the procurement of levee reconstruction contracts.
Of course we are all aware of the failings of the banking and mortgage industry. The subprime lending crisis and resulting credit crunch resulted in significant losses and many lawsuits involving the mortgage lending and securitization process. There were civil lawsuits, criminal and regulatory investigations, government efforts to correct the impact of the subprime crisis and credit crunch, and litigation and regulatory actions relating to the collapse of the auction rate securities market. Taxpayers will be covering the numerous bailouts for decades.
The inspection of Wachovia Securities caught many of us by surprise, perhaps even Wachovia Securities. Securities regulators from six states began an inspection on July 17, 2008 as part of a probe into the company’s sales of auction rate debt. The inspection was triggered by their failure to comply fully with information requests from Missouri securities regulators.
Massachusetts sued Merrill Lynch over auction rate securities. The state alleged Merrill Lynch was committing fraud by pushing the sale of auction rate securities, knowing that the auction market was unstable.
Many of our clients lost their homes due to a collapsing housing market. Of course, some of the problems came not from fraud or shady practices but from over-eager buyers and mortgage lenders who turned a blind eye to their own accountability (there’s that word again!). As we know, a mortgage is a loan made against real property with the intent being repayment as agreed by the borrower, under an amortization schedule until it reaches maturity. This would normally be interrupted only by significant life events such as moving, unemployment leading to bankruptcy, divorce, or serious medical events.
Mortgages were successfully handled by banks and lending institutions for many years using responsible repayment formulas. There were underwriting requirements to ensure that borrowers had the financial means to meet the repayment agreements. All the elements that could cause repayment failure, such as bankruptcy or serious life changing events were known by the actuaries that underwrote the loans, so risk factors were easily analyzed.
Consumers understood the concept that they were “sold” the house, but they did not consider the mortgage itself as being “sold” to them. Rather borrowers sought out the lending institutions and submitted loan applications. That changed. Advertisements came in full force on television, radio and in print. They promised that anyone could get a home mortgage regardless of many previously unlendable situations. Both banks and non-banks saw an opportunity and all seemed to want their chunk of the business.
Why did lending companies want to extend credit to those surely doomed to repayment failure? Because they were lending on the premise that the majority of these loans would be refinanced or the debt would be sold. Consumers often fail to realize that “debt” is a commodity that has value in the financial markets. Consequently, the following “concepts” were accepted by even normally sound lending institutions:
1. Down payments, signifying the ability to save and plan for the future, were no longer required. Many lending institutions would lend 100% of the home value.
2. Lending institutions made the assumption that few, if any, of the borrowers planned to keep the loan to maturity. In other words, they would either refinance or sell the home prior to the loan being fully paid off. If the borrower’s refinanced, it was likely to be with the same lending institutions. Borrowers were encouraged to utilize loans they might not otherwise have used, such as interest only loans. This allowed borrowers to buy more expensive homes than they would have ordinarily qualified for.
3. Borrowers were qualified based on the amount of the initial house payment – not the total loan amount. Therefore, banks and other lending institutions knew the borrower’s would be forced to refinance in many cases because they could not afford the increasing cost of their house payment. Initial “teaser rates” went up over time, causing often dramatic increases in monthly home mortgage payments.
4. Finally, many lending institutions did not qualify the borrowers to the extent that had always been done in the past. Some were jokingly saying that the borrower’s pulse was good enough. In effect, some loans simply took the borrower’s word that he or she could afford even the initial house payment. Many of them could not even afford that initial low rate, but the lending companies did not care. It was a matter of getting their initial commission and moving the debt along to the next company.
These loans were not based on the home’s equity because no down payment was required in many cases and loan amounts were therefore on the full value of the home. Of course, many expected the rising housing market values to continue to rise despite signs that it was getting ready to cap. In fact, people bought second and third homes on the premise that they would be sold within two years for profit based entirely on rising home values.
Many of us thought these were new ideas that just didn’t work, but that is not the case. In the 1920’s similar lending practices were used and had basically the same results in the 1930’s when the housing market dropped. While consumers may have thought these were new practices, responsible lending institutions were well aware of what happened in the 1930’s. Because it was common knowledge in lending circles, it was difficult to sell mortgage-backed securities based on ballooning rates without an extra yield premium, so some lenders simply lied.
Of course, not all lenders were unethical. Many lenders continued to work with sound lending practices, including some surprising lenders who were lending to those with even low credit scores. They continued to require down payments and verifiable incomes that were likely to continue into the future (meaning they had stable jobs).
One might ask how this could happen since it was already experienced in the 1930’s. Didn’t the government correct the possibility that it could happen again? Actually, yes they did but the law was ignored. Title 12, Sec. 1831o mandates banking regulators take prompt corrective action regarding any troubled bank. The law mandates specific actions well before the bank faces failure. It further states that a troubled bank must “restrain senior executive compensation” meaning no bonuses or raises. Obviously this law was successfully ignored not only by the banks, but the regulators as well.
Unethical practices are obviously continuing today; some years have not necessarily just been bad years for ethical conduct. Writer Robert Peston[1] wrote regarding Wall Street: “The underlying cause of the current global financial crisis is a system in which there’s little personal responsibility for lending decisions.” There it is again: responsibility.
In the case of the home loan problems, much of the driving power came from commissions for issuing home loans. Many of those issuers did not work for the banking and lending institutions, but rather were paid on the volume of mortgages they arranged. The incentive became production rather than quality. Rather like the insurance broker who wants insurance applications, not necessarily qualified applicants.
Have you ever wondered where all these bad mortgage loans end up? The paperwork and administration duties are handled by specialist companies, such as New Century Financial, which has already gone into bankruptcy protection. The debt itself ends up on Wall Street with such banks as Goldman Sachs, Morgan Stanley, Merrill Lynch and others who take the debt and process it into asset-backed securities or bonds. The banks themselves may have no connection to the actual creation of the debt; they merely handle it once it is there. They do not know if the debt is secure or not (if it will be paid as required or default). Debt is a commodity that is bought and sold without regard to those owing the debt. The banks do have historic data but due to the types of loans that were being generated such historic data may be worthless.
The companies will assess the risk value of the bond or security based on the data on hand, so accurate verification of the risk may not be possible. For a fee, special credit rating agencies, such as Standard & Poor or Moody’s will verify what they believe to be the correct risk rating, but unless they have better data such a rating is obviously flawed. As a result many of the bonds and securities have received inaccurate ratings so those who invest in them are receiving flawed investment advice from those who sell them. Data may eventually emerge allowing a more accurate prediction of the risk involved for investors, but by then it will be too late for many people.
Unfortunately for investors, not all involved have done their best to provide accurate risk assessment. Since many investors do not want any part of the mortgage industry, some have become creative when marketing these bonds. Sometimes they have been mixed with other bonds in collateralized debt obligations to hide the risk involved. As the mix becomes more muddled, additional investors (believing they are avoiding mortgage debt) will actually be purchasing in part the very thing they are trying to avoid. Some have branded mortgage debt “toxic waste.” As a result of these “mix and measure” bonds, many large investors are simply avoiding bonds entirely. The mixed bonds have been sold worldwide so it is actually affecting global finances to some degree.
If I have given the impression that only American institutions have performed shamefully, that is not the case. This has been a global financial issue in one form or another. It is not something that the general investor is going to unravel.
A survey conducted some years ago by Business Week stated that 59 to 70 percent of managers feel pressured to compromise personal ethical views in order to achieve corporate goals. This perception of pressure seemed to be especially high among lower level managers. On the positive side, 90 percent of the managers said they would support a code of ethics in their business place and the teaching of ethics in business schools.
Even a normally ethical individual can be influenced by unethical pressure from others, especially upper management. In today's economic climate, individuals often feel they would be unable to survive financially if they lost their job. As a result, he or she may be willing to participate in an activity once hired that they would not have participated in prior to being hired.
It is interesting that the FBI shifted agents from terrorism activities to work on Wall Street investigations, including one into the fraud of Bernard Madoff. Apparently we have decided that the threat to our society is higher from the financial sector than it is from the more physical terrorists.[2]
Laboratory research has shown unethical behavior rises as the industry or climate becomes more competitive. Perhaps that is why some insurance agencies push competitive contests and look the other way when activities seem to compromise ethical behavior. These studies further indicated that when unethical behavior is rewarded (as with prizes or additional commissions) it further erodes ethical standards. On the other hand, the same studies noted that when unethical behavior was punished, unethical behavior was deterred.
Those who study the rise and fall of ethical behaviors have made some observations: it is necessary, if one wishes to preserve ethical behavior, to require:
1. A sensitive and informed conscience;
2. The ability to make ethical judgments individually; and
3. A corporate climate that rewards ethical behavior and punishes unethical behavior.
Most ethicists believe that the more complex our society becomes, the more we need to teach ethics to the general population. In the past, ethical behavior was primarily taught to children by their parents and churches. As families became more complex and spread out, ethical teachings seemed to diminish. Some studies have suggested that the loss of grandparent interaction is partly responsible for the loss of ethical teachings.
There are probably multiple factors causing a perceived decline in ethical behavior. For example, when people interact face-to-face with others, there is less temptation to be dishonest. When we do not see or know the person we are dealing with, dishonest activity becomes easier. It is simply easier to cheat an individual we do not personally know.
Example:
Scenario #1: Betsy finds a large sum of money on the bus. There is no obvious person who left it behind. The honest thing, of course, is to turn the money in so the owner can be found, but statistically Betsy is likely to keep it.
Scenario #2: Betsy finds a large sum of money on the bus on the seat an elderly woman had been occupying. Betsy had briefly chatted with her and learned she was on the way to see her new great grandchild. Having had a personal connection with the possible owner of the cash, statistically Betsy is more likely to turn the money in to authorities.
Promoting Ethical Behavior
Ethics is not entirely about oneself; it is also about others. It is not so much what one knows that makes an individual ethical, but rather what he or she understands. We all know it is wrong to steal, but understanding how stealing harms others is more likely to promote ethical activity.
Making ethical decisions addresses four basic issues:
1. Is it possible to teach others ethical behavior?
2. What is the scope of ethics?
3. What does it take to be a moral person?
4. What are a person's responsibilities to other moral persons?
There is no doubt that each of us, regardless of our occupation, faces ethical issues on a daily basis. Those in an occupation with a "public interest" are especially faced with ethical issues and probably legal consequences.
Ethics are standards to which an insurance agent or broker must aspire to; it is accepting the ethical commitment owed to each client. Every type of profession has an informal code of ethics, which may sometimes be more understood than written. Ethics are a means of creating standards within any given profession to upgrade it and give it honor. It is a means of measuring performance and acknowledging outstanding individuals. Ethics are often a means of providing priorities and building traditions based on integrity.
It would be hard to imagine doing business with anyone that we knew to be unethical. Can you imagine turning over control of your financial affairs to an attorney convicted of stealing from his other clients? Would you buy a car from a person who had knowingly lied to others about the cars he represented? Would you deal with an insurance agent who had repeatedly misrepresented the products he or she sold? Ethics are the only element, other than legal mandates, that add an element of trust to many industries. It is very difficult to mandate ethics. Only behavior, as we previously stated, may actually be mandated. If a person is ethical, that is something within themselves that simply adds to their trustworthiness.
No matter what our profession may be, as individuals, each of us faces ethical issues each day. Some are very simplistic in nature while others are complex and may have many sides (and many correct answers) to them. We face moral issues every day. Such questions as: How much should I give to the poor? Is it wrong for me to take drugs? Should I report someone who is cheating are daily concerns.
Some types of ethical or moral questions can be directed to our religious institutions for support in determining the right answer. Sometimes the answers can be found in our legal system. If our state or federal government says commingling funds is illegal, for example, then we could also state that it must be unethical as well. Sometimes, determining what is ethical is simply a matter of what feels right emotionally. We have all said or heard someone else say "It just doesn't feel right." That feeling of right and wrong is probably the result of our childhood upbringing. Even if we do not distinctly remember being taught that a particular action is either right or wrong, somewhere in our upbringing or past experiences, we have received such teachings.
While this course cannot instill ethics into anyone who has none, it may provide the tools for determining the more complex issues. By using basic concepts and theories and by having an appreciation of what constitutes an ethical solution, decisions may be made on the basis of reason.
It should be noted that different conclusions may be reached to the same ethical question. It does not mean that one solution is right and another wrong. Ethical questions often have multiple answers, all of which may be correct. Many ethical questions involve multiple hues; some decisions may be based solely on facts, while others may be based less on facts and more on emotional factors (or what simply feels right).
Business leaders often question whether ethics may be taught in the workplace. This, of course, depends upon multiple factors. First of all, does the employee desire to be ethical? As with all things, the person must want to achieve the goal at hand. If other goals are more important to the individual, then it will perhaps not be possible to teach ethical behavior. If however, ethical behavior is important to the individual, even if other goals are also sought, ethics may be taught. Unfortunately, those who are faced with the responsibility of hiring personnel can seldom determine the individual's ethical desires.
Sharing is one of the first lessons a child learns. Sharing is a form of ethics; it is the opposite of greed. As adults, we learn to share in numerous ways, but sharing begins in childhood. The shift from securing our own interests to sacrificing on behalf of others is an essential part of what is meant by "ethical decision making." This may especially come into play for insurance agents. The choice to make a sale and earn a commission in any way necessary rather than sacrificing the sale on behalf of honesty is an ethical decision. The selfish person cannot routinely make such moral decisions, or perhaps more correctly will not, make such decisions.
It is necessary to understand that one of the general features of taking an ethical point of view is a willingness to take into account the interests, desires and needs of others. A person may argue that it is necessary to look out for one's own interests, desires and needs. While this is certainly true to a point (we must clothe, feed and house ourselves and our families), taking our own interests into account need not mean making unethical or immoral decisions regarding others. Even commission salespeople are able to make a very good living while still maintaining ethical behavior. In fact, the best salespeople do not need to behave unethically because they have mastered their trade through the development of communication skills and professional training.
When a child asks his or her parent "Why do I have to share my toys?" the reply may be "Because if you don't share your toys with your sister, she will not share her toys with you." This simple logical answer teaches the child a valuable lesson. Our interests are tied to the interests of others. Just as our ancestors had to protect one another to survive, we must treat each other ethically so society and all that involves can survive. For example, if only those who wanted to pay taxes did so we would not have free schools, decent roads and bridges, emergency services, libraries, and many other luxuries that exist solely due to the taxes we pay.
Every aspect of our society is built on the premise that it must be ethically run for the good of those who cannot adequately protect themselves. Our laws protect the weak, the less educated, and the unusual from others. We know the system is not perfect; there will always be those who cheat, lie, and steal. There will always be those who kill others, those who harm themselves (through drugs or alcohol), and those who cannot look beyond their own self interests. Even so, our society runs pretty well as long as we are constantly vigilant about enforcing ethical behavior. When we fail to act ethically there are unfortunate consequences, as seen in the housing and loan markets.
Just as the man who is known as a liar or a thief will find others unwilling to trust him, the insurance agent who is not ethical will, at some point, find making a living impossible because no client will wish to deal with him. We are better able to achieve our goals when we recognize the goals and interests of others. Plato argued that immorality (unethical behavior) is ultimately self-defeating. While the con artist may not believe this and some unethical people do seem to prove the point, most people believe that, at some point in time, each person receives what they have given. The Bible says we will reap what we sow. Even if we do not get back what we give others (whether that be good or bad), most people would agree that it is easier to be happy with ourselves when we feel we have done the right thing.
Egoism
Not everyone believes it is in their own self-interest to be ethical in their behavior. Some who reject the idea of other's interests and desires are called egoists. Do not confuse this with egotism. An egotist is a person who is self-absorbed or stuck on themselves. These people make poor egoists. Webster's dictionary defines egoism as the doctrine that self-interest is the basis of all behavior whereas egotism is the habit of being too self-absorbed, talking too much about oneself or conceit.
Psychological egoism maintains that people are always motivated to act in their own perceived best interest. Psychological egoism is not an ethical theory since it does not tell people outright how to behave. Rather it attempts to explain why people behave in certain ways. Ethical theorists consider this theory, however, since it does have a bearing on their theories of ethical behavior.
Another version of egoism is a genuine ethical theory. Traditionally named "ethical egoism," it maintains that people ought to act in their perceived best interest. An ethical egoist argues that people should act in their best interest at all times because it is good for the general economy (providing industry and jobs, for instance).
In the marketplace we all try to buy low and sell high. That is certainly an attempt to pursue our own self-interest. It is unlikely that the buyer worries about the seller when buying low, nor does the seller worry about the buyer when selling high. Individual self interest is at work. Even though this may be an excellent example of ethical egoism, it tends to be both orderly and productive to our society. This points out that this theory has positive dimensions to it despite the selfish basis.
A political economist, Adam Smith, believed in ethical egoism. He felt that people, while being interested in their own needs and desires, created good for society as a whole. Smith felt that economic conditions were created and expanded when people acted in their own behalf.
If we were to fully believe in psychological egoism, which states that humans automatically act in their own behalf, many of the acts of heroism that we see could not be explained. Examples of individuals giving their own life for that of a stranger could certainly not be explained by psychological egoism. Nor could the actions of entire communities that come together for the benefit of a stranger in need; the groups that build houses for someone they do not know, organizations that put their time and money together to build a playground or help abandoned animals are putting themselves second – and enjoying every minute while doing so.
There is more day-to-day heroism than one might realize. Such simple things as the child who shares his lunch with another student, the woman who gives her last dollars to a homeless person, the man who donates his only day off for a food drive are all acts of kindness that consider the needs and desires of others first.
Is it possible to teach ethical behavior to others?
Many feel it is possible, though perhaps not in every situation. An agent who has never considered ethical behavior might suddenly begin to do so if the agency where he or she works begins a strong ethics campaign. On the other hand, an agent might continue to act unethically even if threats are made to recall his or her license to sell insurance. One thing is certain: the effort must be made to emphasize ethical behavior because there will always be those agents who will respond favorably to such efforts.
What is the scope of ethics?
This is an expansive question that could be carried to great depths. In many industries, including the insurance industry, the professionals have knowledge that the general population does not have. As a result, those individuals who seek out the professionals must rely upon their honesty and integrity. Therefore, a feeling of ethical standards must exist. It was the potential for abuse of power that provided a set of rules for what is commonly called "ethical behavior." Sometimes, ethics are written standards, which may be mandated by law on either a local or federal level. The premise, upon which practical ethics must be based, is that power must be exercised in the interest of the clients who seek the professionals out and may not be exercised solely in the best interest of the professionals themselves.
Parts of the insurance industry have been labeled (often unfairly) as lacking ethical standards. Usually what we find is not an industry as a whole without ethics, but rather some individuals who have received much publicity. The insurance industry, which deals with senior products, is one section that has received bad publicity off and on. Part of this has to do with the age of the consumer. If a 25-year old person is taken advantage of, many would think he was simply stupid or uneducated to have allowed it. If a 75 year old is taken advantage of, however, publicity is sure to follow. This is not surprising since a 25 year old is more likely to have the ability to make sound judgments in comparison to a 75-year old person. Also, our older population controls most of the nation's wealth. If a salesperson (in whatever industry) is greedy and unethical, he or she is most likely to hit those with money. That would typically be older people.
We should also ask ourselves why society seems to consider it less offensive to take advantage of a 25 year-old person. If unfair advantage exists, why does it matter how old or young the victim is? Perhaps that is an ethical question in itself.
When we look at what the scope of ethics is or could be one might be surprised at the extent to which it could be taken. Even our financial investing may be an ethical issue. For example, if an agent were an animal activist, would it be ethical for them to invest in companies that use animals in the laboratory or for testing? If a client is an environmentalist, should he or she invest in any type of investment that is detrimental to the environment?
People and cultures do not always agree on what is ethical. What one culture or society may consider ethical another may not. Even within the same culture or society, people may disagree on what is and is not ethical. America fought a civil war over a strong ethical disagreement.
Every person probably has some degree of greed or selfishness within them. The ethical person realizes this possibility. Since ethics is a code of values to guide man's choices and actions, the ethical person will bypass their own greed and do what is perceived as best for the majority of people or best for the person they are dealing with. In choosing his or her actions and goals, constant alternatives are faced. It is not always easy to decide which choice is best and ethical. Without a standard of values, ethical choices would be very hard to make. At some level, our religious background may set the standard of values by which we make our choices. However we arrive at it, understanding how others feel determines many of our ethical decisions.
What does it take to be a moral person?
Most people know right from wrong. While what is right may not always be agreed upon, as long as a person acts on what they perceive to be right, then they are acting ethically. For most people, there will be little disagreement since most of us are not involved in the global ethical questions. Most of us deal with the simple things in life – earning an honest living, paying taxes, supporting our families, giving to our churches, helping our elderly parents, and all the other aspects of daily life. Our quest for ethical guidelines is mostly black and white. We don’t have to address the issues on Wall Street or help the President solve world peace.
The ethical person believes in doing what is right. He or she doesn’t have to think about it; they know the path to take. The ethical insurance agent does not believe it is necessary to trample their potential clients in order to get the sale, they do not believe it is necessary to tell half-truths or leave out needed information. Of course, it is also necessary to be well prepared and use good communication techniques. All types of professions benefit from these skills.
It is not possible to be one person at home and another person at work. Who we are is defined everywhere we go and in everything we do. Three questions must be addressed:
1. What kind of person am I?
2. What quality of work do I want to perform?
3. What do I want my legacy to be?
Just as a man is defined by the lies he tells, and a thief by his actions, all of us are defined by our daily activities. We do not necessarily have to be a liar or a thief to define ourselves as less than honest. Many of our political figures are not wholly dishonest and yet they are not perceived to be honest either. How do we want ourselves defined? Answering such questions cannot be avoided. Even when we try to ignore them, we are still answering the questions by our actions. It must be realized that the questions are asked in the minds of every person we come in contact with. They look at us and they form opinions to these questions. Coming to terms with the basic philosophical questions about what we are doing with our lives may be the most practical of all possible ventures.
If we have children, we know they are very good at defining those around them, including their parents. Children may not voice the image they see, but little is missed. How do you wish your children to view you? What you do in your every day lives will form their opinions. It will also demonstrate to your children what path in life they might take.
Perhaps the worst image some children receive from their parents is that of violence, whether against them or each other. It is difficult to understand how an adult would allow that type of personal action to exist, whether it involves striking a spouse or child. Verbal abuse is just as damaging. While it may not show as prominently as physical abuse, the effects last for a lifetime.
What quality of work do you want to perform?
Quality of work includes how we treat our clients, perform the necessary insurance duties, including required continuing education, and the effects of the policies we place. It is quality, not quantity of work that counts. Forging signatures, misstating health conditions, omitting information for the sake of a sale, and so forth, determines the quality of one’s work. True professionals simply feel their integrity is worth more to them than a quick commission. We all occasionally make mistakes and that is not a reflection of quality unless we do nothing to learn from the error. If an error occurs and no effort is made to correct it, then that would reflects on the type of work performed.
What do I want my legacy to be?
Most of us must surely want to be remembered in a favorable light. I doubt we go through life worrying about it, but we also don’t want people standing around our grave saying “I sure am glad he’s gone!” I remember a friend saying about an especially mean family member: “I showed up at the funeral just to make sure she was really dead!”
Those who proclaim the loudest that they don’t care what anyone thinks probably care the most. Most of us want to be remembered in a favorable light. We want our children to keep our picture on display; we want our grandchildren to talk fondly of the time we spent with them; we want our friends to remember the good times.
While the legacy that matters most is the personal one we leave our family and friends, we will also leave a business legacy. Hopefully it will be one of competency. Of course, most people would not view themselves as incompetent even if they were which is why the industry is supposed to remove those that are incompetent. Sometimes, competency is merely a matter of obtaining required or necessary education within any given industry. It is always interesting to note the amount of sincere education acquired by the leaders in an industry. The leaders are nearly always more concerned with educating themselves to a greater degree than are those at the bottom. Education and ethics go together. It should be noted that success and education also go hand-in-hand.
The Leaders of the Pack
It is unlikely that most agents would consider who they work for to be a matter of ethics. However, as many industries have shown us, it can be. When ethical behavior is not deemed important by the company individuals find themselves following the pack. When an individual feels their day-in, day-out role is primarily connected to making money without any regard as to how the money is made, ethics may easily take a back seat.
How does an agent know, except in the extreme cases, if their agency lacks ethics? It may not always be a black-and-white situation. Sometimes the decision can only be a personal one if the agency is not noticeably to one extreme or the other. One would not expect an agency or brokerage to be outright unethical. Each state has mandated certain procedures that a company must follow which usually prevents outright unethical behavior. It is more likely that questionable companies would ignore unethical actions of their agents, which would equate to condoning such actions.
Some examples of this might include:
Example #1
Joan, an insurance agent, is sitting in the agent's room of the agency where she works. As she is completing her paperwork on the business she has written that week, she notices that she forgot to have one form signed. Another agent in the room, Matt, suggests: "Don't worry about it. Just put one of his signatures against the window pane and copy over it onto the one you need."
Joan: "Isn't that illegal?"
Matt: "Maybe, but everyone does it. If you're not, then you're the only one who isn't."
As Joan asks around, she discovers that Matt is correct. Virtually everyone she spoke to about it confirmed that they too copied signatures where one was forgotten. Joan found that nearly every agent intended to get all required signatures, so it was not a matter of purposely omitting them. Rather, it was an easy way to perform below necessary levels of competence. Several agents even mentioned that the management had sometimes been present when signatures were copied. They simply left the room and acted as though they had not seen it.
Of course, it is unethical to copy any signature in any situation. It is also nearly always illegal to do so. In this case there are additional ethical questions involved. Is Matt unethical for advocating that another person forge a signature? Is the agency unethical by ignoring the behavior going on? By ignoring the behavior, is the agency condoning it? If Joan had decided against forging the signature would she then be free of any other agent's unethical behavior? Or, having knowledge of unethical (and even illegal) activity, would she be ethically obligated to report it to the insurance department? Should she go elsewhere to work and leave it at that or, in the interest of ethical behavior and responsibility, should she report the behavior to the State Insurance Department and perhaps to the insurance companies as well? Since Joan had developed several good friendships among the agents, how would loyalty to her friends and her responsibility to ethical conduct intertwine?
As you can see, ethical behavior is not a simple matter. Do your standards of what is ethical apply only to yourself or to others as well? When views do not correspond to the views of others, who is right?
Example #2
John works for a large investment company. John is a strong believer in environmental issues. Because of his beliefs, he will not refer any client to any stock or company that John feels harms the environment. John seldom allows his clients to see any investment that he does not agree with. John's company knows that John will not present any company that he does not agree with. The company says nothing as long as John brings in a good quantity of business. If his business is down, however, they do bring up the matter.
Is it ethical of John to only show those companies that he agrees with? Secondly, is it ethical of the company he works for to only be concerned about it if his sales are down? Could John ethically represent companies that he opposes? Which set of ethics should come first: his own or his responsibility to his clients to allow them to make their own choices?
If the company that employs John should require that he show all options to their clients, is John ethically bound to follow his employer’s requirements? Whose ethics come first: John's, the client's, or the employer's? Different people or groups often do not agree on what is or is not ethical. Who should decide which ethics come first? This question might come under the heading of "What are a person's responsibilities to other moral persons?"
Basically, all of these concepts or questions bring us back to the original point. A person must know why they are doing a particular thing. In the case of selling insurance, if the agent does not understand the reasons why insurance policies are important to own, it would be very easy to lose track of important ethical elements. The lack of this understanding might eventually force the agent to deal with the basic inquiries that come about when ethics are pushed to the background.
What are our responsibilities to other moral persons?
Most people realize that they are responsible for their actions. In sales, we often hear the statement "For every action, there is a reaction." This is generally true in life as well. It goes beyond the obvious situations (if you smack someone, they may smack you back). If you are rude to a person, you may not realize the "reaction" at that moment, but one will surely follow. The reactions may not always be noticeable to others. This is especially true when it involves emotions, such as hurt feelings. Since each of us is responsible for our actions, the question then is “are we responsible for the reactions that follow?”
Some reactions are directly tied to our actions and are predictable. If we lie in order to obtain money, our actions are then directly tied to the reactions that follow. What we did was deliberate and the results should be no surprise. In such situations, we are responsible for the reactions to our actions.
In other situations, we cannot be responsible for the reactions. If we act in a responsible manner and a reaction occurs that hurts or offends others, we may not necessarily have any responsibility. What a person does in every day life is the result of multiple decisions made over their lifetime. Those decisions include our perception of whom and what we are. Our character (or lack of it) is made up of our day-in, day-out decisions. The irresponsible person will not care what his or her responsibility to other moral people may be. Therefore, we will look only at what an ethical person's responsibility is towards other ethical persons.
Let's look at the example of John, the investment counselor. He would not present any investment to his clients that he did not personally agree with. Let us assume that most of John's clients are themselves ethical people. Since his clients are themselves ethical, is John wrong in making such investment choices for them without giving them a chance to bring out their own sets of ethics? What is John's responsibility to other moral or ethical persons?
Moral or ethical responsibility is not a single choice. Such choices are made daily in many things that we do. If we assume that our children are basically moral people, then what are our responsibilities towards them? This may also be said of our peers at work. If the majority of the agents at the firm we work for are ethical people, do we then owe it to them to also be ethical?
Agency XYZ prides itself on being ethical. The owners and managers stress such behavior at all company meetings. While sales are certainly promoted, it is made clear that the sales must be honestly come by. XYZ Company seeks out the very best products available so that their agents can present a superb policy to their potential clients. Training and education is given a top priority by the company as well.
It would probably be safe to say that XYZ Company has invested not only time but money into their company and their sales force. Since they have stressed ethical behavior, it is also probably safe to say that they do not feel such behavior will hurt them financially. In fact, they probably feel it will benefit them financially. Given this scenario, XYZ Company has probably attracted those insurance agents who also give a high priority to ethical behavior. If an unethical agent came to work there and misrepresented the products (theirs or others), XYZ Company, or any other aspect involved in the sale, how would this affect the ethical agents?
An agent once relayed this true story: she had been building a client base for about two years when the agency she worked for became the subject of an investigation by the state's insurance department. Since she had always prided herself on giving her best efforts to her job and her clients, it was distressing to see the agency she worked for on the evening news. It did not matter whether the agency had actually done anything wrong. It did not matter whether she had done anything wrong; she worked for the company and that was enough in the eyes of many.
In this same context, the agents at XYZ Company would be affected by an unethical agent even though the other agents were very ethical in their behavior. People believe in the old saying "It only takes one bad apple to spoil the whole barrel." Therefore, one unethical agent will affect how others in the same agency are viewed. In this context, every agent has a moral or ethical responsibility to all the other agents. In the case of the agency being investigated, that agency had a moral or ethical responsibility to all of its agents. Of course, it is the job of the state's insurance department to investigate any complaint. That certainly does not mean that anyone is actually guilty of doing something wrong. Chances are, however, if it hits the evening news or the newspapers, it will not matter whether there is any guilt or not. Opinions will be formed. Therefore, each insurance agent and each insurance agency has an ethical responsibility to act in a way that will not cast doubt on themselves or others.
Sociologists have contended that determining our own identity is not an easy thing. Many people never realize that we are able to choose who we are by the choices that we make. Certainly, we are influenced by many things, some of which are beyond our control. Even so, most of whom and what we are, we determine ourselves.
Objectivist Ethics
Since reason is man's basic means of survival, it is not surprising that we have the ability to form who and what we are. This is called Objectivist Ethics. Since everything man needs has to be discovered by his own mind and produced by his own efforts, there are two basic elements involved in becoming the person we choose to be: thinking and actions. We decide who we will be and our actions carry out those thoughts. To be an ethical person, we must, through our thinking, choose to be so, and then productively work towards it.
If some people do not choose to make any conscience choice, they will develop by imitating and repeating the actions of those around them. This is why it is so important that agencies and management staff make ethical behavior a priority in the workplace. Those who simply repeat the actions of those around them seldom make an effort to understand their own work. Unfortunately, who is imitated is seldom a concern to these individuals. As a result, one bad apple can, in effect, spoil the barrel.
Those who do choose to think out their actions and work productively towards a goal still do, however, remain the main force. They are the people who are most likely to be copied by others. Even those who survive by using brute force, or by making others their victims in some capacity, survive only because someone else was thinking and working productively. In other words, con men survive off the thinking efforts and hard work of others. Those who use brute force to steal or loot, survive off the thinking efforts and the hard work of others. It all comes back to those who do use logic and conscience choice.
As a theory of ethics, objectivist ethics holds man's life as the standard of value and his own life as the ethical purpose of every individual man. The difference between "standard" and "purpose", as used in this context, can be important. "Standard" is an abstract principle that serves as a measurement or gauge to guide a person's choices in his or her achievements or specific goals. The goal itself or the achievements obtained become the "purpose". Probably every person has some "purpose" or goal in life, but not everyone would have a "standard" of life.
Pete was born very poor. This poverty made such an impact on him in his childhood that he now strives to become wealthy. He obtains his accumulating wealth by whatever means necessary. Although Pete definitely has a goal or purpose in life of becoming rich, he does not have any standards. There is little doubt among those who know Pete that he will become very rich. Along the way, however, Pete is not finding much happiness. He has not thought out the goals he has established. Pete knows what he is doing, but he does not understand why he is doing it. Pete would be surprised (and perhaps even laugh) if someone told him that ethics are a part of finding happiness.
Holding Our Ethical Code
Our history is full of wise men that wrote about the philosophies of life. While many of them did not agree on many points, most did agree on one: lack of ethics promotes disorganization, financial turmoil and, sometimes, even the demise of governments.
As individuals, we may often feel that we have little control over others. This is true to a certain extent, but we do actually have more control than we might realize. The control we have is the ability to choose our own way of life. There is little doubt that what we do on a day-in, day-out basis affects everyone we come in contact with. We are also impacted by others in the same manner.
The activities and policies of a business tell the employees what the firm's underlying values actually are. It will not matter what is written in the employee manuals. What the firm actually does will be the loudest indicator. Actions reveal more about a business than does executive speeches or advertising campaigns. The employees will judge the company by the way they are treated individually.
Is the way we treat others an extension of our code of ethics? Often we forget that ethical behavior is not only connected to such things as paying our taxes fairly, following the laws or telling the truth. Ethical behavior can also be connected to how we treat others. Ethics is a code of values to guide man's choices and actions. In choosing one's own actions and even goals, we must face constant alternatives. Even such things as the manner in which we speak to others are a part of our daily alternatives.
Selfishness is something that we expect from children, but not from adults. To be selfish is to be motivated by one's own self-interests. This concept can be applied to individuals or companies. Insurance agents are often accused of self-interest, but companies are probably the most common target of such claims. For an individual or company to center on their own self-interests, they must have considered what constitutes their own self-interests and how to achieve it. Because a selfish person or company chooses their goals through reasoning, selfishness is part of a goal to achieve self-gratification, wealth, or power by whatever means necessary.
Being ethical can be very difficult when being unethical appears more rewarding from a financial or public standpoint. The public standpoint is often overlooked. If we feel strongly about something that no one else seems to, it is very easy to keep quiet. In fact, that is precisely what gets "followers" into trouble. When a person knows something is not right, but no one else is saying anything, it is easy for the individual to simply go along with the group.
Greg works for a very large insurance agency. Greg has always had very strong religious convictions and, as a young man, took much teasing because of his views. Over the years Greg simply found that keeping quiet was easier. After all, he reasoned, as long as he personally held his moral ground, what others did was their own business.
Mike was also an agent with the same agency as Greg. As time went by Greg found mounting evidence that Mike was "clean sheeting" his applications. One day in the field Greg ran across one of Mike's clients. She was an elderly woman who obviously had some mental disorder. She could not remember simple things and was under a doctor's care.
Back at the office, Greg asked Mike how he ever got her on that policy, which was issued only 6 months previously. "I would not have even attempted it, given her medical situation," stated Greg.
Mike replied "I simply stated what she told me. If she didn't say it, I didn't write it."
On two other occasions, Greg found similar circumstances in Mike's business. Greg voiced his concern to Mike: "You know those people won't be covered if something comes up. The company will simply rescind their policy."
Mike: "You worry too much."
It became obvious to Greg that Mike did not intend to change his practices.
Since Greg is not involved and performs his job ethically, does he have any moral obligation to Mike’s clients? Since Greg considers Mike to be a friend, does he have an obligation towards Mike?
Greg was so concerned that he went to his manager. The company's manager told Greg that it was not his concern as did several other coworkers. In fact, most people that he talked to within the company seemed to be viewing Greg as a potential troublemaker. Greg had heard about "whistle-blowers" and he knew he could be putting himself in a precarious position with the company if he became too vocal.
On the surface it would be easy to say that right is right no matter what. It is likely that most people would, however, suggest a different course for others than they would suggest for themselves. Studies have shown that people are more likely to voice ethical behavior than follow it.
The truth is, our identity is established by our actions (a liar is known for his lies; a thief is known for his stealing, etc.). A common pitfall to proclaiming ethics, but not following them, is that an identity is established. When we allow ourselves to be defined by whatever we happen to fall into, that in itself is a choice. Who we are is established by what we do and even by what we fail to do.
Who we become is a gradual thing. Seldom are we formed by one single experience although one single experience, if great enough, can change our direction or focus in life. Change, for either good or bad, can be a gradual process. So gradual that people may fail to notice what is happening. Therefore, a code of ethics must be a daily goal that we deliberately choose to follow.
We often hear that Americans are the largest consumers of goods and services in the world. We have become a nation of buyers where we were once a nation of savers. Pleasure today is promoted over financial safety tomorrow. This attitude is natural; most people would rather have something now than later. Without a system of values, individuals may come to feel that society owes them a comfortable living in retirement. This rationalization allows them to spend today without worrying about tomorrow. Self-discipline and self-control have given way to self-fulfillment and material consumption. Businesses have also fallen prey to material consumption. Material consumption can often be translated into one general word: greed. It is the desire for more today.
Some might say being ethical is hard work, but others would disagree. Having a specific ethical code could make life easier since such individuals instinctively know who they are and how they wish to respond to any given situation. It removes the stress that might otherwise exist when decisions are necessary regarding personal or business actions. The beauty of freedom of choice is the ability to improve on past decisions; we are not permanently tied to what we have done in the past.
It is possible to discontinue acting in an unethical manner, or "mend our ways" as it is often referred to. It is never too late to begin to act in an ethical manner. In fact, John Newton, the man who wrote one of our most famous songs, was the captain of a slave ship. As he came to realize that slavery was wrong, he used his experiences to bring this same understanding to many others. The song written by John Newton was Amazing Grace. Knowing this, the words of the song gain a greater meaning:
Amazing grace, how sweet the sound
that saved a wretch like me
I once was lost
but now I'm found
was blind, but now I see.
While there are many reasons to perform ethically in business, the one that should matter most is our image to others. We are a reflection of our lives, our work, our families, our community and ourselves. Our children will copy us (that's hard to believe during their teen-age years, but it does happen), our families and our communities will be affected by our actions and we must live with ourselves. In fact, those around us, including our coworkers, are affected by our values (ethics). Just as a follower may follow the cheater, he may also follow ethical behavior. When an agent defines their character as an ethical human being, it will show in his or her daily behavior, which includes his or her work. This will bring self-assurance, which will ultimately benefit him or her in many ways, including financially. Personal integrity radiates confidence and everyone prefers to deal with people who seem confident.
A few years ago, the Howard Fischer Associates (one of New York's top executive search firms) conducted a survey of CEOs of the top one hundred companies in the New York area. They were looking for traits most valued by industry leaders.
Of course honesty and fairness were ranked at the very top. These are the other character traits that were listed:
1. Never compromise on matters of principle or standards of excellence, even on minor issues.
2. Be persistent and never give up.
3. Have a vision of where you are going and communicate it often.
4. Know what you stand for, set high standards, and don't be afraid to take on tough problems despite the risks.
5. Spend less time managing and more time leading. Lead by example.
6. Bring out the best in others. Hire the best people you can find, then delegate authority and responsibility, but stay in touch.
7. Have confidence in yourself and in those around you, and trust others.
8. Accept blame for failures and credit others with success. Possess integrity and personal courage.
There are many books and so-called experts telling us how to achieve financial and business success. We are not here to say whether that advice is accurate or not. Even so, before accepting advice from others it might be wise to determine what one actually wishes to accomplish during their lifetime. So often individuals lose track of their true goals (rearing happy children, writing a book, or establishing a close family) and become side-tracked with the goals of others, such as the company they work for. When an individual loses track of their own goals, they are more likely to become followers. For business owners, including many self-employed insurance agents, it is easy to become consumed by earning that next commission. Always searching for another sale is, of course, necessary for financial reasons, but not at the cost of all else in life.
In an effort to become the super-salespeople our company, agency or management staff promotes, people tend to embrace a variety of roles. That might include optimum time usage, aggressive sales techniques, becoming a superb team player, or motivational skills. Certainly all of these avenues can have advantages in one way or another. Each method does have its place in the business and sales world. Usually, each method that is promoted contains a certain amount of useful advice because they contain certain truths. That is precisely why these books tend to sell well. Even so, these methods, whatever they may be, also have their limitations.
Agents have complained that there seems to be something "missing" even when they have followed the methods precisely. Perhaps the why of our profession is missing. Why are you selling insurance - only to make a living? Do you understand where a product fits? Does the product do an outstanding job of meeting another's goal? If not, you have likely missed the why of your job. It is in the why that ethics or values often play an important role. When an agent understands the role they are playing in another's quality of life, the satisfaction gained goes hand-in-hand with ethical behavior. Clearly defined goals and purposes are essential if people are to understand what their lives in general and their work in particular are really all about.
It seems that psychology is the current rage in selling. While it may give an air of being scientific, often the "psychology" listed is more apt to resemble manipulation. When such techniques are encouraged by their employer, individual employees may feel inadequate to challenge the validity of them. This may especially be true if the concerned salesperson is not the "star" of the agency. Often, an individual may feel their job is not secure enough to question the techniques being pushed on them by their employer. Or, if the salesperson is not the super producer of that agency, they may simply feel that they have not earned to right to speak out. In actuality, ethics belong to everyone, not just the superstars of sales.
Totally fulfilling work probably does not exist. For many people, commissioned sales are something to be feared. It is probably safe to say that some amount of high self-esteem likely exists for those who enter the commissioned sales field. A person must feel they can succeed even to enter into such work. This brings us to another area of ethics. In this case, it involves those who recruit commissioned sales staffs.
Nearly every insurance agent has, at some time or another, had a company or person promise the world. The majority of workers do not enter commissioned sales. There must be a reason. If financial success were so easy, everyone would be doing it.
Can ethics be a part of promotional selling? At what point does reality need to be interjected? Should the fail rate be stated?
It might be easy to state that the "dark side" should also be stated, but would you expect that in other industries? Can you imagine a new car salesman saying: "Oh, sure, the car looks great now, but it won't in a few years. There will be wear and tear and the paint job will become dull. Five years from now you'll be glad to just get rid of the car."
It is common for agents to say that they would never have gotten into the business if they had known everything. And yet, now that they are in the business, they do enjoy their work. There are many aspects of commissioned sales that can scare a person out of ever entering it. Should these aspects be discussed with new recruits? There are no easy answers to these questions. It is safe to say, however, that overstating the benefits in commissioned sales is commonplace. Promoters often feel it is necessary to promise the old "chandelier in the barn" in order to bring in new salespeople.
There is no such thing as a totally satisfying job. Certainly it is desirable to find fulfilling work, but most things are a mixture of enjoyable and mundane. In other words, there are times that the job seems extremely fulfilling and there are other times when the job seems absolutely terrible. Even fields of work that seem to be glamorous to others generally carry with them a certain amount of negatives. Even jobs that promise excitement carry stretches of boring routine tasks.
Promotional advertising is all around us. As viewers of this, we must be aware that glamour and excitement also carries simple hard work and frustration. Look at the ads for joining the armed forces. These ads show handsome men flying planes or jets, standing on the decks of mighty ships, or visiting exotic foreign places. They do not show kitchen duty, strenuous marches, or dangerous duties.
There are so many temptations in life that ethics must remain a primary focus, especially in financial industries and commissioned sales. Even though it may seem to come effortlessly to a few, the majority must make a conscience effort to be ethical. Ethical people typically have a moral reason for being such. People who consider ethical standards to be a high priority also value such personality traits as patience and kindness towards others. In fact, whatever the career line, the most successful salespeople state that patience and kindness is necessary in their line of work. Some state this quality as a "love of people". Top-notch salespeople do, of course, develop the necessary skills for their jobs, but their love of people motivates them to do a better job than the average person. They tend to "go the extra mile" for their clients, even when that extra mile does not overtly bring them any financial rewards.
An individual who is naturally kind towards others tends to have a sensitive awareness of them. Kindness generally takes into account how another person might feel as a consequence of what we do. That is not to say that a kind person always sympathizes with others in every situation. Sometimes being kind means withholding sympathy. It does mean that empathy must be involved. Let's look at the difference:
Sympathy (noun): (1) fellow-feeling; compassion. (2) condolence. (3) agreement; approval; accord.
Empathy: (noun): (1) the complete understanding of another's feelings, motives, etc.
Not all will agree on the need for sympathy or empathy. Sympathy may not necessarily help a person and may, in some cases, increase the existing problem. Empathy tends to be aimed at correcting a given situation, and may be described as "tough love".
When a person is discharged from their job, personnel managers report that they often try to soften the blow by being less than honest about the person's shortcomings. In addition, they often do not tell the next potential employer the true reasons they were discharged.
Such evasions of the truth may do more harm than good. Unless the person knows and understands the deficiencies and mistakes that led to the loss of his or her job, those deficiencies and mistakes cannot be corrected and are likely to be repeated. Certainly, kindness needs to be used when relaying the information, but honesty is still the best option.
An individual that does not know what changes need to be made will never make any changes at all. As a result, the same mistakes will be repeated over and over again. The truth, in such a situation, may leave you disliked by the person, but it may also lead that person into the possibility of success. Sometimes being liked is simply not as important as being kindly honest. It is not always kind to deny the truth to a person who truly needs to hear it.
The next question: Are you being kind in telling someone the truth, or are you getting some type of power or pleasure personally by pointing out their failure?
To be a truly kind person, what you say must not be a reflection of your own insecurities or envy. The ethical person can take pleasure in other's happiness or successes. We seldom have control over what recognition we receive from others, but we do have complete control over how we react to the recognition others receive. Business owners especially need to consider how they treat individual employees. A chain store employed a regional manager who knew the name of every employee, including those who only worked part time. Every time he entered a store, he seemed to make a point of speaking directly to each employee on duty that day. By calling each person by name and acknowledging their presence, this manager undoubtedly increased production and added to the employee's happiness - such a small action, yet such a large benefit.
Looking the Part
In the business world and in sales especially, assertiveness is valued. It is hard to imagine a meek insurance sales person. It is generally that "take-charge" type of personality that is prized. We read books on how to dress for success. Red power ties must be worn; business suits in specific colors are sought.
In fact, few of us desire to have a salesperson, of any type, who has an inflated ego sitting at our dining room table trying to sell us something. While we may not be looking for meekness, we do appreciate humility. Do ethics also concern such personality traits as humility? If you were new to an agency and were unsure of what was proper, whom would you copy?
Personality types do not signify ethical conduct, of course. Any person can be very ethical just as any specific personality type is not always honest. In fact, con men are often very charming, which is how they become successful in stealing from others.
Courtesy
Respect is an ethical behavior element. Some people seem to be instinctively courteous, but chances are it is a habit they have purposely formed or carefully been taught in childhood. Courtesy is not linked to income, background, or schooling. Courtesy is a trait that is purposely developed. Those who practice courtesy simply wish to make others feel comfortable.
I can’t say that courteous people are also ethical people, but they are certainly more pleasant to be around. Of course, con artists may also be very courteous, but for different reasons. We are drawn to those who treat us well. We are more likely to treat them favorably in return. Considering this, it is surprising that more people do not practice simple courtesy.
We have all heard the saying, "It was the straw that broke the camel's back."
That means that there was a string of burdens, one of which finally made the entire situation unacceptable. Even in marriages, it is often the tiny problems that erupt into divorce proceedings while the larger differences are seldom addressed. The final "straw" is the sum total of the indignities that were endured day-in and day-out.
Simple words, such as "please" and "thank you," make mundane tasks seem more enjoyable. Many managers seem never to have learned how to say these simple common words. They somehow feel that their "power" will be diminished if they ask an employee to perform a task. These managers prefer to order their employees to do the work. In the end, those managers do not get the performance they could have by using simple courtesy.
Mores
Mores are those customs, which are enforced by social pressure. Mores are relative to culture. They are established by patterns of action to which the individual is expected to conform and from which deviation may bring disapproval and perhaps even punishment. While these standards are considered to be a matter of ethics, they may vary from society to society.
The Thorndike Barnhart Comprehensive dictionary defines mores as:
mo.res, noun: traditional rules; customs; manners.
We stated previously that only behavior may be dictated, not ethics. The term mores works directly into this context. Mores are ethical standards that are enforced by social pressure. Groups of professional people create ethical standards to give their profession honor. These groups desire society's approval and they realize that there will always be those among us who will not voluntarily follow ethical procedures. As a result, mores are developed.
Many types of professions deal with knowledge that the average person simply would not have. Insurance is one of those professions. As a result, those individuals who seek out the professionals must rely upon their honesty and integrity. A feeling of ethical standards (which are enforced by social pressure) must exist. It was the potential for abuse of power and knowledge that provided sets of rules or what is often called ethical standards. Sometimes ethics are written standards; sometimes they are merely understood. Often ethics, which have previously been "understood," become written laws when individuals do not follow preferred practices. At that point, pressure from society makes these "rules" into written laws or mandates.
Terrance is new to the insurance industry. Therefore, he eagerly accepted when Ralph offered to take him into the field so that Terrance could see how to generate a sale. At their first appointment, Terrance noticed that Ralph did not fully disclose a limited benefit that the client had directly asked about. When they were back in Ralph's car after the appointment, Terrance asked about it.
Terrance: "It was probably just an oversight, but you didn't tell Mr. Macky about the limitation on that benefit he asked about."
Ralph: "Look, do you want to make a living or not? No, it wasn't an oversight. By law, that is not something that I specifically must state. It's in the material I left him. It's his responsibility to read it all. If he doesn't, that's his problem. I'm not a baby-sitter, you know."
Even with the limited training Terrance had received, he knew that company policy mandated clients receive complete information by agents. Even when not legally obligated there is an ethical responsibility to provide full disclosure. Ethically, Terrance knew Ralph should have openly answered Mr. Macky's question. Of course, if it ever came up, it was likely that Ralph would claim he had done so.
If such a scenario repeated itself often enough and involved enough agents and consumers, it is likely that the state would then mandate specific legislation addressing the situation. Ethics, or mores, already mandate it. Every consumer wants complete honesty from those they deal with, including complete disclosure from their agents. Therefore, complete information is a custom, which is enforced by social pressure. Mores are established patterns of action to which an individual is expected to conform.
Mores vary from culture to culture because how people live and what is important to them vary from culture to culture. For example, an insurance agent probably would not have many rules (resulting from society's pressure) in cultures that have no past experience with insurance. Since it has not been a part of their culture, the need for specific rules may not be known. As the need and desire for insurance increase, however, such codes of conduct would arise. We have seen this in our own country. When Medicare was first introduced, there were relatively few rules or regulations on the design of Medicare supplemental insurance policies. As abuses mounted, standards were implemented because the need for them brought about pressure from our society.
Mores relate to customs, not always laws, although those customs often develop into laws. Mores are customs that are enforced by social pressure. In this context, "right" simply means according to the mores and "wrong" means in violation of the mores.
We must point out that mores do not automatically make an action right or wrong. Mores make no attempt to determine what is right or wrong morally. They simply define what is right or wrong according to the given culture.
A good example of this has to do with the slavery that existed in the United States. It was the custom in some areas to own slaves. Those who lived with those customs generally tended to support slavery. That belief (which is a mores) did not necessarily make it morally correct. There is the tendency in any group of people to consider their best interests to be right. That which is contrary to their best interests may often be considered wrong. In some areas of society it could be argued that mores may be negative to one group of people and positive to another.
As a whole, however, mores tend to be the general rule of conduct for the society in its totality. Generally speaking, it is right for the members of the culture to follow the mores because they developed from the group in its entirety. Without mores, any society would lapse into a state of anarchy that would be intolerable for its members. While this basic concept is correct, one should not lose sight of the fact, however, that not all mores are morally acceptable. There is certainly some obligation to conformity in our society for the good of all. If one is deviating from the generally accepted code of behavior, that individual might wish to consider the possibility that his or her deviation has to do with personal gain. If this is the case, that deviation cannot be rationalized away.
When Helen Keller was asked if there were anything worse than being blind, she answered: “Yes. Being able to see and having no vision.”
It is a natural and correct human condition to want to be somebody! All of us need to receive recognition for who we are and what we do. Unfortunately, so often we do not have any idea what our calling in life is. We spend years in school, often years in a job which simply pays our bills. We may spend virtually no time at all determining what is important to us and what will give our life meaning. Again, it all comes back to the “why” in our lives and careers.
There is no denying that our workplace has a great influence over who we are. We are constantly exposed to the theories of sales techniques (some good, some bad), the promotions of numerous companies (sell our product and go to Spain!), of our agencies (Your production is down. What are you going to do about it?) and of our coworkers (I sold 10 applications last week. How did you do?). There is also an added pressure: since we work on commission with few companies offering any guaranteed salary, we know we must produce or our creditors may not get paid. The financial pressure itself can cause the most honest salesperson to be tempted to get a sale in any manner possible.
A work atmosphere that is kind and considerate, education oriented, and cooperative can go far in securing ethical behavior practices, but let's be realistic. When an agency is investing heavily in its sales force, it is likely that production is a major criterion for remaining employed there. Certainly there are agencies (many of them) that do promote both sales and ethics. If you are lucky enough to find yourself in such a work situation, it is likely that new comers become more ethical (just as others will become less ethical in the opposite type of atmosphere) just by being exposed to those who work there.
How does one know if an agency is a good place to work? We cannot give you any sure guidelines. It may be necessary to simply try the agency out for a month before it is possible to know. You can, however, ask yourself a few questions:
1. Is the agency anxious to equip you to succeed? In other words, do they have an ongoing educational program? This is not referring to the required education that your state demands, but rather to a program that connects you soundly with your products.
2. Does the interaction at the agency seem to be relaxed and positive?
3. Do you get a "gut" feeling that you will be happy there? We are often reluctant to consider whether or not a workplace will make us "happy." Somehow that suggests that we might be a bit "wimpy", but if you are not content with where you are employed, the chances are you will not perform well in the sales field or you will be tempted to act unethically in order to maintain your pride.
If you really want to be somebody, become the “somebody” that you really want to be. When your life is nearing its end, chances are you will not be considering how you could have made one more sale if only you had tried harder, or listened better. No, you will likely do what most people do: regret the things you did not take the time to do with your family, for your religion, or for personal enjoyment.
It has been said that, while we clamor for the recognition and respect of others, what we are really trying to achieve is the recognition and respect that we give to ourselves. We are not attempting to weigh the correctness of this, but it does seem to make sense. Perhaps each of us, when considering our ethical conduct, should imagine our own deaths, reflecting upon what would be important to us then. What acts would we be most proud of in our lives? What will stand out? It is doubtful that, when death comes, we will remember how many sales we made. It is more likely we will think of the people we know and love and how they will consider us when we have died. For those who really want to be somebody, they will have been successful if those they love and respect feel the same way about them.
We occasionally hear a motivational technique that seems to mask the real aim of the motivator. Perhaps you, too, have heard this one:
"It is important that you make lots of sales so that you can help others. If you do not have any money, you cannot give as you would like to your church, your family, or your friends. If you make lots of money, then you can donate to organizations that are important, maybe even get a plaque put up in your name. Don't feel guilty because you are financially successful! The only way that you can help others is to help yourself."
We would not have a problem with this motivational technique if ethical behavior were given some importance. Each time we have heard this approach there was a clear rationalization of getting sales, no matter what, because down the road you would be helping someone else. We thought it seemed like a new twist to the "Rob the rich to give to the poor" theory. The professional will not fall for this.
Certainly, we are not advocating that an agent pass up a sale. We are advocating that ethics must be a part of each and every sale. There simply is no reason not to act ethically. It is not a matter of either/or (either get the sale or be ethical). Ethics and selling simply go together, as many salespeople from all types of vocations can confirm.
As we have stated over and over, our actions speak louder than our words. Being an ethical person is our statement about ourselves. It is our statement to our children, spouses and our coworkers. Behaving in an ethical fashion, not just in our work but in our daily lives, is our declaration that we value who we are and what we do.
An ethical insurance agent that goes bankrupt because he or she could not bring in the earnings necessary to pay their bills is not likely to do the consumer much good. Therefore, for the good of the consumer, it is not enough to merely be ethical. The agent must be both ethical and skilled in his or her trade. In fact, it seems probable that the financially successful agent is more likely to be ethical since there will be less stress involved, less desperation to make the sale.
Education/Continuing Education
Certainly education must play a role in ethical selling.
Why is education important? It is common to hear agents and agencies alike complain about the educational requirements of their state. The agent may look for the shortest or easiest educational course to simply get the requirements out of the way.
Consider this:
You are not feeling well so you go see your general practitioner. Your doctor states that you must go to a specialist because he or she suspects that you have a heart problem. The specialist that is recommended has a booming practice and obviously does very well financially. The office is plush and he or she drives into the complex parking lot in a fancy foreign sports car. There is lots of office staff and everyone seems intent on pleasing the waiting patients. Even so, you ask the medical specialist some questions that are important to you about their schooling.
The specialist replies, "Oh, don't worry yourself about that. I finished school twenty years ago, and I haven't had the time to attend any of the seminars or other educational programs. But don't let that worry you. I've had lots of practice and I make a point to read all the brochures sent to me by my suppliers."
Of course, we realize that a heart specialist is not an insurance agent. Even so, the point is the same. How much confidence would you have in such a doctor? Why should a consumer have confidence in an agent that does not consider education important?
Probably every agent alive has attended a seminar where educational laziness was obvious. Of course, it is the responsibility of the speaker to be interesting and cover a topic in an organized and practical fashion. Having stated that, it is also the responsibility of the agent to attend the seminar in a prepared manner. He or she should have a notebook, ink pen or pencil or a recorder. Notes may be optional, but if the seminar is truly educational it does seem that notes would be appropriate.
It is not appropriate for the attending agent to talk to those around him (which is likely to interfere with the enjoyment and learning of others), read the paper or a magazine, write personal letters, or work on personal business during the seminar. It is not unusual to observe an agent or two sleeping through the seminar waking up only long enough to sign the roster that is passed around for attendance. Certainly, the agent who signs in and then leaves for an hour or two is not learning anything. Although most states have specific rules about such actions, they still occur. The agent who must be policed into being responsible about his or her educational actions cannot be considered ethical or even professional.
As an educational company, we have heard complaints from agents who feel they have been in the business too long to learn anything new. Again, we refer back to the medical doctor who feels education is not necessary for their continued medical practice. Just as you would not feel comfortable with such a doctor, would your clients feel comfortable with that attitude from you?
Getting Education in a Timely Manner
It is impossible to truly be a professional unless education is made a priority. Every educator's dream is to no longer hear "How easy are your courses?" It certainly does separate the serious career agent from the average agent.
Most states do now require that education be obtained. While there was initially great variation among the states, they are gradually becoming uniform due to the adoption of the Midwest Zone Agreement. States want uniformity in education and procedures to better monitor the industry. At all times, however, it is the responsibility of each agent to know and understand their state's education requirements. Each agency is responsible for promoting education as an important feature necessary for the welfare of both the agent and the consumer. An agency should never resent the time an agent takes out of the selling field to acquire education. In the end, the agency also benefits.
The words, "in a timely manner," seem to be a key phrase. It is very difficult to get all that is available out of a course if the agent must rush through it in order to meet a deadline. Education is the mark of a true professional.
What about getting education that is not required by the state? Some agents complete education, which gives them specific designations, such as Chartered Life Underwriter (CLU) or Registered Health Underwriter (RHU). These designations are the result of additional education specific to certain insurance lines. While such designations do not necessarily mean the agent is a wiser or a more skilled salesperson, they do show that the agent is serious about his or her profession. Regardless of the line of work a person is in, additional education is always a sign of a true professional. This is true of a teacher, a doctor, a lawyer, and certainly an insurance agent.
There is another side to education besides formal, credited courses.
Angie is a fairly new agent having only been in the sales field for about six months. She works for a large agency with a very large field staff. While the agency does hold product meetings, it is not unusual for new items to be added before they have been formally introduced in the product meetings. As a result, Angie is often given brochures and applications for products she is not familiar with.
Angie's field manager, Reggie: “Angie, here are some brochures for a new cancer policy we just got in. It's fairly simple, but if you have any questions give me a call. Just read the brochure. That should do it.”
Angie reads the brochure and understands the basics of the product. What Angie is not sure about is where such a policy fits in and who might benefit from buying it. She knows that major medical policies are supposed to cover such things as cancer. Since Angie sells mostly life insurance, however, her understanding of medical policies is not great. Angie makes the determination that many plans must not cover cancer. Otherwise, why would insurers issue cancer policies? Angie sells two cancer policies in the first week and is highly praised by Reggie. Being so new, Angie does not often get praise, so now she begins to make a special point of suggesting her clients buy the cancer policy.
We are not trying to suggest that cancer policies are either good or bad. The question here does not necessarily concern the value of the policy itself, but rather how Angie handled a situation concerning education. Since Angie was not sure where this new product best fit in and misjudged major medical coverage benefits, what should she have done? It was obvious that Reggie felt the brochure should answer her questions, but he did offer his assistance if she wanted it.
What were Angie's options?
1. She could have called Reggie or cornered him at the office to ask questions.
2. She could have asked other agents more experienced than she.
3. Angie could have waited for the product meeting and asked questions.
4. Angie could have called the insurance company marketing the product. Most companies do have a product support department.
Did Angie need to do any of these things? Since she was able to sell the product even though she was not fully educated in medical policies, did any questions even need to be asked? Remember that Angie did not have a great understanding of medical policies and made the assumption that some plans must not cover cancer. Is it possible that she misrepresented existing medical policies due to her misunderstanding? We know that Angie would not have purposely misrepresented other policies, but does this lessen her liability? If Angie did misrepresent other plans, what will this do to her credibility if her clients discover her error? If Angie did not bother to explore this product completely, is it possible that this is a work pattern that repeats itself with other products also?
Does the agency bear any responsibility here? Although they do have product meetings occasionally, is it their responsibility to have such meetings before releasing a new product to their agents? Since the agents are basically self-employed, does this mean that education is solely the agent's responsibility and that anything the agency does is more of a courtesy than a responsibility?
We are not attempting to answer these questions. Often the answers vary so much depending upon such things as contracts, etc. that each agent must determine their own answers. However, it is certainly true that each agent must take on a degree of responsibility when it comes to education in general. To rely upon another person or agency to fulfill educational needs is foolish, both personally and financially.
Laying Out Policy Benefits and Limitations
Once the consumer has agreed to hear the agent's presentation the agent enters into many possible pitfalls. Policies can be very difficult to understand. Most presentations involve a few set items, which include premium rates, benefits, agent services and company stability. Of these, the premium amount should be the least important, although our clients do not always allow this to be so. As a result, rates often take up the majority of the presentation, yet an Errors and Omissions claim has never occurred due to the premium quoted. Probably 98 percent of the E&O claims filed relate to the benefits of the program and how those benefits were discussed (or not discussed, as the case may be). Obviously, more time needs to be devoted to that aspect. Then, as an agent, you must hope that the client remembers what was said and understands the concepts discussed.
The insurance contract can be very intimidating. Technical in nature, complex in its subject matter and seldom read in full by either the insurance agent or the policy-owner, it is bound to be misunderstood at some point by somebody. It has been said that insurance contracts are the number one unread best seller. More insurance contracts are probably sold than nearly any other type of contract, yet they are seldom read by the consumer. Unfortunately, policies are seldom read in their entirety by the selling agent either.
To our clients, the most important part of the policy is the part that begins, "We promise to pay . . . ” In reality, all other parts are, of course, limitations and/or conditions on the policy.
In some ways, life insurance policies are more easily understood than other types. After all, a person is either dead or alive. If the insured dies while the policy is in force, the promise of a payment is kept. In a medical policy, there may be numerous limitations or conditions of payment that the consumer (policyholder) has difficulty understanding. Medical policies contain such things as co-payments, stop-loss provisions, elimination periods, plus a variety of other confusing and easily misunderstood clauses. All of the provisions can create dissatisfaction, which can cause questions regarding an agent's diligence in presenting the policy and providing services. This is not to say that a life policy should not also be clearly explained to a client. Any contract can be confusing to the consumer. Any contract can cause a misunderstanding.
There are steps that an agent can follow to minimize possible misunderstandings:
1. Full disclosure is always necessary in any type of policy being suggested to a client. Where different interpretations are possible between a brochure and the actual policy, the policy is always the final authority. A brochure is simply a selling tool; never the final answer. The statement the agent receives over the telephone from the agency or home office also takes second place to the actual contract. The policy is the final word every time. An agent who has not read the contracts he or she is selling, is an agent waiting for a lawsuit to happen.
2. An agent should always be slow to replace an existing contract of any type. This is not to say that an existing contract should never be replaced. However, to do so without fully examining what is currently in place would be foolish. The agent should first be fully informed of any new or preexisting health conditions, take-over provisions and limitations that may exist in the new plan. Health problems of any dependents that may apply should also be reviewed.
3. Sometimes owners/employers may not be enrolled in and paying premiums for worker's compensation coverage. While this does not necessarily apply to the senior clients you will encounter, increasing numbers of older-age people are now working past the typical retirement ages and might need this consideration.
4. Whether you are dealing with a health program, a disability program, or a life insurance program, make sure that health questions are clearly understood and correctly answered. A term that has come into wide usage lately is clean sheeting. It means that an agent knowingly fails to correctly list existing or past health conditions of the applicant. The agent is presenting a "clean" application so that the company will accept it and issue a policy. This is obviously illegal and will not be tolerated by any insurance company!
5. Sometimes an agent simply is not aware of existing health conditions. If the applicant does not fully understand a health question, it may be incorrectly answered through no direct fault of the agent. We say direct fault because it is ultimately the responsibility of the agent to present the questionnaire in a way that is understandable. Even if the agent thought the health portion of the application was correctly completed, it will not alter the insurance company's view of it. A policy may be rescinded (taken back) by the insurance company for incorrect or undisclosed information. This may occur, for example, on a question, which asks if the applicant has high blood pressure. Since the person is taking a medication that keeps his or her blood pressure under control, they may answer the question "no" when, in fact, it should have been answered “yes.” Since these types of misunderstandings can easily happen, an alert agent will want to closely monitor the questions and answers on applications.
6. Eligibility of applicants is always a concern when replacing an existing coverage. Do not overlook the eligibility of dependents also. An employee's spouse or disabled child may be especially vulnerable.
7. Any time an existing coverage is being replaced with a new policy, continuity must be considered. The old plan should never be dropped until the new plan is firmly in place. The policy should actually be in hand and reviewed for accuracy before the old policy is dropped.
The actual way in which a plan is presented can be very important since so many of the consumers will not understand industry terminology. The weight falls on the agent to present the policy in such a way that understanding is possible. Again, this often comes down to good communication skills. We also suggest that you pay close attention to the "body language" of your clients. It is often possible to tell that your client is lost merely by the expression on their face. Many people feel awkward saying that they are lost. This might especially be true if they feel their agent is in a hurry to get on to another appointment.
There are also those agents who cannot seem to resist being overly technical. The agent may feel that such technical explanations are necessary or he or she may simply be trying to impress the client. These agents may be extremely knowledgeable, but they are unable to present their knowledge in a way that is understandable to the layperson. While this relates more to skills than it does to ethics, an ethical person will put a priority on client understanding. If the agent is trying to impress the client, then we must ask the question, does ethical conduct allow for such self-serving purposes?
Policy Replacement
Most agents are geared to replace other policies, if necessary, to bring in business. Even the most ethical of agents realize that this will often be part of their sales day. In some areas of insurance, replacement became such a problem that state and federal legislation was enacted to protect the consumer.
Most states require that comparisons (for the purpose of replacement) be precise and done in a manner that fairly compares the two policies. Often there are specific forms, which must be utilized if replacement of an existing policy takes place.
Agents often complain that it is very difficult to compare policies if the types do not have much in common. It ends up comparing apples to oranges rather than apples to apples. Whatever the situation, an ethical agent will fairly compare the two products, not only because he or she is ethical, but also because it is simply smart to do so. We live in a lawsuit prone society and it is not surprising that many consumers are all too willing to sue.
Most consumers are aware that competing agents will be attempting to replace each other's business. Realizing this, consumers do tend to use judgment before replacing their policies. Replacement practices may not be as obvious to the consumer when it involves an agent replacing their own policy. Consumers seldom question a replacement when it is the same agent (versus a competitor) doing the replacement.
Why would an agent replace their own business?
An agent may replace their own policy for several reasons; some make sense while others are questionable.
One reason some policies are replaced by the writing agent is to gain another commission or a higher commission, depending upon the type of product.
Another reason an agent might replace his or her own business has to do with the mobility of the industry. It is not unusual for agents to work for a period of time for one agency and then, for one reason or another, move on to a different agency. If an agent is not meeting production standards, the first agency might terminate the agent or terminate benefits, such as providing leads. When the agent moves on to another agency, he or she often feels that his or her clients belong to them. Legally, this may not be true, depending upon the agent's contract provisions with the agency. Regardless of the legal aspect, the agent may desire to bring his clients with him to the new agency. Since the agency is benefiting from the additional business, few agencies worry about the ethics of such replacement business. In fact, it is not unusual for agencies to actually encourage the practice.
A third reason for policy replacement deals with company stability. The industry has seen some ups and downs in the financial stability of some insurance companies. If an agent feels that he has clients in a company that may be suffering some financial problems, the agent may change their client's policy in an effort to protect the consumer. Certainly it is best to use strong companies initially to prevent this situation, but even the most careful agents may, at some point, find their clients with an unsound company.
Replacement of business is sometimes proposed by the agencies that have legal rights to the business but, due to contracts with vested agents, are paying part of the commissionable earnings to those terminated agents. The agencies may be able to move the business within their agencies and therefore, discontinue the commissions paid to those agents who have been terminated. As we have stated, not only individual agents, but agencies as well have a duty to behave in an ethical manner. Most insurance laws protect the consumers, not the agents.
When the Agent Allows Misconceptions
It would probably be surprising how many policies are sold on the basis of assumed facts or misconceptions. We are not saying agents purposely misled consumers, but they may have allowed misconceptions.
An agent relayed this story:
I was sitting in the home of an older client who was interested in investing in an annuity product. I was showing him several plans available. One was paying a higher interest rate than the other two, and the consumer liked the higher rate. I made a point of telling him the ratings of the companies, carefully pointing out the one company’s "B" rating.
After a moment's pause, he replied: "Hell, I would have been happy with B's when I was in school."
It is obvious that the consumer did not understand the importance of financial ratings. It would have been easy to simply fill out the application and never address the obvious misconception on the part of the client.
Any agent who has spent time in the field can probably tell their own stories of people who made incorrect assumptions placing a sale directly into the lap of the agent. Some misconceptions may simply be amusing, while others may cause serious legal problems. Sometimes it can be so difficult to clear up a false assumption that the agent simply lets it slide by. This is seldom wise. It is always better for the client to correctly understand what they are buying. The next agent in their home may clear up the matter, making the first agent appear either inept or unethical. As one agent relayed, he hates coming into a home where he must spend most of his time correcting the false information left by the agent before him. While this does tend to cement the sale, it is also a waste of time and energy for the second agent on the scene.
One other point should be made at this time. Insurance agents tend to have a reputation only slightly higher than that of a politician. Why does this happen? It is probably safe to say that the majority of this reputation comes from consumers who feel that they were "taken" by an insurance salesman. Either the consumer did not get what they thought they were buying or they felt pressured into buying something they did not really want or intend to buy. We often hear people say that the "big print giveth and the small print taketh away." In reality, print size is generally mandated by each state. There is no "big" or "small" print. What the consumer really means is that claims were not paid due to policy limitations or gatekeepers. A policyholder that knows a specific claim will not be paid is not likely to be upset, but a policyholder that thought a specific claim would be paid will be most upset when he or she is turned down for the claim. That policyholder will probably feel the salesperson misled them or, at the very least, failed to fully disclose the conditions and limitations present in the policy.
When the Premiums Seem too High to the Client
Another area of ethical behavior that should never happen still needs to be addressed. It needs to be addressed because it does happen. There was the client who thought he was paying the premium for a full year only to discover that it was a 6-month premium. There was the woman who was told her bank would be drafted one amount only to learn that the draft was for a much higher figure.
Sometimes when an agent fears he or she is losing a sale due to the amount of the premium, figures may be incorrectly stated for the benefit of the sale. We would like to think that such situations are merely misunderstandings, and certainly misunderstandings may happen. There is never any excuse for purposely misstating premium amounts.
Premium amounts may be misstated simply because the agent is inexperienced in using premium tables. So many types of policies have formulas for figuring rates. For example, many long-term nursing home policies have premium rates that vary according to multiple factors, each of which must be considered. Major medical plans are based upon ages, the plan selected, and sometimes health conditions.
Obtaining Proper Application Signatures
The practice of forging client signatures is not only unethical, but illegal as well. Despite this fact, it is much more common than many people might realize.
There are many reasons why signatures may not be obtained from the client. Often, it is merely an oversight by the agent. Such oversights clearly suggest disorganization on the part of the agent. New agents might benefit from highlighting signature lines on all their forms before entering the field. Doing so could prevent the omission of needed signatures.
In some cases, signatures might be purposely overlooked as a way of avoiding the explanation of certain forms. This commonly occurs when replacement forms are required and the agent feels inadequate explaining the information contained in them. Again this is not only unethical, but generally illegal as well since all forms need to be disclosed to the client. In addition, the well-trained, well-organized agent simply does not need to omit signatures, whether by oversight or by intention. Anytime an agent feels uncomfortable about a particular form, he or she should seek council from an experienced ethical agent.
Keeping in Touch after the Sale
The hardest policies to replace are those belonging to the agent that keeps in touch with his or her clients. What are an agent's ethical duties regarding service following the sale?
This often depends partly upon the arrangements made between the agent and his or her agency or insurance company. Some companies have a separate servicing staff so that the selling agent is not expected to do any further service work. Most agents, however, are probably expected to do any necessary service work personally. Even if the selling agent is not expected to do so, most professionals do feel that referrals and additional sales result from close client contact. In addition to that aspect, everyone likes to feel that they were more than a commission to a salesperson. Even a simple birthday card at the appropriate time is appreciated by the consumer.
Many agents want to provide service to their clients. Not all agents or agencies feel this desire. Many simply do not wish to take on the burden of service after the sale. Certainly, servicing one's clients is prudent, but is it required from an ethical standpoint? Some states mandate that each client must have an assigned agent. This means that the insurance company must assign an agent to every account if the writing agent is no longer with them. Those states then expect those assigned agents to handle any claim requests that might occur. Many of the states report that the lack of claim service is the number one complaint from consumers.
Earlier in this text we pointed out that it is only possible to mandate behavior, but not necessarily ethics. Is it possible to force an agent to properly service their clients? Probably not. If the agent is not smart enough to understand that service promotes sales and helps business retention, it is unlikely that he or she will be smart enough to understand service requirements imposed by his or her state. In fact, an agent who is unwilling to service his or her accounts, probably will not even be educated enough to know how to service the accounts. When this happens, one can only hope that the insurance company or agency will step in and handle the matter. If no one handles it, eventually the client will simply change agents and insurance companies.
Selling the “Fast Buck” Items
Some might consider “fast-buck” an unfair label. However, we feel the evidence is compelling that many people, not just insurance agents, will quickly step forward if there appears to be a "fast buck" available by selling a particular item. There may be differing opinions on what constitutes a "fast buck" item. In fact, it is often true that the fast buck lies not in the item sold, but in the manner in which it is sold.
In some states, selling Revocable Living Trusts has become big business. While there is no doubt that a living trust can be very beneficial in the proper circumstances, many of these trusts have been sold for inflated prices to people who did not benefit in any way. Sometimes the consumers did not benefit because the trust was not properly executed; sometimes the consumer simply did not need the trust, so their purchase was unnecessary.
Perhaps the most perplexing aspect of the sale of these revocable trusts has to do with the way in which they are sold. An item is definitely a “fast buck” item when the seller says anything necessary to get the sale. Consumers have been told so many incorrect things about trusts that it has become clear to many state regulators that the aim of many trust companies is simply to bring in cash. If this were not the case, there would be more control exercised over the sales force. Unfortunately for those who are honest in their promotion of revocable living trusts, many states have passed specific legislation in an attempt to curb the abuses.
The “fast buck” label does not intend to imply that particular items are in this category. Actually, it has to do with how the items are sold. Any product paying a commission or finder's fee can become a fast buck item. Fast buck has to do with the attitude of the salesperson. Is the salesperson thinking almost entirely about making some fast money or are they considering where the item fits and whom it best serves?
As we saw with the living trust sales, a valuable estate planning tool was misused by salespeople for the sake of making a fast buck. There was often little concern for the consumer or the consumer's needs. Therefore, this item is both a useful vehicle in the right circumstances and a fast buck item in the wrong circumstances.
Commingling Funds
Any professional should always be shocked when they hear an agent express ignorance regarding the hazards of commingling funds. This is something that every agent should be aware of. While state laws do vary, the basic concept remains the same: insurance funds and personal funds should never be mixed. By this, we mean that two separate accounts must be kept. It might even be wise to go a step further and use two separate banks, one for your personal account and one for your insurance account. Many professionals have an operating account and a trust account. The trust account is used for funds that generally belong to the insurance company or the client – not to the insurance producer. The operating account is used for commissions that are due and payable to either the agent or the agency. The operating account is used to pay the routine bills that come with running a business. The trust account holds funds "in trust" for either the insurance company or the policyholder.
Any agent that is not clear on this should contact their state's insurance department for that state's specific requirements.
The Professional
There are many people wanting to be thought of as a professional investment advisor. Simply desiring the title does not make one a professional, however. In many states, a person can give themselves nearly any title they desire. The title may have nothing at all to do with either experience or training. From a business standpoint, it means selecting insurance companies, products, and other support systems that are both professional and knowledgeable.
The first step for any ethical investor or advisor is to be sure that the insurance companies and professionals giving advice are themselves ethical. That does not necessarily mean that they must share the same views on the environment, government or community. It does mean that they must be honest in every capacity. Certainly, this means following all laws, but also honest in how they deal with the consumers, agents and brokerages.
Consumers often ask others for recommendations. Professionals in other fields that are themselves ethical often make referrals as well. These professionals would include accountants, bankers, or attorneys. It may even include fellow insurance agents that do not themselves handle particular types of investments. If you belong to a specific type of organization and your investing goals are in line with that organization's views or activities, other members might also be an excellent referral source. For example, if you were part of a group that worked with homeless people, fellow volunteers are likely to have your same goals. As a result, they might be able to steer friends to you for professional investment advice. Ethical investors do generally feel more comfortable when their investment advisor is like-minded.
Another area often overlooked is fellow church members. If you have members of your particular religious organization who work in the investment field, they may be an excellent source of information. Consumers do not always feel comfortable working with someone they feel TOO close to, but they may still consider you for their ethical investments in some areas. In addition, it may not be wise to take on clients that are close friends or relatives. There can be many pitfalls when clients are more than business associates.
Preparing for Tomorrow
We hear it so often, but our lack of preparing financially for retirement is a huge problem in America. It is actually an ethical duty to financially prepare; otherwise we are expecting others to support us financially in retirement. Those “others” may be our children and grandchildren or the taxpayers, but whoever it ends up being it is the duty of each person to do what is necessary to be self-supporting. It is not ethical to spend every dime today without consideration of financial needs in the future.
Fixed and Variable Income
Income vehicles fall into two categories: fixed, and variable.
Fixed income vehicles never vary the amount of income they pay. These include some insurance products such as annuitized annuities. They also include such things as bonds and commercial paper.
As the name implies, variable income vehicles vary. In other words, such vehicles do not produce a "set" amount of regular income, but rather will go up and down according to several regulating factors.
Investing for retirement income is usually a process that happens over one’s working career; the individual routinely sets aside some amount into a fund that produces earnings. Both principle and interest are invested with retirement in mind.
Financial Management
Each of us must manage our day-to-day lives in the best way we can. This includes the management of our finances. This is just as true for the insurance agent as it is for any other person in any other line of work. In some ways, it is especially necessary for those in commissioned sales.
Those in commissioned sales often tend to overlook necessary financial discipline regarding taxes, Social Security payments, and other types of business requirements. As every agent has heard, there is a very high failure rate in commissioned sales. Some of those failures result not from a lack of sales ability, but rather from a lack of business sense. Most experienced businessmen and women state that their most important asset is their CPA or bookkeeper. Those who have an accountant who is experienced in small business or commissioned sales state they are especially happy with the relationship.
Sometimes it is difficult to locate those people and institutions one wishes to do business with. Generally, it is worth the time it takes to find them, however.
Most of us tend to bank with the institution located nearest us. Few people take any time at all in selecting their bank past the location. This is unfortunate since banks do vary in many areas. For the small business owner or independent agent, it is particularly necessary to understand the opportunities, or lack of them, offered by their bank.
Business ethics involves many things. Certainly one ethical concept is paying bills on time. This is true even in our private lives, of course, but it is especially necessary for your business. Not only may the person you owe money to be a potential policyholder, but they may also personally know other clients you currently have. An insurance agent with a bad financial reputation is not going to generate great trust.
Small business owners often overlook one other vital factor in their business: the people they hire. This includes not only insurance agents but also the office personnel. It goes without saying that anyone who answers the phone needs to be courteous. Beyond that, personnel also need to be knowledgeable and display a willing attitude. Probably everyone has, at one time or another, been in a public setting where the person waiting on them obviously was not interested in the duties at hand. Perhaps it was a rude clerk in a grocery store or a clerk who seemed resentful when you requested a larger size in a piece of clothing. Whatever the incident, such actions always hurt the business they work for. For example, if a clerk in ABC store is rude, the customer does not say: "A clerk named Sue was rude." Rather she states "ABC store is rude."
Nowhere is this truer than in a commissioned business. A commissioned business typically has a great deal of competition. The consumer has many choices of companies and products from which to buy. An insurance agent who seems impatient for the signature or appears rude when a consumer does not wish to purchase a product damages the agency they work for. Chances are the consumer will not remember the individual's name, but they will remember the company that was represented. It only takes one unprofessional agent in your company to turn numerous sales over to your competition. Any agency who tolerates such behavior, no matter how much that particular agent sells, will experience reduced business overall.
Due Diligence
What does the term, due diligence, actually mean? For the agent, due diligence is the analysis of a particular company's products, performance and financial standing. Where life insurance is concerned, this is often done to determine whether or not there is a reasonable expectation that the illustrated values presented can actually be achieved. Life insurance is, in some measure, the business of making long-term promises to clients. It is vital to those clients that the company is able to keep the promises they are making. Due diligence is the agent's analysis of whether or not the company can, in fact, keep their promises. The term, due diligence, is primarily derived from the securities industry.
For the insurance company, due diligence is an ongoing process which insures that pricing objectives are being realized, and that integrity and consistency of internal procedures are being maintained. It is working with the agents and agencies, as well as their policyholders, to preserve fairness in all parts of the operation. An insurance company that is concerned with due diligence will treat its sales force and back-up members as well as they treat their policyholders. Company due diligence also means making investments that are sound and prudent. For life insurance companies, due diligence is not a new concept, even though it may be for many agents.
The life insurance industry has moved their product design away from fully guaranteed values and benefits towards a dependency on current, sometimes more favorable parameters. This means more risk has been transferred to the consumers. The factors more often used these days also tend to be more volatile. In many cases, only the strength and the integrity of the company involved can ensure that projected, non-guaranteed elements of the policy are actually realistic.
As agents and the general public have become more educated on the variety of options available, insurance has seen a change in how it is perceived. While price has always been considered, additional elements are now commonly looked at as well. Consumers want to know if the company they are considering can manage its overhead expenses, mortality expenses and investment returns in a way that allows the company to make good on its promises in the contract.
In addition, the role of the agent has changed. Whereas the agent was typically thought of as only the salesperson, consumers now consider the agent to be someone who must give reliable information for the good of the policyholder. We no longer accept the view that the agent represents only the company. This change in the general perception of an insurance agent places greater responsibility, both legal and ethical, on the insurance producer.
In the public's view, the level of service and the quality of the advice given are linked directly to the insurance company and that company's performance. It must be noted that practicing due diligence makes sense from many standpoints, one of which is financial protection for the agent, as well as the consumer. When an agent takes the time to investigate his companies (and document that investigation), he or she is also protecting their own financial future. Lawsuits are common and it is reasonable to believe that even a good agent can experience one. Due diligence is, of course, an ongoing process since companies can and do change how they operate. Due diligence might be considered as a method of self-protection through knowledge.
Many agents groan when due diligence is brought up. They picture hours of work put into a schedule that is already difficult. It should brighten their day to know that there are more answers than one might imagine at their local library. A morning spent looking up the companies they are representing, or are considering, is a morning well spent. There are three reasons to do so:
· To prevent lawsuits from angry consumers who feel they have been taken,
· To protect the trust they have spent hours building up with their clientele, and
· To determine if the people associated with the companies they sell have the level of integrity desired.
If an agent bases his or her company affiliations on commission levels, leads provided, or where the next convention will be held, he or she is in for a few surprises down the road. An agent should request a copy of the insurer's annual statement and pay particular attention to the interrogatories, because they are brief and speak to short-term changes from the previous report.
An agent needs to begin his due diligence process by gathering information on the major components of the company from as many sources as possible. This would include seeking information directly from the company. In fact, this is probably the first place to seek information. Generally, such information is readily available. The agent should not overlook another simple way to gather information: ask questions. Management, fellow agents, insurance company staff, anyone who seems knowledgeable may be able to supply information. Anytime an insurance company seems reluctant to provide information to their own agents, a red flag should go up.
Insurance producers can learn much from simply asking other agents who have been with the insurance company for a relatively long period of time. Ask about the speed of the company's claim service since this is often an indicator of company solvency. Find out if commission checks seem to be consistent, correct and on time. If a financial error is made, how long does the company take to correct it?
The agent should collect the three most recent sets of financial statements and study them. Does the company seem to be making excessive profits? Does the company seem to be making minimal profits or perhaps too little profit to ensure continuance? Compare the surplus in relation to the amount of business being produced. Ask the state Insurance Department to see if there are any watches or cautions outstanding. How many complaints from consumers has the company experienced in the past year? You may also wish to look at complaints over a three-year period to see if any pattern seems apparent. The agent may also want to watch for any shifts in management of the company since this can change the philosophy of the company.
Once a measure of information is gathered, the agent must assimilate it in a manner that is easily understood and assessed. There are several ways to assess this information, but often the agent simply looks at it from the standpoint of "Does it feel right?" With so many carriers to choose from, there is no need to represent any carrier that does not feel comfortable.
At the very least, agents should consult rating agencies. They are not infallible but they will supply basic information. Only top rated insurers should be used.
Technical Approach or Common Sense Approach?
So many areas of ethical behavior are overlooked; one area that should not be overlooked deals with due diligence. Professional agents prefer to deal only with financially sound companies, but many agents may not know how to locate them.
There is both a technical way of locating sound financial companies and a common sense approach to it. Understandably, it is difficult for an agent to research each individual company, although that must be done to a certain degree. Sometimes, a common sense approach actually works better because much of the information that an agent may find on any given company could be outdated or unconfirmed.
A certain amount of technical analysis of historical data is important, especially as a point of reference to start with. To spot a potential problem before it happens, however, a common sense approach is often more effective. Once a potential problem is identified, technical analysis is then appropriate again. The technical analysis will either confirm or deny the suspicion of a financial problem within the company.
Financial due diligence could also be called solvency appraisal. Traditionally, such an appraisal is done from a technical standpoint. It is true that if you told another agent that you simply had a "gut feeling" that a company is having financial trouble you are not likely to be taken seriously. As a result, even if it is simply a gut feeling, you must be prepared to then proceed to the technical detective work that is necessary to validate your feelings. Many "gut feelings" originate from sensing that something has changed or is amiss. This might be something as simple as delayed claim payments. There are some problems or limitations to the technical approach:
1. Agents rarely conduct their own technical analysis. Instead, they refer to what others have compiled. It would simply be too time consuming to personally research each company we deal with and most agents are not willing to spend the amount of time it would require. In addition, few agents would even know where to begin such an analysis.
2. Most professionals feel that a true technical analysis requires historical data on the company in question. In the past such data was considered important, but with so many rapid changes occurring, the validity of such data may now be questioned.
3. Even though we do recommend that agents stay with "A" rated companies, there is evidence that the rating services are generally unreliable when it comes to predicting insolvencies. This appears to be true of both corporate bond rating services and insurance rating services. Many professionals find it best to review multiple rating companies so that several perspectives can be seen.
4. One problem with technical analysis lies in the oversimplification of only a few indicators. Agents and consumers alike tend to lock in on only one element in the analysis. The public, for example, knows only about the rating systems and seldom understands precisely what those ratings really indicate.
5. Generally speaking, the management of a company determines its business practices. If the company is not a mutual company, who owns it becomes an important indicator. If the owners of the company are not the managers, then who is managing the company is also very important. Corporate values and culture can often be shaped by a single powerful person. Along this line, if the management of a company changes, the strength and weakness of that company can also change.
6. Product design is something that agents often do spot immediately, especially if the agent is experienced. Product design tends to be a mirror of those who are running the company. It is a fundamental extension of the leader's vision, desires, and values. Are there gimmicks or sound benefits within the product? Some products seem to utilize a "bait and switch" sort of theory. Common sense should also tell us that a product that puts out more than it takes in will not benefit the companies or its policy-owners.
7. As we have discussed, replacement selling is more common than ever before. As a result, the risk of adverse news or competitive interest rates can cause disloyal policyholders. This makes distribution a point of common sense. A debt loaded volatile national and world economy does nothing to reduce the risk that could pull a company into insolvency. Distribution of products must, therefore, be considered. Stockbrokers are notorious for rolling their money quickly. If a company does a lot of single premium or asset intense products (such as annuities) distribution can become critical. Insolvency risk is much higher when insurance products are distributed through a limited number of non-insurance distributors.
To recap, the technical approach has some limitations:
1. Technical analysis is difficult and few agents know how to do it.
2. Historical data is not always reliable.
3. Rating services are useful, but not necessarily an indicator of insolvencies.
4. Technical data is often oversimplified or simply misunderstood by both the agent and the consumer.
5. The ownership and management of companies that are not mutual companies is an indicator of company practices. Few agents or consumers personally know who is in charge of the companies they deal with.
6. Product design is a fundamental extension of the company's management, but technical analysis seldom takes this into consideration.
7. Distribution is critical for the solvency of a company, but it is very difficult to know how products are distributed in many technical analyses.
Despite these limitations, technical analysis is still useful as long as it is combined with the agent's common sense. There are many ways that an insurance company can get into trouble. Usually it is a combination of problems; seldom one problem alone. Instead of making little mistakes, the company might make one or more large mistakes, which of course can have severe consequences. Perhaps losses greatly exceed gains and capital and surplus are consumed. When money goes out faster than it comes in, no business or individual can run efficiently. This is called a negative cash flow. A positive cash flow means more money is coming in than is going out. In addition, if one or more of these problems is made public, policyholders may begin to withdraw their money, which only intensifies the existing problems.
The old saying, if something looks too good to be true, it probably is, is a good common sense approach to insurance, as with so many things. The easiest product to sell may well be the very product you should avoid. It will save you future embarrassment and liability to avoid some products.
A common sense approach to due diligence is a practical way for many agents to spot potential trouble for themselves and their policyholders. The object is not necessarily to find those companies that are sound, but rather to avoid those companies that are not. Such things as ratings and historical data certainly do have their value, but they should not be the only indicators used.
The insurance industry has suffered many image problems, a few of them deserved. In public opinion polls, insurance agents routinely end up at the bottom of the list between attorneys and politicians. Consumers simply do not feel that insurance companies and their representatives consider ethics to be a high priority. In fact, many consumers feel that ethical behavior of any kind in the insurance industry exists only because the states mandate it.
For many questions of ethical behavior, there must be consideration of all facts involved since the deciding factor can vary from situation to situation. An agent must ethically give the insurance company all facts considering the insured that are pertinent to the issuance of the policy, but on the other hand, the agent also owes it to his or her client to give them all the pertinent facts regarding the insurance company. In other words, the agent has an ethical duty to both the insurance company and the policyholder.
In the past, most agents felt that giving the financial rating assigned to a company by a rating firm was sufficient, but in recent years that has not proven effective. In one case, it may be sufficient, but in another it may not be enough. How is an agent to know when he has given enough information or too little? Must the consumer take more responsibility for looking up facts and figures on a specific company or is that the role of the insurance agent and his or her agency?
Some people feel commission structures have been a primary cause for ethical problems within the insurance industry. These individuals feel a commissioned basis fosters an "anything goes" attitude. That does not completely explain the problem, however, since many other industries also function on a commission basis without the negative image that has plagued the insurance industry. Most experts feel that commissioned sales, of any type, is ethically neutral although it is possible to have unintended results if it is not structured properly. It is not the commission pay system itself that causes problems. Rather, it is how people prioritize their work and their lives that bring out negative results. When making sales becomes the priority, without any other aspects considered, integrity can certainly suffer.
All companies want to make a profit. In fact, companies have a duty to their stockholders to run a profitable business. Being profitable, however, should not alter other ethical concepts within the business.
Property and casualty lines may have little incentive to use one company over another on the basis of commissions, since they tend to pay about the same. It is more likely to be an issue in the life and health field. Some advocacy groups are calling for the discontinuance of all commissioned sales people. Interestingly, few of the consumers themselves seem to view commissions as the root of the problem. Consumers are more likely to target the insurance company itself as the major source of dissatisfaction. Groups that are calling for the discontinuance of the commissioned agent force may not be taking into consideration the matter of customer service. While there are certainly a measure of agents and agencies that do not provide service, there are many that do. Without commissions, it is unlikely that service will get better. We have seen many industries that do not utilize commissions demonstrating very poor customer service practices. Many feel commissions may encourage good customer service since agents want to retain their client base.
A basic question asked not only by the consumer, but by the agents themselves, is whether or not the insurance companies and management staffs actually value ethical behavior in their field force. While most people do feel that practicing good ethics is also practicing good business, many agents feel that there is little, if any, recognition for ethical behavior or practices. Insurance agencies seem uncertain how to reward, or even recognize, ethical sales practices in their field agents. Certainly, underwriters value ethical behavior because it is necessary in order for them to underwrite the policies effectively. When an agent has a reputation for giving solid information, the underwriters are likely to do a better job for that agent in terms of time and judgments. On the other hand, when underwriters know an agent consistently omits needed information or is vague in the routine information given, then underwriters are much more likely to question every aspect of that agent's submitted applications. Certainly, in this area, ethical behavior is rewarded.
Clearly, the issuance of insurance policies is based upon ethical behavior. There is the general agreement that the insurance industry is founded on ethics. It would be impossible for the industry to operate without it. The risk-sharing mechanism is closely dependent upon the ethics of trust. The insurance industry depends upon the consumer to act ethically when disclosing personal information, it depends upon the agent to relay that information correctly to the underwriters and it depends upon the insurer to keep their promises that appear in the contracts. Even the claims that are submitted to the insurance companies depend to a certain degree on ethical behavior. Of course, we all know that many fraudulent claims are submitted each year, which drives up our costs for insurance protection. Such fraudulent claims are certainly unethical. Ironically, many consumers feel insurance companies have lots of money, which makes filing false claims, in their minds, acceptable.
There was agreement from those participating in the ethical review for Insurance Review magazine that encouraging ethical behavior, within any company, must begin with top management. A strong, understandable code of ethics must not only be a written doctrine, but also practiced by those at the top. The more massive a company is, the more a written code of ethics is needed since many of the employees may never have access to top management. When ethical codes are clearly stated and demonstrated by a company, the lower management and staff are more likely to behave ethically themselves because they know it is expected.
A written code of ethics that is buried in a company manual, but seldom discussed, is not likely to be taken seriously by the employees of the company. This is especially true when management does not appear ethical themselves. Employees certainly want to be recognized, so it simply makes sense for management to recognize ethical behavior. Such recognition will promote ethical behavior among the employees, which will benefit the company itself. On the other hand, if top management seems only to recognize sales without any concern as to how they are achieved, the message will be clear to the sales staff.
Some companies conduct ethics training sessions. Questions that arise in the sales field every day are looked at for possible solutions, which are both ethical and sensible. Ethical competency often is simply a matter of education. It is also a matter of peer pressure. When coworkers expect ethical competency, others are more likely to act ethically competent. Ethics must be made a part of the decision making both by the company management and individually by the personnel. If employees are to act ethically, however, they must feel confident that their superiors will stand behind them.
It seems like the quantity of rules and regulations grows daily. With their abundance, it may seem asking “is it legal?” should be enough. Simply following the laws may be the minimum acceptable level of ethical conduct however. It is up to the business organization to develop company standards for employees and sales staff. Ideally, that will be higher than is actually mandated by law. Of course, each individual must also set their own personal standards of conduct. We all know of individuals who do simply use what is legal as their standard of ethical behavior. For these individuals, as long as they are not breaking the law, any behavior is deemed acceptable, regardless of how many other people are taken advantage of.
Doing the proper thing ethically is simple when the choices are clearly between an action that is right or wrong. Stealing or not stealing is basically a clear-cut choice, for example. Making ethical choices is not so easy when the decision is between two sets of action, either of which might be right and/or wrong. This generally has to do with two sets of ethics, either one of which could be valid. For example, we have all probably lied to someone in order to spare feelings. This may not necessarily make the action right, but the choice was made between truthfulness and another person's feelings. Both of those choices may be ethical (it is not right to lie nor is it right to hurt another person).
Ethical behavior tends to have long-range (versus short range) benefits. In the short term, it is often advantageous financially to make the sale no matter what tactics are used. In the long term it is more advantageous to behave ethically even if that means forgoing the sale. When an individual is financially stressed, it is more likely that he or she will ignore the ethical requirements making the financial gain the top priority. This applies to both individuals and businesses. When an agency or other type of business is struggling, their first concern may be profits rather than ethics. That is why salespeople must use some thought regarding whom they choose to work for.
Society as a whole has become much more demanding when it comes to ethical behavior. At the same time, we are living in an age when financial success is more likely to be admired. Often, we feel that others wish to be treated ethically, but others are not necessarily willing to do the same in return. Nearly everyone has, at one time or another, gone out of their way to do something for another only to be treated badly in return. Such situations do not change what is ethical but it may change our future behavior.
Sometimes ethical behavior is aided by our advancing technology. People may act more ethically simply because they realize that their chances of being caught in unethical actions are greater today than in the past. In the past, our technology often did not allow vital information to be brought out quickly. Today, with the aid of computers, information is much more available to a greater number of people. This brings up another question: when an individual acts ethically, not out of desire, but because they know they must, is that person actually ethical? As we previously pointed out, sometimes we are only able to dictate a person's behavior, not their ethical standards.
Each of us has a public image, which is either good or bad. We sometimes make the mistake of believing only large companies must be concerned with public relations. It is doubtful that any other area is more important than how the public (consumers) see us. Having a good public image means more referrals will be generated, more business will stay on the books and people will be more trusting of our advice. In fact, when businesses sell, it is often the public image of the company's name that raises the price. When a business has a reputation for excellent service or products, the business is simply worth more money.
We sometimes think of public images as having to do with advertising budgets and promotion. Actually, our public image is simply how others perceive us. The definition of oneself is seldom set down by us, but rather by others we come in contact with. We establish the traits others judge us by. This is true of both individuals and business.
Individual ethics and business ethics are sometimes thought to be different things, but that is not necessarily true. Every business has a responsibility to develop a business ethic. Certainly, an insurance entity must worry about becoming the concern of a government regulator if legal ethics are not followed, but it really goes beyond that. Without clear principles within the business outlining what is acceptable and what is not, problems may easily develop, with both the public image and the legal continuance.
Accounting firms and attorneys point out the need for a clearly written, legally sound employee manual for every business. With the number of employee-related lawsuits being filed, employers simply cannot afford to ignore the need for a well thought out employee manual.
Experts note that a significant percentage of these employee-based lawsuits would never have stood up in court if the situation had been properly addressed in the manual and then emphasized at company meetings. Businesses that have not put together such a manual are definitely at legal risk. Besides lessening the likelihood of being sued, a well-written (and followed) company manual can also improve employee morale as well since it establishes what is expected of the employees.
Such things as churning policies, misrepresentations of products or services, and outright fraud taint the public's image of our industry, which ends up hurting every person within it. All of these issues need to be addressed in the company manual. Often, salespeople are hired as independent contractors. In other words, each salesperson is self-employed. An agency may do this for a number of reasons, but even if this is the situation, the agency would still be wise to formalize a manual on ethics in selling. It is simply prudent to do so.
Selecting Insurers to Represent
It is common for an agent to go to work for an agency and simply accept whatever companies and products are given them to work with. While we would like to assume that an agency has done their homework, this may not always be the case. In addition, it is possible that the agency viewed the companies and products only from a profit point of view.
What responsibilities actually fall on the selling agent? The answer varies depending upon the individual’s view. As little as ten years ago, due diligence was something done by broker-dealers, people selling securities and by some home offices. Seldom was due diligence thought to be an agent's responsibility.
In more recent times, agents are being told that due diligence is their responsibility. This statement is often the result of court actions. In other words, it is now being legally determined that individual agents are responsible for the recommendations they give, the products they sell, and the companies they represent.
If It’s Legal . . .
Another philosophy often heard expressed is: If it's legal, it must be moral. Again, we only have to look at our country's past history to know that this is not necessarily true. The fact that slavery was, in some places, legal did not make it right. The fact that children could legally work in factories did not make it right. The fact that it was illegal for women to vote and sometimes even illegal to own property independently of her husband did not make it morally right. While laws are intended to have a strong connection to morality, we know that this is not always the case.
It is certainly necessary to teach our children to respect the law. It is necessary to not only respect the law, but in most cases, follow it as well. Otherwise, our country could not prosper. However, not every law reflects what is moral. As Martin Luther King, Jr. said, "Any law that uplifts human personality is just. Any law that degrades human personality is unjust."
Moral inconsistency appears to be a part of our human nature. Even good people will be tempted in some situations. Morals are often about dealing with the temptations of life. It is easy to be ethical when temptations never arise; the real test is resisting the temptations.
Ethics often require tough choices but ultimately our lives are usually easier. Choices between right and wrong are not always easy to identify. Individuals must make what they perceive to be the best choice. It is not necessary to always be right but it is necessary to stay with the morals we believe in.
A moral dilemma is the struggle to determine what is right, while a conflict occurs when you know what is right, but you do not particularly wish to do the right thing. For example, among friends, relatives or colleagues it can be difficult to take an unpopular stand even if you feel strongly on the issue. Interestingly, studies have shown that individuals are more likely to take a stand on political issues than on morality issues. Perhaps it is socially acceptable to disagree on politics but not on moral conflicts.
Some people can react morally even in crowds, while others find it difficult to step forward. People who step forward in difficult situations possess moral certainty. They strongly believe in doing what is perceived to be right, even when others fail to act. It does not necessarily make their view right or wrong but these individuals are certain of their moral path. Such people are more likely to help a stranger in distress, even facing personal danger to do so.
Two separate studies have shown that a strict religious upbringing substantially contributes to a person's moral certainty. This may be because there is no ambiguity about what is right or wrong. There are straightforward definitions of right and wrong; good and bad. Another study revealed that when a person is presented with multiple choices or ideas of what is right or wrong, the more likely that person is to be indecisive. Apparently, it is more difficult to narrow down multiple choices of what is right or wrong and easier to make the choice when only a couple of alternatives are presented.
From a common sense approach, it seems logical that a child who has been taught right from wrong will have less ambiguity as an adult since he or she has a background in moral issues. It is those who have never considered the right path that will have the most difficulty making such decisions. When moral education has been provided (and accepted as truth) decisions are simply easier to make.
We could continue to study the issues of morality, which is simply acting ethically, indefinitely. We could cloud issues with multiple views and supporting facts. The topic of ethics is a complicated and complex issue. Basically, however, ethics is simply a matter of doing what we perceive to be right. Acting ethically is not a difficult thing, but it can be a struggle. People and businesses do not act ethically for multiple reasons ranging from simple laziness to indifference to ignorance. All too often greed is also an element.
Certainly, ethical behavior is practical from the legal standpoint. To behave unethically means that you may find yourself in a legal dilemma. Unethical behavior may also mean legal action against an insurance producer, the agency, and the insurance company.
A twelve year old from Ohio wrote: "If everyone did their share, no one would have to save the entire world." Although simplistic, this statement makes an amazing amount of sense. If each of us acts responsibly, everyone benefits. This is especially true in the insurance world.
There are no clear or easy answers to many of the moral dilemmas in our lives. Most of the ethical choices we have are not complicated, however. We, as insurance agents, know what is legal and what is not. We, as insurance agents, know if we have concealed necessary information from the consumers (our clients). We, as insurance agents, know if we have lied or been truthful. Each of us has personal shortcomings of some type, but ethical behavior is something that we clearly have control over. With free choice comes responsibility. No ethics course will change the reader. As in all things, each individual must make personal choices regarding their own integrity and accountability.
Being ethical simply means doing what the individual perceives to be right even when it means forgoing a commission. Each day brings multiple opportunities for going either way, but we know what we should do. Temptations will always exist; the moral person handles them without giving up their morality. This means overcoming greed, laziness, indifference, temptation and perhaps even fear. The truly committed ethical or moral person will have personal convictions by which they live. These convictions didn't happen by accident. They were convictions that were fully adopted and continually followed.
It is easy to be moral and ethical when it makes us look good or noble. It is easy to behave ethically when others will be observing us. The difficult part comes when there will be no recognition for our convictions, when we may even be unpopular or have to face another who is acting illegally or unethically. Doctor Martin Luther King, Jr. said a person's worth is "not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy."
Maya Angelou said: “My mother said that I must always be tolerant of ignorance but understanding of illiteracy. That some people, unable to go to school, were more educated and more intelligent than college professors.” Moral convictions seldom rely solely on education. While education is likely to bring about thought, convictions are something the individual personally adopts, regardless of their educational status.
In the end, what you and your business represent will be established by your convictions, your principles, your actions and your words. It will not matter how many material things you have, what you look like or who you know. You will be defined by what you do and what you say. Who you are is the only thing that no one can take away from you. It is your final statement about yourself, your business and your life.
Irene Peter said: “Ignorance is no excuse – it’s the real thing.” There is no excuse for ignorance when it comes to ethical conduct. Insurance producers are exposed to ethical education (in most states) each license renewal period. Increasingly more states are now mandating training in insurance ethics.
We had hoped to end this course on some grand statement that insurance producers could carry with them throughout their lifetime. In the process of researching this material, however, it became evident that each person must arrive at their own grand conclusion. For in the end, we each make our own choices and choose our own life paths. We choose our own mishaps, our own miseries, our own troubles. We also choose our own principles, our own victories, our own happiness, and our own ending statement about ourselves.
Perhaps the greatest challenge is not philosophical knowledge, but rather moral understanding. The challenge is not your financial goal, but rather your moral living. The financial goal will come on its own.
United Insurance Educators, Inc.
8213 352nd Street East Eatonville, WA 98328
www.uiece.com mail@uiece.com
(253) 846-1155
End of Chapter 8