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To the Point Ethics, integrity, trust Corporate misdeeds taint much of the business world, but insurance industry's record in exemplary By Emanuel Levy We are barely into the second half of the first decade of the 21st century and the record regarding business ethics in general is decidedly dismal. Instances of greed and deception involving corporate leaders are all too common. I am gratified to except the insurance business from this descent to unethical practices. A look at the record reveals that aside from a few (I call them relatively minor) abuses, this industry has behaved with commendable integrity. I think there should be widespread public recognition of the achievement, even though there has always been an undercurrent of resentment because of the very nature of the insurance transactions. In contrast, look at the scandalous spate of rip-offs by top executives of corporate giants like Tyco, WorldCom and many others during the past four to five years. Probably these unethical and criminal activities will move off the front pages now that Kenneth Lay—prior to his sudden death in July—and Jeffrey K. Skilling, who helped bring on the collapse of Enron, were convicted, with Skilling still facing serious prison time and millions of dollars in fines. Perhaps they found it amusing to amass and squander millions of stolen dollars, but the thousands of former employees and shareholders who suffered from the depredations, will never get the joke. And all of us in the community at large who savor the high principles of American enterprise may now, more than ever, find it difficult to blindly ennoble high-ranking corporate executives. Of course, this is not to say that up to the recent Enron/Tyco et al. events, there were not incidents of high-level embezzlement and corporate theft. But the current incidences may relate to an overall decline in moral standards abetted by technology that facilitates complex, indefinable, manipulative and geographically unlimited high-dollar transactions. Regrettably, the news concerning ethics in the government sector also has become more dire in the past several years. Members of the U.S. House have consorted with heavily funded lobbyists for improper influences on legislation, contract awards and patronage. Where have ethics and integrity gone? The amount of dollars involved is breathtaking, but an even more serious dimension is the fact that in too many instances those conspirators awarded contracts that never fulfilled their announced purposes. That could prove to be tragic because the country might have to face more natural disaster events—and not only from Gulf Coast hurricanes. There is little evidence that government agencies are prepared to prevent destruction or effectively respond if these occurrences come singly or in multiples. Insurance offers as much protection as seems possible, but the aftermath of Katrina shows that it is not enough. And insurers face public and sometimes official wrath when they react to reality by withdrawing or threatening to withdraw from the homeowners markets, or seek higher premiums in almost certain storm path zones, even though rates are regulated by the states. And the protests are understandable. But—is this insurer behavior unethical? According to an analysis issued in June 2006 by A.M. Best, major storms could cause $100 billion worth of property loss and wipe out 20 to 40 insurers. Not the major ones which write 45% of the homeowners market, but the “thinly capitalized” P-C companies, currently either low-rated or non-rated, Best said. Decade after decade Going back untold decades, the insurance industry, overall, has unquestionably continued to live up to its mission in providing coverage on virtually every kind of exposure imaginable. It has responded to unique and challenging situations, offering creative products on demand and often in anticipation of demand. That is an ongoing phenomenon that keeps pace with new exposures as well as a changing landscape. And brokers and agents are usually expert and imaginative in fitting customer needs to markets. In addition, the industry has been a good public citizen, engaging in efforts to save lives and safeguard property, fight fraud, and accomplish myriad other positive things. It is a monumental assignment. It has created, nurtured and expanded an effective and financially sound structure of insurers of many sizes, specialties throughout the country and the world, with a distribution system (independent agents, brokers and direct writers) that defies comparison. Despite its vastness and almost all-encompassing nature, there is a minimal amount of disputation among its parts. It has lived within a demanding statutory and regulatory structure. Aside from its own emphasis on ethical behavior, the insurance industry is subject to intensive oversight. On top of thousands of laws and regulations, the financial condition of insurers is constantly under review by state insurance departments as well as federal agencies, to say nothing of a small army of private watchdogs. This has both plus and minus values. The minus values—pointed out by both insurers and their representative associations and producers—are the costly redundancies and reporting demands that often stifle freedom of initiative. Nevertheless, the unending surveillance keeps the industry from possible fiscal mismanagement and assures the public that its interests and risk exposures are not in jeopardy. In addition, everyone in the business is aware of the associations of every stamp that create ethical standards, and offer educational support, leadership, guidance, and representation before municipal, state and federal agencies and legislatures. They provide outstanding networking opportunities and are fonts for background information, guidance, and press relationships. It is also true that philosophically, the insurance industry has always maintained a high degree of ethical standards. The concept of ethics has been the watchword of virtually all of the professionals in the business. This is not said because it may please the congregation, but rather because the business is a unique service all can be proud of. Oh yes, there have been lapses. The phenomenal ability of the business to protect the trillions of dollars of exposure worldwide and to do it profitably can be attributed to all the factors mentioned above as well as the tradition of a work and professional ethic that almost appears inherited. Certainly that is especially true of the agency and brokerage fraternity. * The author |
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