Although 90 percent of property/casualty insurance industry representatives say their industry is largely an ethical one, they believe that the public doesn’t see the same picture.

And ethics in the ranks can be improved with more support from leaders rather than with punishment of bad actors, the majority of 3,000 survey respondents to a survey conducted by The Institutes and CPCU Society said.

In honor of the 25th annual Ethics Awareness Month, The Institutes and CPCU Society polled members of The Institutes Community, an online social platform for risk and insurance professionals.

Regarding internal and external perceptions of the level of ethics in the industry:

  • More than 90 percent of respondents said that they believe insurance professionals are already largely ethical
  • Just under half—48 percent of respondents—said the industry is acting more ethically than it did a decade ago, and just over half (52 percent) said they believe the industry will be more ethical in the next decade
  • On the other end of the spectrum, 11 percent said the industry is acting less ethically than in the last decade, and a similar percentage (12 percent) said it will become less ethical in the next decade.
  • 55 percent said they believe the public views their industry as largely unethical
  • .Over 80 percent of respondents said the key to improving public perceptions of insurance industry ethics is to enhance the public’s understanding of how insurance works.

There’s room for improvement internally too, though. Asked the best way to ensure ethical behavior:

  • 40 percent said that demonstrating leadership support would have the greatest impact.
  • 38 percent said integrating ethics into company goals would be best.
  • A minority—only 8 percent—said punishment for unethical behavior would have the greatest impact.

“Our members are sending a clear message that risk management and insurance executives need to lead by example on ethics,” said Peter L. Miller, president and chief executive officer of The Institutes, in a statement. “Leaders should not only tell associates that ethics is a priority, but they also need to exhibit that ideal every day.”

A clear majority of respondents, some 84 percent, said they strongly agree that ethics play a major role in their day-to-day jobs.

Forty-one percent cited the pressure to meet business objectives as the factor that makes it most difficult to uphold their ethical standards.

Ethics Recognized and Analyzed

Some within the industry are being recognized for their ethical practices.

Last month The Ethisphere Institute, which promotes standards of ethical business practices, published its list of the 2015 World’s Most Ethical Companies. The latest list includes 132 companies across the globe. P/C insurers Allstate and The Hartford, and insurance brokerage firm Arthur J. Gallagher, were on the list.

Academics have looked at how individuals perceive their own ethics. Researchers at the University of Utah, Duke, Notre Dame and Harvard Business School published a paper on the psychological processes of individuals and how they come to see themselves as ethical people. “The Ethical Mirage: A Temporal Explanation as to Why We Aren’t as Ethical as We Think We Are” was published in Research in Organizational Behavior in 2010.

“Companies typically don’t do bad things because they have bad people,” said Kristina A. Diekmann, Ph.D., University of Utah professor of management and one of the four authors of the paper. When people imagine what they would do in certain situations, they think about what they should do. But when it comes to actually making decisions, “people tend to focus on what they want to do,” according to Diekmann.

For example, individuals know they should behave ethically when negotiating with a client, but during the actual negotiation with that client, their desire to close a deal may cause them to make misleading statements and later justify doing so to others.

In the 2010 paper, Diekmann said organizations can break the cycle of unethical behavior by enforcing procedures that reduce the likelihood of unethical behavior.

Doing the Right Thing

Sixty-two percent of the members of The Institutes Community responding to the latest survey said the primary reason for the industry to act ethically is that it is the right thing to do. Fourteen percent said customers are the main reason—or more precisely that customers will not trust an industry where professionals who don’t demonstrate ethics.

Quinn Green, a loss control specialist for Nationwide Insurance, said “Customers will continue to demand transparency and will push the envelope on ethics with insurance carriers as long as there is a need.”

“Most customers want to be treated fairly, regardless of what type or how much insurance they purchase, so the Golden Rule will always prevail as an ideal best practice as it relates to ethics.”

Of those respondents who said the industry is acting more ethically than 10 years ago, improving education, transparency through technology, and increased regulatory and media scrutiny were common reasons cited by respondents.

“With the impact of social media on everyday life, being ethical is the only way to go,” said Terri McKane, an agent and a quality control coordinator at American Strategic Insurance.

“With use of today’s technology, the underwriting side of insurance is definitely more transparent.”

Noting the entrance of new competitors and increased regulatory scrutiny of insurers, Oswaldo Castillo Jr., ClaimSearch operations manager for Verisk Analytics, said “it will become necessary to adopt as many different advantages as possible, citing ethics as one of them.

“A solid ethical reputation will give the industry more authority in terms of speaking to consumer needs in the market,” he said.

About The Institutes

The goal of The Institutes is to deliver proven knowledge solutions that drive powerful business results for the risk management and property/casualty insurance industry. The Institutes’ knowledge solutions include the CPCU designation program; associate designation programs in areas such as claims, risk management, underwriting and reinsurance; introductory and foundation programs; online courses; research; custom solutions; assessment tools; and continuing education (CE) courses for licensed insurance professionals and adjusters through their CEU business unit.

The Institutes are affiliated with the CPCU Society, a community of credentialed insurance professionals who promote excellence through their technical expertise and ethical behavior, and The Griffith Insurance Education Foundation, a not-for-profit educational organization that promotes the study and teaching of risk management and insurance.

The organizations polled members of The Institutes Community, an online social platform for risk and insurance professionals, to mark the 25th anniversary of Ethics Awareness Month. The Institutes and other industry stakeholders held the first Ethics Awareness Month in 1991 to begin an annual tradition of reaffirming and improving their commitment to ethics.

The survey was distributed online in the second week of March to the more than 130,000 members of The Institutes’ Community, almost all of whom are risk management and insurance professionals.

Source: The Institutes