Ethics in Insurance Sector

1:

Overview on Business Ethics

Business ethics is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known

as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Businesses can often attain shortterm gains by acting in an unethical fashion; however, such behaviours tend to undermine the economy over time. Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt). Meaning of Ethics:Ethics in Latin Language is called Ethicus and in Greek, it is called Ethicos. In fact, this word has originated from ethos meaning character or manners. Ethics is thus said to be the source of morals; a treatise on this; moral principles; recognized rules of conduct. The character of a man is expressed in terms of his conduct (ref: Diagram 1)

Decided by Charter of a Man Conduct of a Person

Leads to Series of Actions

Taken together Considered as

Good or Bad, Right or Wrong, Moral or Immoral

By which we can judge again

Known as Moral Judgment Moral Standards Requirements

Meaning of Ethics

Ethics thus can be considered as the source of character of a person expressed as right or wrong conduct or action.

Introduction to Business Ethics:Ethics is a social science that deals with what is good and right, and with moral duties and obligations. Ethics is a science of morality that guides and helps to achieve objectives through legal and moral means. Business ethics regulates the activities of business firms towards society and other on social, legal and moral values.

Code of Conduct for Business Practices:-

In order to adopt fair business practices, trade associations, chambers of commerce, Council for Fair Business Practices, and others have framed code of conduct for businessmen. The code of conduct is to be followed by the members of the association. The code of conduct states what is to be done and what should not be done by businessmen. A code of conduct is framed by Council for Fair Business Practices (CFBP) for its members. The following are the highlights of code of conduct of CFBP: 1. To charge fair and reasonable prices. 2. To ensure accuracy in weights and measures. 3. To ensure that intermediaries do not manipulate the prices. 4. To fulfill social responsibility towards various sections of the public such as employees, customers, shareholders, government, suppliers, competitors, dealings, and the general public. 5. To pay attention to consumer rights. 6. To provide product warranty in clear terms 7. Not to engage in hoarding and profiteering. 8. Not to adulterate the goods. 9. Not to trade in sub- standard products, and also smuggled products. 10.Not to undertake misleading and deceptive advertisements. The members of the CFBP are expected to follow the code of conduct. The code is framed in the interest of business community and in the interest of the society. Adoption of the code of conduct would enhance the image of the business firms in the society. An award has been instituted by CFBP to encourage members to adopt fair business

practices. The award is given to the organization, which adopts high level of ethical practices.

Why Study Business Ethics? 1) Business executives and budding managers study the various ethical theory, ethical principles and ethics judgements. Students understand the nature of ethical problems critically analyse it. Use conceptual tools and also leads the students to respecting opposite views and reflecting upon them. 2) It will help build and groom a value based organization. Ethical behaviour is important for business leaders as they influence the ethical climate for everyone else. In a value based organization there is a high degree of trust and integrity and it empowers all the stakeholders. 3) It creates awareness about their social responsibility. A business has to share pat of its prosperity with the community, by offering amenities and services not otherwise available to the needy of the community. 4) Making them better individuals study of ethics, practice of virtuous acts, resolving dilemmas at the work place will go a long way in their spiritual

development. Such managers will not be slaves of material possessions, they would not amass wealth out of selfish motive but as a trustee of the community to which they belong. Such managers, who practice business ethics would be led by divine thought within and through their relentless ethical conduct, lead a life of dharma and realize godliness. Thus, as mentioned earlier, ethical conduct would be a self- realised conduct which would give a new vision drishti of aham bramhasmi I am bramham

2:

Measures to Improve Ethical standards in Business

Majority of the businessmen follow ethical values and principles in conducting business and dealing with various social groups. However, efforts made to popularize and spread the message of doing business ethically because it benefits everyone. Considering the importance, actions Should be taken at the organizational, government and societys level to spread the message and improve the working of business ethically. A brief explanation about such measures is given below:
1) Measures at the Business/ Organizational Level:-

a) Adoption of code of conduct for dealing with employees, consumers, shareholders and other social groups

b) To hire the services of expert in business ethics and arrange for his lectures. c) To make social audit compulsory to identify the ethical and unethical conduct of business. d) To arrange training programmes on ethical standards for executives and employees. e) To introduce open and free communication system and bring total transparency is business working. f) To penalize those employees who willfully violate rules of ethical standards. 2) Measures at the Government Level:a) Government policies, procedure and working should be simplified. b) Excessive or unwanted controls over business working be lifted or reduced. c) Strict enforcement of laws relating to protection of interest of shareholders, consumers, employees and other social groups. d) There should be political discipline and corrupt politicians must be punished seriously. e) The working of Lok- Adalat should be popularized. f) Quick dispersal of legal cases relating to unethical business practices. 3) At the Social Level:-

a) Social boycott on the products made by companies involved in unethical business. b) Trade Associations and chambers of commerce to prescribe code of conduct to its members and they must be made to observe it strictly. c) Social organisations like Consumers Guidance Society of India, and Council for Fair Business Practices should play active role in spreading the message of ethical values in business.

Advantages:1) It builds a value based organization: Ethical behaviour is important

for business leaders as they imbibe high degree of trust, integrate and motivate and empower all the stakeholders thereby building a strong organization which can compete in a globalised economy. For e.g.: Tata Group of company has a very good reputation of business ethics.
2) It creates awareness about the corporates social responsibility of

business: A business is a part of the society and it shares its prosperity by offering various facilities and services to its immediate community. It also funds important projects which are for welfare of the community. For eg: - building garden, hospitals, schools.

3) Business ethics is a practice: Managers has to study the theory of

business ethics and practice it in their professional life as they understand the nature of ethical dilemma and analyzing it they are better equipped to practice business ethics.
4) Practising ethics at work place: It makes the individual associated

with the organisation aware about their divine nature and brings peace and harmony to all of them.

3:

Role and Importance of Business Ethics and Corporate Governance

Role:Governments around the world are now well aware of the need for trust in capital markets. The United States learned the hard way how fragile trust can be and responded with the Sarbanes-Oxley Act which, among other things, requires serious financial management of US listed companies to have ethical codes and for management and auditors to report on the effectiveness of internal controls over financial reporting. This has resulted in wholesale review and documentation of policies and procedures.

Little research has been carried out on ethical practice in companies and the role accountants play. Partly this is because interest in the subject is relatively new and partly because ethics is one of those soft areas where it is hard to make objective judgment. One important piece of research was published by the Institute of Business Ethics in the UK. This found that there was a strong correlation between companies which have established ethical codes and a number of measures of corporate financial performance, suggesting strongly that good ethics is the right thing to do not just because it is the right thing to do: it also makes for successful business.

Good ethics are vital to good corporate governance. Company boards too are now becoming much more aware of the need to have the right ethical culture. The culture of an organization is probably the most important aspect of system of internal control, and it is the foundation for other internal controls. Management may set out the policies and procedures which it wants followed, but it is the corporate culture which determines when they are followed, amended or ignored. The accounting profession globally has taken steps enhance the importance of ethical behavior and decision making. The International Federation of Accountants (IFAC) has launched a revised code of ethics based on a set I fundamental principles to be adopted by individual accountancy bodies. ACCA has already revised its own code of ethics for its

members, to be consistent with the IFAC standard. These codes are about accountants' professional ethics. Business ethics is a different, but related, matter Accountants in business, particularly at board or at top management level, are often regarded as the keepers of the ethical conscience of their organizations. As well as following their own professional codes of ethics, accountants set an ethical example to others. Theoretically, the US SEC rules which give effect to Sarbanes-Oxley require companies and their auditors to assess the ethical environment. There is however no generally-accepted approach to doing this and it is not just about documentation. Not surprisingly, this important subject tends to be given less attention than it deserves by companies and their auditors. Interestingly, over half the respondents to this survey say they have processes in place for assessing adherence to their company's code of ethics. This is a higher percentage than we would have expected and it would be interesting to research further and learn more about what companies are doing. The challenge of living up to one's ethical values is evident from the survey findings. For nearly 40%, company culture is a cause for concern. Boards set the values and standards for their organizations and we believe that in future boards will insist on knowing how well their companies are living up to these. This goes beyond simply complying with rules: the reputation and the future of the company and individual board members are at stake.

Importance:1)

Standard of behavior:

When we talk about business ethics,

usually we're speaking about standards of behavior in the workplace as well as with customers and partners. Companies known for ethical standards usually have an ethical code stating that they treat everyone with dignity, don't present misleading information, and scrupulously follow rules and regulations.

2)

True North Principles to lead a Business:

Having a moral

compass leads to more effective business practices - whether in building sales, retaining employees, or reducing litigation and regulation costs. For example, people are usually willing to pay premium prices to feel good about the products they buy. Also, companies that follow certain moral codes attract better people - and these people often are willing to work harder with less compensation. It goes without saying that ethical companies are less likely to undergo the costly scrutiny of courts and regulators.

3)

Short Term Gain and Long Term Pain V /s Short Term People normally like to take a short cut

Pain and Long Term Gain :

to success not realizing that short term gains lead to long term pain. Also it's important to understand that people don't engage in unethical behavior

when the incentives are small. They tend to engage in unethical behavior when the incentives are large. Keep in mind also that unethical behavior usually breeds more unethical behavior - because hiding that first misdeed usually requires more misdeeds - and for some businesses, like Enron, this can lead down a path ill destruction.

4)

Value Based Leadership creates Ethical Practices:

Most

of the time people in positions of power tend to become more egocentric and self-focused. This limits their capacity to understand the viewpoints of other people, which may provide needed insight. However, an ethical company that values the contributions of its employees is more likely to be innovative in the marketplace.

5)

Moral values of employees:

Milton Friedman once stated that

the employees of a firm have the moral obligation to maximize shareholder value. Deviating from this directive, he believed, is like a form of taxation without representation, because shareholder money gets spent in ways that does not maximize returns. This, I think, needs to be tempered with a stakeholder theory of the firm, which deals with how employees interact with suppliers, partners, customers, and their co-workers - and these are all interactions that should be encapsulated in a company's code of ethics.

6)

Strong and Independent Board:

Business ethics are critical

for members of company boards, as these people should provide a great deal of moral leadership. But in some cases, board members turn a blind

eye to developing problems, and this can make bad situations worse. Still, board members often find it difficult to fulfill their ethical duties; Board members who are zealous about fulfilling their duties often get punished by not being selected for boards at other companies.

7) Role of Regulation in Business Ethics:

Legislating some

ethical behavior can help keep the marketplace free of monopolistic behavior and safeguard stakeholders such as partners, customers, and investors. What's more, a transaction between two organizations can affect other parties - and these externalities, as economists call them, are sometimes best addressed by regulation.
8) Role of Information Technology

& Business Ethics:

Some

of the biggest issues with ethics and technology can be found in security and privacy concerns. Ethical companies do their best to protect company assets without making people feel stifled - and this balance is increasingly important for innovation and creativity.

5: Unfair or Unethical Business practices (I) With Respect to Customer:

1)

Pricing:

Differential pricing for different class of customers as low quality. Special pricing

similarly low price identified

factoring discount are all forms of unfair business practices.

2)

Advertisement

: Marking false claims using advertisement

to confuse or confuse the customer with exaggerated claims and colorful copy.

3)

Product Promotion

: Using sales promotional techniques one free offers, etc. are used

like demo pack, free trial buy two get

to lure the customer in purchasing the products Similarly in industrial goods giving bribe to get the order.

4)

Customer Service:

Appointing female executives to get

new business and then sending recovery agents for outstanding dues is unfair business practice.
5)

Price Fixing:

Collaborating with other companies and fixing

prices which are on higher side so that customers does not have any choice.

(II)
(a)

Unethical business practice of employees: Job Switching: When an employee changes job, he

must protect the information of his previous employer. Similarly a huge amount of money is invested in training of employee and he leaves the organization which has trained him and takes his expertise with him.
(b)

Giving

Information

which

is

Confidential

(Insider Information):

An employee has confidential information

about financial status, future projects etc. which he should not disclose to anyone. Investors buy or sell shares of the company based on this sensitive information.
(c)

Industrial Espionage:

This is spying for either

personal or companies benefit.

(d)

Occupational Crimes:

They are wrong actions of

employees like: a) b) c) Using office telephone or PC for personal use. False claims made by sales executive. Theft or pilferage. d) Damaging the property of the company. e) Manufacturing, transporting & selling products that are prohibited by law e.g. liquors and drugs.

6: Ethical Issues

How Ethics Can Make Corporate Governance More Meaningful? 1) Corporate governance is meant to run companies ethically in a manner such that all stakeholders, creditors, distributors, customers, employees, the society at large and governments are dealt in a fair manner. 2) Good corporate governance should look at all stakeholders and not just shareholders alone. Otherwise, a chemical company, for example, can maximize the profit of shareholders, but completely violate all environment laws and make it impossible for the people around the area to lead a normal life. Ship breaking in Valinokkam, near Arantangi in Tamil Nadu, leather tanneries in South, Arco and hosiery units in Tirupur, have brought about too much of environmental degradation that has unleashed untold miseries to people in and around their locations.

3) Corporate governance is not something which regulators have impose on a management, it should come from within. There is no point in making statutory provisions for enforcing ethical conduct.

4) There is a lot of provisions in the Companies Act, for example, (a) disclosing the interest of directors in contracts in which they

are interested; (b) abstaining from exercising voting rights in matters they are interested; and (c) statutory protection to auditors who are supposed to go into the details of the financial management of the company and report the same to the shareholders of the company. But most of these may be observed in letter, but not in spirit. Members of the board and top management should ensure that these are followed both in letter and spirit.

5) There are a number of grey areas where the law is silent or where regulatory framework is weak, which are manipulated by unscrupulous persons like Ketan Parikh and Harshad Mehta. In the US, for instance, the courts recognise that new forms of fraud may arise, which may not be covered technically under any existing law and cannot be interpreted as violating any of the existing laws. For example, a clever conman can try to sell a piece of the blue sky. In order to check such crooks, there is the concept of the "blue sky" law. However, such wide-ranging processes are not available to courts in developing countries.

6) The Securities and Exchange Board of India (SEBI) has jurisdiction only in cases of limited and listed companies and are concerned only with their protection. What about the

shareholders and others of other unlisted Limited companies?

7) The Serious Fraud Investigation Office (SIFO) in the Department of Company Affairs (DCA). has been investigating several "Vanishing Companies". By 2003, SEBI has identified 229 as "vanishing companies" which tapped the capital market, collected more than Rs. 800 crores from the public and subsequently became untraceable. However, thousands of investors have lost their hard-earned' money and no agency has come to their rescue so far.

What is Ethics? Ethics involves learning what is right or wrong, and then doing the right thing -- but "the right thing" is not nearly as straightforward as conveyed in a great deal of business ethics literature. Many ethicists assert there's always a right thing to do based on moral principle, and others believe the right thing to do depend on the situation -ultimately it's up to the individual. Many philosophers consider ethics to be the "science of conduct." Seniors explain that ethics includes the fundamental ground rules by which we live our lives. Philosophers have been discussing ethics for at least 2500 years. Many ethicists consider emerging ethical beliefs to be "state of the art" legal matters, i.e., what becomes an ethical guideline today is often translated to a law, regulation or rule tomorrow. Values which guide how we ought to behave are considered moral values, e.g., values such as respect, honesty, fairness, responsibility, etc. Discussions around how these values are applied are sometimes called moral or ethical principles. Business Ethics is now a Management Discipline: Business ethics has come to be considered a management discipline, especially since the birth of the social responsibility movement in the 1960s. In that decade, social awareness movements raised expectations of businesses to use their massive financial and social influence to address social problems such as poverty, crime, environmental protection, equal

rights, public health and improving education. An increasing number of people asserted that because businesses were making a profit from using our country's resources, these businesses owed it to our country to work to improve society. Many researchers, business schools and managers have recognized this broader constituency, and in their planning and operations have replaced the word "stockholder" with "stakeholder," meaning to include employees, customers, suppliers and the wider community. The emergence of business ethics is similar to other management disciplines. For example, organizations realized that they needed to manage a more positive image to the public and so the recent discipline of public relations was born. Organizations realized they needed to better manage their human resources and so the recent discipline of human resources was born. As commerce became more complicated and dynamic, organizations realized they needed more guidance to ensure their dealings supported the common good and did not harm others -- and so business ethics was born. Note that 90% of business schools now provide some form of training in business ethics. Today, ethics in the workplace can be managed through use of codes of ethics, codes of conduct, roles of ethicists and ethics committees, policies and procedures, procedures to resolve ethical dilemmas, ethics training, etc.

INSURANCE - The indication of reforms IRDA - central to the insurance reform process - is an autonomous, regulatory authority endeavoring to protect the interests of policy holders; and regulate, promote & ensure orderly growth of the insurance industry. The IRDA has been empowered to carry out several functions, including: * Promoting and regulating professional organizations connected with insurance & reinsurance * Improving the efficiency while conducting the insurance business * Establishing a code of conduct for players in insurance * Determining the specification of accounts, and the manner in which funds are invested * Laying down prudential norms for investment for both life and general insurance companies

THE SIX STEP INSURANCE PLANNING PROCESS Insurance Planning is the process of providing advice and assistance to clients to determine whether and how clients can meet their financial needs and lifes goal through proper management of financial resources.

Establishing and defining the client planner relationship: The Financial advisor should clearly explain or document the services to be provided and define the responsibilities. The advisor should explain fully how he will be paid and by whom. The advisor should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests. The advisor should agree on how long the professional Relationship should last and how decisions will be made.

Gathering client data, including goals: The Financial advisor should ask for information about the financial situation. The planner should mutually define the personal and financial goals, understand the time frame for results and discuss, if relevant, how one feels about risk. The Financial Planner should gather all the necessary documents before giving the advice.

 Analyzing and evaluating the financial status: The Financial advisor should analyze the information to assess the current situation and determine what one must do to meet the goals, depending on what services have been asked. For this one could include analyzing the assets, liabilities and cash flow, current insurance coverage, investments or tax strategies. Developing and presenting Financial Planning recommendations and/or alternatives: The Financial Planner should offer Financial Planning recommendations that address the goals, based on the information provided. The planner should go over the recommendations with the client to help and understand them so that one makes informed decisions. The planner should also listen to the clients concerns and revise the recommendations as appropriate. Implementing the Financial Planning recommendations: The planner and the client should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your coach, coordinating the whole process along with professionals such as solicitors or stockbrokers. Monitoring the Financial Planning recommendations: The planner should agree on who will monitor the progress towards the clients goals. If the planner is in charge of the process, he/she should report personally to review the situation and adjust the recommendations, if needed.

Ethics in insurance today (present scenario): According to insurance stakeholders, the issue of compliance with ethics and best practices should govern market strategies and operations. Stakeholders have warned that the sector's efforts at achieving a more robust financial capacity would be rubbished if steps are not taken to address unethical practices and the prevalence of fake institutions in the industry. Insurance operators need to devote more of their energies and resources to ensuring the emergence of a new order in terms of players' attitude to the issue of ethics. Insurance, being a business that is based on trust, could only win the admiration and patronage of the buying public when there is a widely acknowledged effort by operators to operate by the rules laid down by trade bodies and the regulatory authorities. One would agree that the level of capital companies have had to raise within the last few years is quite challenging. That is why there must be a collective resolve by underwriters, brokers, loss adjusters, and agents to ensure that the

additional funds injected into the sector are safeguarded and used optimally through strict adherence to ethics of the profession. Operators are usually expected to display more commitment to ethical standards in all the operations. There should not be any room for unprofessional and unethical practices in the dispensation. Generally, the fear of losing business, rate cutting and offer of illegal inducements has compromised insurance operators' compliance to the industry's ethics. Industry watchers say experience of non compliance with ethics in the insurance industry is a reflection of the situation in the larger society, adding that professionalism, honour, service and social responsibility, should be the key attributes of the sector.

Insurance and Ethics Insurance, by definition raises ethical questions. Insurance might be viewed as mans attempt to control and influence an environment that we all know is in Gods hands. Mans attempt to insure anything is, at best, limited. Insurance is nothing more than a pooling of money to provide limited reassurance for a limited set of assets or circumstances. Many people look to insurance to provide them with a complete sense of security and assurance. When they buy insurance some people think, Oh, now I dont have to worry, everything will be taken care of. Unfortunately, over the years, the insurance industry has often nurtured this paternalistic and incorrect notion. Because they do not control the world, insurance is only a partial or stopgap measure to deal with the uncertainties that the world presents. Insurance does not provide the kind of universal coverage and

assurance that many people look for. Many ethical concerns with insurance exist because of this gap between consumer expectations and genuine insurable risk. For example, people are often disappointed, angry or disillusioned to find that the insurance they have been paying for does not cover a particular situation. This can leave consumers feeling that insurance is a poor economic value or a rip-off. In this business managers frequently hear statements like, Ive paid thousands of rupees of premiums, and this small claim isnt covered or Because I forgot two payments, my coverage was cancelled. Now my claim wont be paid after paying premiums for many years, or I didnt understand what I bought, I thought everything was covered. Not meeting a customers expectations can feel frustrating and dissatisfying to them. Because of this difference between what people expect and what insurance provides, insurance is one of the most highly regulated industries in our country. Although it is national in scope, it is one of the few industries of its kind that is primarily regulated at the state level with 50 different sets of laws and regulations governing insurance. Historically, insurance has played an important role in the development of world economies. Unfortunately, there are times when the industry has not been a good corporate citizen. In some cases, the insurance industry has a history of discrimination, usurious prices, and dishonest business practices. Is insurance a good business after all? Does it raise so many ethical questions that we should just avoid or eliminate it? Once looked at carefully, insurance is a wonderful and much needed product. Insurance, at its core, is a pooling of community risks. It is a formalized way for people to come together and help each other. For

example, when we pay life insurance premiums, we are putting our money together, not just to help ourselves but to help other families. When someone else dies, his family benefits because a payment can be made from this pool of premiums and the investment income that arises from it. When we die, our claim is paid to our family, from the same pool. People, in more informal ways, have done this for centuries. When someone dies, those remaining help the family. This may appear very basic, but insurance is much more powerful than just survivor benefits. Insurance allows us to take risks and therefore fully live our lives. Insurance is required in most industries and professions. This gives us some assurance of the quality of goods and services that we use. Commercial insurance for industries and professions has underwriting standards that require certain practices, safeguards, licensing, and so on. In this way, insurance provides a form of safety net for consumers both in terms of the product or service delivered and remuneration if there is malfeasance. Very few of us would have surgery, ride in an airplane, get on an elevator, eat in a Restaurant, and drive cars, if there was no insurance in place. Even more compelling, in many cases, without insurance we would not enter into these businesses. Without insurance one mistake could bankrupt the business and shatter customer confidence. Insurance not only provides protection to the consumer, but also frees us to conduct business. Insurance, just like money, is not an evil unto itself. It is a channel that can be used in very good and helpful ways. Once we accept the proposition that insurance actually is a good business, the ethical concerns do not end. In fact, in many ways, they just begin. Every day in running an insurance business, ethical considerations arise.

A few of the questions insurance corporatists confront daily are: 1. What is a fair price to charge? Should we charge as much as we can, as little as we can, or something in-between? 2. What is the proper level of customer service? Just enough to get by, more than the customer has bargained for, or something in-between? 3. What kinds of policies and procedures should govern the running of the company? Should we follow the letter of the law, the spirit of the law, or both? 4. Which laws are we talking about, mans laws, Gods laws, or both? When can and should we make exceptions to our policies and procedures? 5. How should we contract with other companies? Should we get as much as possible, give as much as possible, or something in-between? 6. What should our benefits and compensation be for the people working within the company? Should we pay them as little as possible, as much as possible, or Something in-between? 7. What should be done when someone is not doing the job? Should we help them, get rid of them, or keep them no matter what? How can we best address these ethical dilemmas?

There are no hard and fast answers to any of these questions. Based upon the situation, any of the answers may be right. It is possible to face the changing questions, and the changing answers, every day depending upon the individualistic views and ethical followings.

Institute for Insurance Ethics Mission and Purpose The mission of the Institute for Insurance Ethics is to develop programs that will educate members of the insurance and financial services industry, as well as the consuming public about the nature of ethics, social responsibility, and the application of high ethical standards. A primary purpose of the Institute will be to consider the role of ethics as an alternative to additional regulation of the insurance and financial services industry. Unlike many other businesses, insurance is based on mutual trust between insurance producers and insurance clients. Trust, in turn, is based on the highest ethical standards.

Vision of the Future The Institute for Insurance Ethics will be a highly visible advocate for ethics and ethical behavior in the life insurance and financial services industry. It will be a strong, clear voice for ethical conduct and social responsibility within the insurance industry. The leadership shown by the institute will create ever-growing awareness of ethical issues among insurance and financial services professionals. Through its growing leadership and influence, insurance professionals will gain more and more formal training in ethics and in dealing with ethical situations that they confront. Through that training and awareness, consumers will continue to gain trust and confidence in insurance professionals and in the insurance industry.

CODE OF ETHICS Selling Life Insurance is like selling intangible product. So, the marketing staff needs to observe a set of norms in his / her professional conduct, which make him / her worthy of trust and faith. The Code of Ethics for the life insurance, marketing staff 1. To perform his / her duties in high esteem. 2. To give utmost priority to the client's interest. 3. Not to disclose client's confidential and personal information

4. To ensure prompt and sincere service to the client and his or her family. 5. To use appropriate methods in convincing clients to protect their insurable interest. 6. To make truthful and accurate presentations. 7. To improve his / her knowledge of life insurance through constant study. 8. To set a plan and work accordingly. 9. To maintain fair relations with colleagues. 10. To strictly follow the concerned laws and regulations. 11. To obtain proposals only on the lives of persons who fits in the physical, moral and financial standard defined by the Company. 12. To be loyal to the Organization.

The IRDA has formulated a Code of Conduct for the marketing staff which comprises two broad group heads viz. "Do's" and "Don'ts". They are listed herewith: Do's 1. Identification of marketing staff and the insurance agency - certificate of License to be shown to the prospect on demand. 2. Match the needs of his / her client with various products available with his insurer.

3. Work out the premium to be charged so that his / her prospect is able to weigh the economic or financial implication of the proposal on his / her resources. 4. Bring to the notice of his / her client the implication of various questions in the proposal form and other documents and advise the client to disclose all the material information. 5. Disclose to the insurer all relevant information. 6. Inform the prospect about acceptance or rejection of the proposal by the insurer. 7. Obtain all documents from the prospect for the completion of the case. 8. Assist the policy holder in matters of: Claim settlement, Effecting nomination/assignment, Revival, change of address, Exercise of various options.

Don'ts - No Marketer shall 1. Solicit or procure insurance business without holding a proper authorization 2. Induce the prospect to omit to disclose the material information in the proposal form 3. Induce the prospect to submit wrong information in the proposal form or in the documents submitted to the insurer for acceptance of the proposal

4. Behave in discourteous manner. 5. Interfere with any proposal introduced by any other insurance marketers. 6. Offer different terms and conditions other than offered by the insurer. 7. Part with or share his incentive with Prospect or with any other person. 8. Receive a share of the policy proceeds from the beneficiary. 9. Compel any person to terminate an insurance contract with any insurer in order to effect a new proposal within three years from date of such termination. 10. Apply for fresh license to act as an insurance marketer if his / her earlier license / authorization have been terminated with in five years from the date of termination. 11. Remain or become a director of any insurer carrying on insurance business in India.

Ethics in insurance: Building relationships through trust The momentum of the private insurance sector leaves no doubt in ones mind that it is amongst the foremost growth sectors of our country. A market share of 26.18 per cent in five years is testimony to this. But even while one braces himself to avail of the numbers within his/her sight, they need to realize that the "long-term" will belong to that company which rigidly

benchmarks ethics for itself and for the industry. In a business, where the customer entrusts the company with his / her financial savings, ethics has a direct relation to sales. The greater the trust, the more the sales. There are many ways to build trust through ethics, the most fundamental being the way the product is designed. It should offer complete clarity and transparency and the literature supporting the product should not overpromise the benefits or understate the risks. For eg: At Birla Sun Life, the use of the sales illustration, the inclusion of the policy proposal form, and the free look period they offer have served to win their customers' trust. By giving customers the option to track investments online and by publishing the performance of the funds against benchmark indices, specifically prepared for Birla Sun Life by CRISIL, they prove that they are an open and reliable organization. Ethics is an attitude that needs to touch every aspect of the customer relationship. It entails having great reverence for the customer's needs, being open to suggestions and insights that might enhance his / her comfort levels, building in riders and flexibility options that address these needs, providing assistance and clarity in documentation and upgrades, and settling claims on time. Ethics means being fully accountable, not just to the company and to its customers, but to the industry they serve. The inspiration for ethics thus comes from the highest source from a need to impact the industry. On the flip side, a lack of ethics can have serious consequences. Litigation and costs of settlement, business losses, a reduction in ratings, and increased scrutiny are not half as damaging as the loss to image and reputation. It's a fact that good ethics makes good business sense. Of course, the mandate for good ethics always stems from the top. Which explains, why at Birla Sun Life, they have introduced a system of checks and balances that guards

against concealment and why they follow norms of compliance and adhere to IRDA regulations so scrupulously that their books and processes are open to audit at all times. While top management can lay down a code of ethics and request adherence, its implementation depends on the individual. As Albert Einstein said, "Ethics is an exclusive human concern without any superhuman authority to back it.. Ethics is that discipline, that momentum that challenges a company to rise above themselves and raise the bar each time they interact. It is the means by which they measure themselves, the strength by which they progress, and the light by which they shall be remembered. It is the way ahead - for each individual and for his industry.

CASE STUDY: CODE OF ETHICS AND PROFESSIONAL CONDUCT ICICI LOMBARD-CHEATS

Rahul Saxena is a policy holder who is an unsatisfied consumer of ICICI LOMBARD. He shares his personal experience with us. Member's Rating of this Product: Member's Recommendation of Product: Customer Service: Claims Settlement: Rates/Premium: Range of Plans: Staff Attitude: Pros: None Cons:Business ethics

this No

The Cheating by ICICI Now if things could not get any worse, I am currently going through what can only be termed as the blatant cheating of a customer from one of Indias largest Companies ICICI. The following is a timeline as to what happened and continues to happen. 12-11-05: Accident took place. Police report was made. Insurance company was notified and claim number received. 16-11-05: After checking the list of cashless garages on their company website, and verifying the same with your customer service representatives as well as the garage of choice Autograph Skoda,

Official Skoda dealers, I towed the car to the workshop. All papers as desired by ICICI were handed over to the garage to produce to the Insurance agent at the time of the survey. The only reason I picked an authorized Skoda garage, even after knowing the ridiculous prices they have, was because ICICI told me they had a cashless facility for that garage. 19-12-05: At 7:30pm, I get a call from Mr. Abhay stating that ICICI cannot process my cashless claim as a third party has been injured and a case has been filed. He instructed me that if I want my car I could pick it up after paying the full amount. I then spoke to Mr. Suresh Shetty, who stated, the ICICI legal department had advised them not to pay the claim. I asked for a written copy of the clause in the policy where it is stated that the claim for vehicle repairs cannot be paid unless the case is solved in court. I also spoke to my long time insurance agent from New India Assurance who confirmed that there is no such requirement and that ICICI is known to harass its customers on large claims. I was put on the line with Mr. Kapil Madgar who stated that he was the Regional Manager. I asked him to provide me with the clause as mentioned above. However he rudely told me that he does not know and even though he was sitting in the office, he did not take the bother to atleast try and assist me. Till date, Mr. Abhay and Mr. Shetty were well mannered and helpful to the extent they could be, but I must say that the manner of speaking of Mr. Kapil leaves a lot to be desired! As it was obvious that I was not going to get an accurate answer on the phone, I have asked for a written statement by fax from the company showing me where this clause is mentioned. I was assured that it would be with me by 10am the next day. Nothing came.

On 20/12/2005, I receive the biggest shock of my life. I get an unsigned fax from ICICI stating that they will NOT HONOUR my insurance at all stating the limitation in the policy of PACEMAKING. No explanation was given as to what they mean by pace making, and my agent at New India told me that this is a motor sport activity and does not apply to my case at all. All further attempts to get a proper reply from ICICI has fallen on deaf years, and a fax sent on the 20th to their MD Mr. Sandeep Bakshi has not been replied too till date. There is no-one at ICICI who is willing to take responsibility, all their written correspondence is unsigned, and there is no-one you can speak to who will give you a straight answer. This from a company whos slogan is Haam hai na! I should take them to court for false advertising alone! I have now approached the WIAA who are supporting me completely. This battle will now move to the Insurance Regulatory Board. From there I can move the Consumer Court if I am not happy with the verdict. However this will now take time and I have no choice but to fund the entire repair costs myself. But, from all the legal opinions I have taken, I am in very good standing legally and I should win my case plus penalties and other expenses paid to me. I am putting this topic up here now to WARN all other members that ICICI are COMPLETE CHEATS AND DO NOT GIVE A DAMN ABOUT THEIR CUSTOMERS. They will try anything in their power to wriggle out

of paying a large claim, which they are rightfully entitled to pay. This tactic is probably their company policy, hoping that finally the customer will give up and forget about it. Well, this is not happening here with me and rest assured this case will be followed till its rightful conclusion. And hopefully it will serve as a lesson to ICICI and other insurance companies that the Customer is no longer just going to lie down and take the CRAP that is meshed out to them. My Final notes DO NOT DEAL WITH ICICI, whether its their banking, insurance or loans. They will gladly take your money with a smile, but when it comes to actual customer service, they are the WORST I have ever had the displeasure of dealing with.

Conclusion:

The ethical and spiritual path in insurance, and in life, is an individual one. At times, it can feel like a solitary path. Ethics is not reached by consensus but by conviction. The ethical path may not be popular but it does stand the test of time. Ethics is not a hard and fast set of rules but is based upon guiding principles. Ethics should guide our communities, yet they are deeply personal. Above all, ethics and the spiritual compass that underlies our individual ethical code, is not a destination, it is not even a journey, it is the journey. What is good, right and true usually stands the test of time and may not always be immediately apparent. The ethical stake in the ground will always be scrutinized and criticized by someone.

Ethics in insurance: Building relationships through trustnews

Nani Javeri* 11 January 2006

The 'long-term' will belong to the company which rigidly benchmarks ethics for itself and the industry. Mumbai: The momentum of the private insurance sector leaves no doubt in my mind that it is amongst the foremost growth sectors of our country. A market share of 26.18 per cent in five years is testimony to this. But even while we brace ourselves to avail of the numbers within our sight, we need to realise that the 'long-term' will belong to that company which rigidly benchmarks ethics for itself and for the industry. In a business such as ours, where the customer entrusts us with his / her financial savings, ethics has a direct relation to sales. The greater the trust, the more the sales. There are many ways to build trust through ethics, the most fundamental being the way the product is designed. It should offer complete clarity and transparency and the literature supporting the product should not over-promise the benefits or understate the risks. At Birla Sun Life, the use of the sales illustration, the inclusion of the policy proposal form, and the free look period we offer have served to win our customers' trust. By giving customers the option to track investments online and by publishing the performance of the funds against benchmark indices, specifically prepared for us by CRISIL, we prove that we are an open and reliable organisation. Ethics is an attitude that needs to touch every aspect of the customer

relationship. It entails having great reverence for the customer's needs, being open to suggestions and insights that might enhance his / her comfort levels, building in riders and flexibility options that address these needs, providing assistance and clarity in documentation and upgrades, and settling claims on time. Ethics means being fully accountable, not just to the company and to its customers, but to the industry we serve. The inspiration for ethics thus comes from the highest source - from a need to impact the industry. On the flip side, a lack of ethics can have serious consequences. Litigation and costs of settlement, business losses, a reduction in ratings, and increased scrutiny are not half as damaging as the loss to image and reputation. It's a fact that good ethics makes good business sense. Of course, the mandate for good ethics always stems from the top. Which explains, why at Birla Sun Life, we have introduced a system of checks and balances that guards against concealment and why we follow norms of compliance and adhere to IRDA regulations so scrupulously that our books and processes are open to audit at all times. While top management can lay down a code of ethics and request adherence, its implementation depends on the individual. As Albert Einstein said, "Ethics is an exclusive human concern without any superhuman authority to back it." To this I add: Ethics is that discipline, that momentum that challenges us to rise above ourselves and raise the bar each time we interact. It is the means by which we measure ourselves, the strength by which we progress, and the light by which we shall be

remembered. It is the way ahead - for each of us and for our industry. *The author is CEO, Birla Sun Life Insurance Company Limited

Insurance contracts are often seen as a form of gambling. That is because they appear as a type of wager that takes place over the lifetime of the policy. Basically the insurance company is willing to bet that you and your property will not suffer the loss insured against. In exchange for making this bet, and taking on the risk, they receive your premium. If they win the bet, they keep the premium; if they lose, they make the payout. In this sense, they are often compared to a type of long term financial casino. The difference between your premium amount, and the amount the insurance company will have to pay out if the loss occurs, is simply the odds the insurance company is getting for taking on the bet. It's just like going to the horse races and betting on a horse that pays out 10 to 1. This view of insurance has led to a number of people and religious communities disapproving of insurance because of its similarities to gambling. Among those groups that avoid insurance are the Amish and Muslim communities. What these people do instead is create a system of what is known as social insurance. What this means is that if there is a

disaster and someone suffers a heavy loss, then the whole community will step forward and help them to deal with their loss and rebuild. While this system is very simple, it has the potential to be just as effective a safety net as insurance. However, it requires that the community actually does step forward and help those who suffer from disasters. This means that it is more successful in small closed and closely knit communities than in large modern societies. Social insurance systems therefore are not always effective. Often the community that is supposed to adopt it is not suitable. Also, in very large disasters the system can break down as a small community will not be able to rebuild itself completely without outside assistance. This is why larger modern insurance systems can be more robust. However, in extremely large disasters, modern insurance systems can also run into difficulties. This is witnessed by the fact that it is impossible to insure against certain risks such as floods and earthquakes. This is because the damage would be simply on too large a scale for the insurance companies to cope with. There are other ways in which insurance doesn't follow the gambling model. For instance insurance companies seek to reduce the risk of the loss occurring constantly, for instance by requiring the installation of fire alarms, or by reducing the loss if the insured against event does occur, for example by providing rehabilitation to accident victims. Therefore insurance is like a gamble in the reward and risk elements, but other elements are different. Joseph Kenny is the webmaster of the insurance site http://www.insure121.com/ where you will find information, news and

links to the leading providers of car insurance in the UK. Article Source: http://EzineArticles.com/?expert=Joseph_Kenny

Insurance Ethics isn't much different than the Ethics requirement for any other Fiduciary position. Since Agents and Adjusters are tied to state regulation, the people and the Insurers could lose their license and Certificate of Authority to transact business in that state. There is a law called Public Law 15, the McCarran Ferguson Act, that allows for each state to regulate their states' business, and the Federals will not intervene as long as the states handle it properly. Inside these laws are the Unfair Trade Practices. If an Agent or Insurer violates any of the Unfair Trade Practices, the state can assess fines and/or imprisonment. Some examples would be Misrepresentation, Concealments, Twisting, Rebating, Defamation, Giving away Free Insurance, Commingling, Embezzlement, etc. Because the Insurance industry is tied to Ethics, the Insurers often keep strict reins on any person who might mislead the public in any way. Fraud is the willfull intention to deceive and every family in America spends around $1,200 more per year just because of Fraud. Every person spends $250 more per year due to Auto Insurance Fraud.

Our Nation spent $1.7 TRILLION dollars on health care in 2003. It is estimated that 20-35% of that was fraudulent. It's everyone's fault, the hospitals, Doctors, Pharmeceuticals, Insurers, Agents, Lawyers, and the CLIENTS themselves for being frivolous. Every Insurer has outstanding people, but are also cursed by the shysters and crooks. No one is immune. If an Agent decides to lie to a client in order to promote his own commission, then that Agent should have his license revoked and face justice. But, since 61% of taxpayers say it's okay to cheat on your taxes, I would say that we will always face that problem. Trying to police Ethics is a full time job, and every day is a new battle.