One could (rightfully) ask at this point, “How does this apply to insurance and insurance sales?” The best way to answer such an inquiry might be to recall actual instances of unethical behavior. Some of these situations would now not only be unethical, but also illegal. One thing to keep in mind, is:
F Repeated unethical activity will usually be made illegal in most cases eventually.
For those in the Health Insurance industry, it appears that most publicized unethical actions over the past few years have occurred in this particular line of insurance. There are several reasons for this, with the result that this branch of insurance seems to have suffered more regulations and more “housecleaning” probably more than any other area of insurance.
Any Health Insurance agent who has been active very long, can still remember situations where it was discovered that a policyholder has multiple coverages on the same risk because a “slick” agent convinced them that they needed the coverage (that could never be used) for a variety of reasons. The elderly are obviously the most gullible, and there have been (are?) agencies that target elderly widows as many (if not most) were in an unfamiliar position of having to make financial decisions formerly handled by their late husbands. Many agents have seen “portfolios” of multiple coverages.
The elderly has always been a ready market for unethical agents; hence the very strict laws regarding Medicare and Medicare Supplements. The government stepping into the insurance business and dictating the standardization of Supplement policies is a direct result of sales abuse. This was followed by more stringent laws, such as the illegality of selling a Medicare Supplement policy to a person who already has such a policy, unless strict criteria is met and multiple forms completed.
As discussed later in more detail, “financial planners,” many of them former “agents” (whom “six months ago couldn’t spell financial planner, but now they are one,”) are under scrutiny in the modern market. A problem in ethics arises where, for instance, a “financial planner” who is also an insurance agent, is made privy to the financial records of a client, and who then passes this information on to a stockbroker or mutual funds salesman, sometimes for a “fee” and sometimes for “goodwill.” This raises many questions discussed later, such as should the agent disclose his connection to the broker to his client and would that make it OK? Or is it just the right thing to do if it is apparent the client would benefit more by investing in a mutual fund or whatever?
In respect to health insurance, there is an interesting situation familiar to many health agents, wherein a client comes to them with the problem of unaffordable premiums with their present carrier because of age, and they are nearing the magical age of 65 when they will be eligible for Medicare. Many agents will suggest a “Temporary” policy with higher deductibles and which are usually issued for only one year and have limited health questions, but have a much lower premium. One of the primary reasons for the low premium is that they do not cover any preexisting conditions under any circumstances. For relatively health older persons, this is acceptable and in some cases, commendable from the viewpoint of the client.
An ethical problem can arise, however, in some situations, if for instance, the client has 3 years (or so) before qualifying for Medicare. Some agents simply find another (a good Health agent will usually have 2 or 3 applications in their briefcase) and rewrite the policy with another company. The problem is that there is NO coverage for preexisting conditions, and sometimes the agent “forgets” to tell the client that any illness that occurs while covered by a Temporary policy, will not be covered under the new Temporary policy. So the client could find themselves without coverage for a couple of years if they should become ill when covered by the first Temporary policy. An ethical agent, as most are, will certainly make sure that the client fully understands the hazard involved with the Temporary policies.
One of the most disturbing unethical acts, which is now illegal in many (if not all) states, was placing Health Insurance on small groups with an unlicensed company, claiming that the company did not have to file rates or receive approval from the state Department of Insurance, because of ERISA (Employee Retirement Income Security Act) regulations which state that under certain situations, employee benefits for an employer are not required to be licensed by or under the jurisdiction of the State Insurance Department.
An out-of-state “Trust” would actively market small businesses offering good coverage at affordable prices (and often-good commissions), and, supposedly, there was nothing that the State could do about it. There were many examples of horrible experience with these “Trusts” who did not pay claims and eventually withdrew from the state, leaving uninsured (and in many cases, uninsurable) employees. The fallacy was that under an ERISA, in order to qualify, only employees of a SINGLE employer can be so insured. It does not say much about the ethics of some Health agents who, after discovering that a “Trust” covering their insured groups, had “flown the coop,” had simply replaced the coverage with another like “Trust.” Today, in most places the agent would not only lose their license, they would also be personally held liable for any losses suffered by their clients/
This is only a taste of unethical behavior of insurance agents and, yes, even insurance companies.
You are now reading about Ethics in the insurance business because the Department of Insurance requires continuing education and some states require that a text discussing Ethics be included. Some may resent having to study about “Ethics” because they consider themselves tremendously ethical, and besides - doesn’t everyone know the difference between right and wrong and everyone knows that if they cheat their clients, they are unethical?
They may have a point inasmuch as in many cases, one can determine whether a particular action is ethical or not, just by using good judgement.
F The greatest tool for ethical conduct is just good sense.
But, if every situation that arises were clear-cut, then this book would not be necessary (and the world would be a better place…). Often given as an example of “everybody knows,” “everybody knows” that if a life insurance agent talks a client into cashing out an existing policy and replacing it with another like or similar policy, but which pays a new first-year commission, that is wrong, a real no-no, end of discussion.
OK. But, how can you explain an agent that defrauds his clients in this manner? This brings up the point of whether there are bad agents who sometimes do good things and/or good agents who sometimes do bad things. The point (yes there is one) is that
F for some agents, what is right and what is wrong is not as apparent to them as it is to others.
This is an actual story of company ethics gone haywire and executives completely ignoring ethical behavior. This happened to a life insurance company, but it could have happened to other types of companies as well – the health insurance industry is full of stories of unethical companies and executives, as well as agents. One of the interesting sidelights of Equity Funding was that the agency force apparently had no actual knowledge of misdeeds, but there is little doubt that some of their large general agents had an inkling of something going on as they had a hard time believing that the company was writing as much business as it was claiming. When they asked about it at the home office, they were never completely satisfied with the answers.
Example: This story broke in the newspapers in April 1973. On April 2, the Wall Street Journal headlined “A Scandal Unfolds – Some Assets Missing, Insurance Called Bogus at Equity Funding Life. Allegedly Phony Policies Sold to Reinsurers for Cash – Firm Declines to Comment.”
(Quoting from Wall Street Journal) “From Beverly Hills, California, comes the story of the one of the biggest scandals in the history of the insurance industry, breaking around Equity Funding Life Insurance Corp. of America, a financial services concern with a “go-go” growth record in insurance sales. This scandal centered on the life subsidiary, Equity Funding Life Insurance Co. This company had four subsidiaries, and they reported total life insurance inforce of $6.5 billion at the end of 1972” (a substantial company in those days) and Equity Funding Life accounted for about half of that.”
“An unknown ‘but sizeable’ hunk of this insurance did not exist, apparently bogus business put on the books and then ‘sold’ to reinsurers for cash. Known in the company as the ‘y’ business, it was conceived and operated by several managers and executives of the subsidiary and parent company and treated as a big joke.”
This story contains many ethical questions, particularly accounting ethics, but it involved more than just “accountants.” It also involved company underwriters, policy issue, actuaries, and policyholder service personnel that were aware of what was going on to some extent or other. Agents, for the most part, were kept in the dark.
The point is that it had to be obvious to those participating in this gigantic fraud, they HAD to know that they were not only operating in total violation of any ethical code created by man, and of course, it was stealing so it was also illegal. What is interesting is that in interviews with some of the persons involved, to most it was just a “big game.” Actually it was certainly more than that because those involved in falsifying thousands of policies, were paid extremely well. One miscreant later stated that he had then been able to put his children into expensive private schools, so he did this “just for his kids.”
“Ignorance” of ethics has universally been understood to start at early childhood. This is obvious in those situations where the parents have been involved in unethical and/or illegal activities as the child soon learns to accept such action as the “norm.” If they are exposed to such activities, not only from family but also by others with whom they associate, they will soon develop the attitude that “it must be right because everyone does it.” Obviously a child that grows up in such an environment, will not know what’s right or what’s wrong.
F Bad ethics are often taught by example.
So how does that apply to an insurance agent? Consider the following situation:
John joins the Acme Insurance Agency after selling siding for several years. He is trained by an experienced agent designated as a “trainer” because he has the highest production (not highest ethics), a rather typical situation. John is a good student, and one of the things that he learns is that there always are several forms to be signed by the client. If he turns in a form that is not signed, he does not get paid for it until he goes back and gets the required signature.
One of his early sales was for a substantial policy and he was looking forward to his commission check until he discovered that the applicant had not signed one form. Remembering that the applicant was not a particularly pleasant individual and had been a rather hard sell, plus the fact that the applicant had stated he was going on vacation for 3 weeks, brought John close to tears. In admitting this to his “trainer” who lent a sympathetic ear, the more experienced agent offered to “get the signature.” John could not believe it, but when the agent came back to his desk in a couple of minutes with a signature that matched the other signatures on the application, John was introduced to the practice of “windowpane signatures” - holding a signed form to the window, and then tracing the signature onto another form at the proper place.
Assume that John knew that forging a signature was wrong (and illegal, to boot). What has he learned? He has learned that it is OK to “windowpane” a signature when necessary, because that is not really “forging.” Besides, if his trainer does it with all of his experience, then it must be OK.
Unfortunately, this is how many agents learn their “ethics.” Taking this one step further, assume that John moves to another agency where he is put in charge of training of new agents. Assume further that John teaches “windowpane signatures” to a new agent, and John is proud when the new agent brags on how his trainer had saved a case for him. Further assume that the owner of the new agency was highly ethical and besides, the agency owner knows he will lose his license if one of his agents is caught forging an application with his knowledge. The result would be obvious – John would go back to selling siding and not fully understanding why he lost his good job as a trainer.
F Sales ethics are the hallmark of the marketing entity.
There is another example of Ethics in an actual situation involving the sale of water softeners. (OK, they are not the most highly respected salespeople in the world…) In this actual case, the salesman called on a lead (generated by telemarketing) to sell a water softener. When he walked into the rather modest home, he noticed an organ standing in the corner next to the bookcase that held the latest Encyclopedia Britannica – indicating that they were “suckers for a good sales pitch.” The salesman performed his sales tasks of “testing the water,” which in reality is just an illustration of how certain chemicals interact with H2O. The prospects were eager to buy not only the unit, but also the most expensive unit. The prospects talked about dipping into their savings and taking an advance on wages to make the payments on the unit.
Again, this actually happened – the salesman just couldn’t do it. He said he had not been raised to take advantage of people like that. He was fired from his job, and on a hunch a couple of weeks later, he called the people, who thanked him for sending the “nice young man” to their house to “make sure they bought the right unit.”
This same salesman swears (verified by others that worked for this sales firm) that the Manager had a picture of a water softener sitting next to a run-down house, that he had sold to a man who had to get his water from a well. We would take buckets of water and pour it into the water softener…
F If a person’s early training taught that one could get away with wrongful acts and
make money; then the individual needs re-training and re-education as to what is right and what is wrong, and WHY it is right or wrong.
While some people act only out of ignorance when making ethical decisions, the ugly green monster, greed prompts others. The demon that perches on everyone’s shoulder is more active with some than with others. Nearly everyone will admit to having done a “wrong” at some time or other (or else they are lying) and psychologists have discovered that people respond positively to rewards but negatively to punishment – no startling discovery, even Adam in the Garden of Eden knew that, or should have.
In business, and insurance is a business (yes, it is), companies will reward the high producers with bonuses, gifts, commission increases, trips to exotic places, and whatever other rewards seem to ring the bells of the producers. Productivity is rewarded, often regardless of how it was achieved. It is no shock to discover that persistency of insurance is worse on business sold during a company promotion, “President’s Club” qualification period, or some other such contest period.
F If only productivity is rewarded, any sales with any business suffer in quality when increasing in quantity.
Remember Equity Funding and the officers that participated in that scam sending their children to private schools, etc.
Take heart, though, there are companies that reward their employees handsomely if they exhibit ethical behavior in their business pursuits. Companies are becoming more aware that commission structures and contests that reward productivity may not be the best way to go, so many companies are restructuring their commission schedules and promotions to reflect more acceptable agent behavior.
No one is perfect – even Mother Theresa admitted to imperfections (but not many or of much importance). Often quoted in these types of discussions is the situation when Abraham Lincoln threw a man out of his office for attempting to bribe him. When he was asked as to why he had thrown the man out, Lincoln replied that the man “was getting too close to his price.” This simply points out that nearly everyone has his price. The old story of the man, who approached a well-dressed lady and asked her if she would go to bed with him for a million dollars, to which she gave considerable consideration, and when assured that he could pay that much, she agreed. He then asked her if she would go to bed with him for $20, to which she indignantly refused and asked “What kind of a girl do you think I am?” He answered, “We have already determined that, now we are just trying to determine price.”
F Since realistically we probably all have our “price,” the smart person will simply not put themselves in situations where they are tempted.
We have all heard the word “character” in referring to certain individuals. Some seem to have it, and some don’t. Actually, those who have overcome temptation tend to have developed a stronger character as a result. So – what is character? The dictionary has about 50 lines (in small print) of definition, but the most applicable would be: “one of the attributes or features that make up and distinguish the individual.” Therefore,
F the goal of an ethical individual is to develop a strong character.
Many scholars, authors, and others, consider virtue as the telling factor in a strong character. Simply put, virtue is like a habit to do good things, such as “honesty is a virtue.” Virtue is not something that anyone is born with, but it must be developed. Children go through a phase when they come up with some “whoppers” and while this upsets many parents, it is a natural part of growing up and it is the responsibility of the parents to teach honesty (a virtue) to the child.
On the flip side, people can develop habits of doing “bad” things – this would then be called a “vice.” People usually don’t state doing “bad” things all at once - like virtue, it must be developed. Normally it is not taught by parents, but by others in the environment, associates, friends and those to whom a child respects. This usually starts with something small, like a “little white lie” that gradually develops into falsehoods so rampant that people simply no longer believe them. Unfortunately, it is easier to develop “vice” than it is “virtue,” as virtue demands continual attention and it must be exercised frequently. Since it is harder to be virtuous, virtue is praised more by others.
People, nearly all people, at some time in their life face situations where they can easily succumb to temptation to do something that they know is wrong, even though they know that another action would be right. Unfortunately, many people take the low road. The importance of ethics training comes into play here, so that the person will do what is right and will be therefore, working towards building a strong character.
When a “What to do, what to do?” situation arise, it is called “a quandary, dilemma, or just “a gray area.” This situation comes into play when it is just not clear as to what is right and what is wrong.
F A quandary or dilemma occurs when in a certain situation, the person is not sure as to what to do, as there are good reasons for the action and good reasons against it.
Recently, the CEO of the New York Stock Exchange decided to cash in his retirement funds for estate planning purposes accumulated over the past 16 years. This totaled some $120 million and caught the eye of the press, making the headlines for a couple of days. He maintains that it has all been collected legally and under the provisions of his contract with the Stock Exchange, and at this point, there is no evidence to the contrary. But it is obvious that with the hue and cry of the self-appointed guardians of the press, his days are numbered. It may have been legal, but was this ethical?
He evidently found himself in a quandary as to how to collect these funds, and one must suppose that there were good reasons for taking it in one lump sum as he did, or to spread it out in some fashion so that it could be more easily understood. Was it ethical for him to take it in one lump sum, considering the fact that during his reign, the stockmarket (probably through no actual fault of his) had fallen drastically and many investors, including retirees, who had invested in stock handled by the NYSE - lost their nest eggs. Was this right, or wrong, or just in a “gray area?”
It is quite easy to find oneself in a quandary in the insurance business. Assume for instance, that a client, is an elderly widower, decides to disinherit his children because they are objecting to his wanting to leave most of his money to a nursing home that had taken care of his late wife and is now taking good care of him. You are a financial planner so you are familiar with his situation and he respects your advice. But when asking for up-to-date financial information, you discover that the person who has been making his investments is the son of the owner of the nursing home, and he has informed your client that his investments have tripled in worth since he took over – which is dubious, to say the least.
What should you do? Following the professional code of ethics (described later in more detail, but for purposes here, are obvious canons) should you investigate this further, or should you simply do as he asks, and change the beneficiaries of his estate (and policies) to reflect his desire to name the nursing home?
Or, should you perhaps contact his doctor to make sure that his mental condition is good enough to make such an important decision? And even “stickier,” understanding the need for confidentiality, do you contact his children (assuming that you know them well as decent human beings)?
These decisions are not easy, and as the world of business become more complex, so do the ethics decisions. But before a dilemma can be solved, there are certain steps to be taken before one can start applying ethical theories or ethical principles.
Every effort must be made to collect all of the information possible that pertains to the “dilemma.” In the situation previously discussed, it would be easier to make the proper and ethical decision if it were known that the client is not incompetent. It may be surprising to learn that
Fmany quandaries are solved when all of the information is collected.
FBefore it can be determined as to what is fair, those that are involved in the
dilemma must be discovered.
Sometimes this is not easy and will require a lot of “digging,” but as they say, “You can’t determine the program until you know the players.” Sometimes there are hidden agendas discovered when all participants are known. Also, sometimes there are those with “shady” reputations on one side of the question, which would raise red flags and which alone could determine the proper ethical decision.
Some ethics “consultants” maintain that since a dilemma (or quandary) must have at least two options, in order to determine the proper option, a third option is necessary. The reasoning seems to be that if one has not spent enough time and thought to the problem without coming up with at least a third option, then they simply haven’t thought enough about the problem.
Practically speaking,
F in order to solve a dilemma, there MUST be another choice, other than just two.
There would not even be a dilemma if there were not two choices – a right choice and a wrong choice – and the dilemma is trying to figure out which is correct. Sometimes the third choice is an acceptable combination of the other two, sometimes it is completely different, but in any case, it usually is not easy to discover.
If the action under consideration is fair to all parties, benefits the client, and is consistent with such actions in other situations, then there really is no reason not to choose that action. Conversely, if taking such action requires that a commitment is broken, it is harmful and unfair, then that action would not be proper.
Of course, it is really not that easy in “real life,” primarily because of the conflict that occurs when an action is beneficial but it still not fair – hence the quandary/dilemma.
To bring all this into “real life,” Bill is an agent that sells primarily Long Term Care Insurance and he represents 3 different companies, but has the right to broker individual cases with other carriers if he wishes.
Of his primary companies, one (Company A) is an “old-line” life insurer with a AAA+ rating with Best’s, licensed in all states except New York, offering a comprehensive policy but the premiums are a little higher than other companies offering the same benefits. Also, commissions are a little lower but once a year they have a sales contest that is quite liberal for new production during a 30-day period. Underwriting is considered as “typical,” i.e., not conservative or ultra-liberal. It only offers tax-sheltered benefits.
The second company (Company B) is an A+ rated company; well known but is not as large as the company discussed above and is licensed in 25 states. Its underwriting is more liberal and the standard commission is better. The benefits are basically the same but it only offers tax-sheltered benefits.
The third company (Company C) is a smaller company that has recently received a B- rating from Best’s. It specializes in LTC Insurance and is licensed in 10 states. It is known to be innovative and offers several different plans, including one that does not protect benefits from taxation to the policyholder but in all other respects, has excellent benefits. Commissions are some of the best in the business, premiums are highly competitive and underwriting is much more liberal in medical (contrasted to mental or cognitive) history. This company is owned primarily by the CEO and his family and other company officers, and industry “scuttlebutt” has it that they are trying to write as much business as possible in anticipation of a sale or merger with another company as the CEO is 72 and wants to retire.
Bill was introduced to Emily by one of his regular clients. Emily’s situation is unique – as are most new clients - so Bill has to make a decision as to how to proceed. The facts are as follows:
Agent Bill has considered such a situation earlier, which is why he contracted with three such different companies. One might speculate what he would do if he had only Company A and Company C. Would he have sought another company, or if not (perhaps his agency insists that he only use those two companies), how would that have affected his judgement?
In determining just what options he actually has that makes sense (incidentally, this is often called “passing the smell test,” if it “smells bad” then it probably is), the following items must be taken into serious consideration.
This “example” is very similar to a situation faced by an experienced LTCI agent a few years ago. Those in the LTC Insurance arena can probably identify the companies (but not the agent who shall forever remain anonymous). Regardless, the question should be asked at this point if the steps needed to resolve an ethical dilemma have been taken? Remember that this is an exercise in ethics, not in financial management.
In this illustration/example, there are undoubtedly other areas that could be explored. However, based on this information, what would be the most ETHICAL action, i.e., what should Bill recommend to Emily? This illustrates the fact that sometimes these situations are not easy, and it gives a background into further exploration into the intricacies of Ethics.
In case you are wondering, what did the agent do in this case? This agent, by the way, was very ethical and had an excellent reputation in the industry. When asked how he solved this dilemma, he stated, “After finding out how much money she actually had, I was able to convince her to invest heavily in annuities, thereby giving her a guaranteed income for life. Then, since I was not married and was about to retire, I married Emily and we are enjoying our winters aboard our yacht!” (He was just kidding, of course. But this raises the question of whether it would be ethical to sell her annuities to replace her blue-chip investments, which leads to another discussion…)
These principles of fairness, consistency and beneficial to the proper parties as discussed above, plus such things as “morality,” and other such items to consider, may be called “ethical theories” that form the basis for ethical rules. But as one would suspect, very rarely is there a clear-cut situation where such rules can be applied with no hesitation and with knowledge that the ethical solution has been reached – no ifs, ands or buts.
What if you promised your family to take them to Disney World this summer? However, just a few days before the planned trip you are informed that your daughter, who has a learning disability, must be tutored during the summer months in order for her to be admitted to the next grade with all of her friends. This presents a dilemma as the tutoring will be expensive and you are not sure that you can afford it and keep another promise to your son to buy him a new bicycle so that he can go to and from Little League practice and games in the Fall. Also, if you took a week to visit Disney World, your daughter would lose that much tutoring and the information that she did not learn could be crucial to her final grade and for her moving to the new class. This is called a “real” dilemma as more than pure reasoning is involved, obviously there are emotions involved too.
Without going into a technical discussion as to the “types” of moral dilemmas, let it just be mentioned that
F there are those who appeal to fairness and rights over the consequences, and then there are those who appeal to consequences over fairness and rights.
No discussion of dilemmas would be complete without bringing up the decision that was made by President Truman to use atomic bombs in Japan, and by doing so, ending World War II. Those who agreed with his decision say that it was worth taking the estimated 80 or 90 thousand Japanese lives in order to bring this bloody war to an end, and otherwise, in all probability, it would have cost millions of lives if the country of Japan had been invaded. On the flip side, there are those who (still) maintain that dropping the bombs was immoral and not just because of the loss of innocent lives.
These dilemmas cry for solutions, and multitudes of such dilemmas arise every business day. Solving these dilemmas is what gives us “ethical theory” and which requires more study.
F Simply put, an ethical theory lays the foundation for a principle, which in turn constitutes the most important justification for pursuing or following a course of action.
In determining whether an action is ethical – or not – depends upon “who is asking?” to a great extent. There are those who prescribe an action for ethical reasons as to whether it benefits more people than it harms. Those who automatically look at every situation as whether or not it is “fair” regardless of the consequences, might look at a situation differently than one who always looks at every situation in the light of what benefit it would be to him (her).
A few words in respect to each of these groups of people who usually look at the same situation differently. Those that look for the benefit to themselves find that problems arise when what is good for them can only be accomplished at the expense of another. This is the key for whether such consideration is selfish, or just self-concern. Selfishness would indicate that the extreme of ignoring how an action would affect others, is the most common example of unethical behavior. In many professions, the code of ethics requires one to act in a way that will best serve the public interest.
Another type of person will always determine an action in light of the consequences of the act and they will then always compute the benefits and the harm of every action. Therefore,
F an action may be justified if it brings more happiness than unhappiness for more people.
This seems rather straightforward, but the problem is determining whether an action brings out the maximum amount of good, or whether it is good to a maximum number of people. If it brings out the good to a maximum number of people, then the problem becomes as to how these “goods” are to be distributed. Next problem is how does one decide as to what counts as “good?”
Sometime “good” is defined as to what satisfies the desires of the individual the best – actually defining “good” as pleasure and happiness. Happiness is considered by many as the ultimate “good.” This discussion can (and does) fill page after page in text books, but it is presented just as an example of how professional ethical theorists can determine whether a specific action is ethical or not.
As far as the other approach that one may take to an action in determining if it is ethical. If a person acts strictly from desire, then he is acting more like an animal inasmuch as there is no moral reason to take the course of action. The question should be not what action will fulfill the inclinations, but what fulfills the sense of duty or obligation.
There is one more class of person, or perspectives used by a person, in determining whether an action is ethical, and which has been called the ethics of virtue, or as some prefer, ethics of character. The first word that comes to mind too most is “honesty.” While the classical sense of virtue is not necessarily confined to honesty, it is most descriptive for this discussion. Accountants have the responsibility to always respond truthfully and there is little doubt that this is a virtue that is mandatory for a professional accountant.
Another virtue can be loyalty. However, is loyalty compatible with good, solid (some say “hard-nosed”) auditing practices? This points out that some “virtues” can conflict. How much loyalty to a client should an auditor have? Should an auditor warn a client of an audit problem before the audit report is filed? It is easy to see the magnitude of this problem.
While it certainly would not hurt any professional to spend the time to become better educated in philosophical studies of ethics with its many ramifications, as a practical matter, most people do not think about the principles to be used in determining whether an action is ethical. Most people simply go by their “gut-feelings,” their intuition or their own personal feelings. Some simply go completely by what their training has provided them to consider.
Since people in the same vocation or endeavor have various reasons and motives for acting as they do, there must be a published code of ethics for any profession if for no other reason than uniformity.
Once these steps have been taken, then the options available must be evaluated to determine which would be correct. To oversimplify this evaluation, there are several ways to determine the right action, but many experts break it down into only four steps:
The proper evaluation of these options is the heart-and-soul of “Ethics” and is discussed below in more detail.
Obviously, “Ethics” can be said to deal with right or wrong. Believe it or not,
Fnearly everyone has a(n) (ethical) set of beliefs as to what is right or wrong and these beliefs do not necessarily remain the same among all persons.
For instance, abortion, capital punishment, and adultery can be good or bad, right or wrong, or acceptable or unacceptable, to a person or a group of like-minded persons.
Cheating, stealing, and not keeping promises, or abusing children, elderly persons or animals are usually considered as “wrong” or “bad.” These all constitute moral beliefs, and if one were to write down all their similar beliefs, they would, in essence, create a personal code of ethics.
The primary subject of “ethics” is human actions, referring specifically to any action that is deliberately taken. If a person thinks about a particular action and then chooses to take this action, then it is a deliberate action and if the person has any control over this (these) action(s) – then they are held responsible for their actions.
In today’s society, this “personal responsibility” is becoming an “ancient” belief that is not “relative” to today’s situations. A mother drowns her children, but it is “not really all her fault…” A sniper kills innocent people at rest stops, but it was only because of the (fill in your own reason)… A corporation goes bankrupt, leaving many vendors, employees and investors with empty pockets, because an accountant employed by the company “went along” with the desires of the company President to over-inflate the value of high-end inventory items in order to show the profit to the Board of Directors that the President had promised - but the accountant is not at fault because he was just doing what his boss wanted him to do… etc., ad infinitum.
True, the actions of individual humans are not the only subject regarding ethics that must be considered. The activities of a group of individuals can be called “social practices” if one delves deeply into the study of Ethics. A practical example would be an individual using insider information to buy certain stock or in the case of a stockbroker, to notify his clients of a probably decrease or increase in the value of their stock because of “insider information.”
Remember the earlier discussion of Equity Funding. The stock analyst who was first made aware of this situation also faced an ethical problem. The analyst had been informed of the situation over lunch with an executive of Equity Funding. The analyst did some quick checking and as a result, was convinced that the executive was telling the truth. He contacted many of his clients and recommended that they get rid of their Equity Funding holdings. As a result of this action, the New York Stock Exchange charged the analyst with violating exchange rules with information about Equity before regulatory authorities made it public.
Ethical questions arose, naturally. Insider trading is a “general practice” and his using this information was an individual action. One question that could be asked – and frequently was – is “What was the analyst to do?” When he became aware of this information he was not able to completely verify the information, but he felt that it was his duty to his clients to pass on the information that he possessed, just in case… Ethically, was it not his duty to protect his clients? If he had not notified his clients and it later was disclosed that he had known of the situation, would he not be susceptible to legal action? And another related ethical question could be “Why did the executive wait for three years before exposing this situation.”
“Sensitive” judgement is often used in Code of Ethics of some professions, but should be used for all professions, including insurance. It simply refers to the total of all factors involved in ethical judgements, i.e., the professional should be aware of all matters pertaining to the morals and judgements of all actions that may arise during any personal or general actions.
Every person has some sort of moral beliefs, and usually they include the simple belief that “everyone should do their own job.” Therefore, a person must determine whether they should do their job under every situation and circumstance.
Many Codes of Ethics state that the members of the organization should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.” This sounds good, but is very difficult to achieve at times. Is an agent, for instance, to place his (or his family’s) interest above that of the public? What if the needs of the company conflict with the needs of the client, or as importantly, the public?
There are always situations where there are conflicts between one’s profession and their job or between either and their personal life. What to do – what to do? How does one know what is acceptable and what is not, what action is acceptable, etc. Thus, the Code of Ethics (or Principles, etc.) has been created by nearly all “professions” and by most businesses of any size.
The Code of Ethics for any profession will state in some fashion or other, that the member should perform with the highest sense of “integrity,” of words to that effect.
F The acknowledged definition of integrity is “firm adherence to a code of especially moral or artistic values.”
One could look at the way this principle is stated and then ask, “Am I showing integrity in the way that I am performing?”
It is important for the student of Ethics to realize that accepting just anyone’s beliefs does not make it correct – think of suicide bombers, slavery, annihilation of a race of people, etc. Therefore, beliefs must be regarded in the sense of morality, and moral beliefs involve emotions, desires, preferences, and entrenched values. One thing for sure, they are intangibles – one cannot touch, see, feel, etc. morality.
Many simply ask, “Are there any good reasons” for doing a certain thing, or are their good reasons why one does NOT want to do a certain thing?
Many “old-timers” would ask, “Is it proper?” when deciding what to do in many situations. When asked how a person could know if it was “proper,” the answer usually was, “You just know.
Suppose you were 16 with a driver’s license, and you had been looking forward for months to taking Susie (or Ralph) to the movies in the family car, all by yourself. Your father had agreed to let you use the car to take her to the movies when you got your license. When the day came and Susie (Ralph) had agreed, you asked your father for the car keys, but he says that you cannot have the car. You are understandably upset, and you cannot understand how he can go back on his word. You father can then say that he is not obligated to give you the car, therefore his belief is not justified or he should justify it to you. Maybe he just doesn’t feel like it right now.
This justification probably wouldn’t fly to your satisfaction, because he did “promise.” And, people should always honor their promises (a basic of Ethics). This could mean that any promise is not worth much – business deals will fail, marriage will come apart, and the world will go to wherever in a handbasket.
However, what if he said that the XX@&$!)**&% thing blew the carburetor today when he was driving home and he can’t get the parts until Monday. Now, there’s a reason for not honoring the promise. In other words, there is justification. This proves that
F moral beliefs are right or wrong, correct or incorrect, and they can be justified if there are good reasons.
This is an important precept in understanding ethics and ethical behavior.
A good exercise in order to better understand moral beliefs is to list those beliefs that you learned as a child. For many, this could start with the Ten Commandments. Nearly everyone will agree that one should not lie, steal, cheat, harm, kill, and one should live by the Golden Rule – “Do unto others as you would have them do unto you.”
As the younger generation may say, “Now, get real!” The overwhelming reason for taking an action for many (too many) today is that is best to do anything that is good for you. Or, it is in your interest to do a certain thing, or perhaps more importantly, will it benefit you. Better reasons are that by doing something, it is just or fair (or “proper”), you promised to do it and it will not do harm to others. And, one does not break promises.
Take this one more step, and take a look at the action that one is considering.
It is not coincidental that this consideration would be the first to be discussed, as that is typically what is the first thing that goes through the average person’s mind. This is not always true, - Mother Theresa rarely, if ever, thought of herself first. For the rest of us who are not approaching Sainthood, if you can actually perform an action that benefits yourself, can you think of a better reason for doing it?
Of course, this is applicable only if it is “meaningful” work – usually defined as work that can be beneficial to the person. Most people have a need to be productive and to work towards that end (some don’t, but they wouldn’t be professionals), so therefore, work is good for us all.
Conversely, if an action hurts oneself (not necessarily physically) then that is a great reason for not doing it. This can be overdone frequently, as some people seem to think that any actions that are beneficial to them must therefore, not be the right thing to do. Of course, this is silly, as if a person doesn’t consider or concern himself or herself with an action that benefits them, then who will? You cannot go through life without looking out for yourself.
This concept can be overdone, as evidenced by taking a walk down the mall and note how many large, overweight people are in evidence. Not in every case, of course, but generally it can be accepted that when it comes to food, some of them look out for themselves just a little too well.
A good rule to follow in determining if an action is good for you is that in most cases,
F there can be justification that an act can be good simply by showing that it is good for you.
The next step is actually to take a step back and look at the “big picture.” Is this action not only going to be good for me, but is it going to be good for everyone (society) as a whole?
One outstanding example of determining what is good for society, as often quoted in such discussions, involves Tylenol and Johnson & Johnson. When Johnson & Johnson were made aware that some of their Tylenol bottles had been tampered with and it was nearly impossible to determine just how many bottles were involved, they immediately made the judgement call to recall ALL Tylenol from the shelves of the many stores and warehouses, cost the corporation untold millions of dollars in profit. This was a decision based upon whether the action would affect society, and fortunately for Tylenol users, this was the right decision.
An interesting point is that the business press solemnly but loudly (in some instances), prophesized that Tylenol would never regain its market prominence. It did.
Remember as a child, the many times that things would happen that just weren’t “fair?” Even as an adult, a situation will arise that just does not seem “fair.” When voiced, the objection was usually overcome with the statement (in some fashion of other) that “life just isn’t fair.” While this may seem logical to an adult to some degree, for a child it still is not “fair.”
Of course, all people should be treated equally unless there is some relevant difference. This can be illustrated by the way that a large (actual) European company was managed for many years. It had only one stockholder, who was designated as CEO and Chairman. In an effort to appear “Democratic,” the CEO designated a “Manager” in charge of each major division within the international firm (this would be equivalent to a Chief Operating Officer in most corporations) as a member of the Operating Management. Great pains were taken to make sure that each Manager was equivalent. However, there always has to be a decision-maker, so all Managers were considered as equal, but they would then elect one Manager as “more equal than the others.” This system survived for many years but upon the death of the sole shareholder, his heirs transformed the operation into a more-typical company-management style.
Just like “cream always rises to the top,” there always seems to be one person who is “more-equal” than others. And that is probably a good thing.
Every American has the right to be treated “equally.” And, we all have the right to life, liberty and the pursuit of happiness, and, to be technically correct, to property. However, the government grants us certain rights and when these rights are infringed upon, then we are protected by laws and regulations. The use of coercive marketing techniques and deceptive advertising is considered as a violation of our rights to liberty. Even the laws that enforce the rights are often considered as a violation of a business entrepreneur to do business.
Certain rights have become known as “entitlements.” These entitlements include the right of a child to be educated, for instance, but the means for this education must come from others who are obligated to provide this right. Healthcare for everyone, jobs for everyone, housing for everyone, etc., are not “rights” per se, but in certain situations, these rights could be assumed. If they are so assumed, it is the right of the taxpayer to know whom, how and how much these “rights” can affect the rights of the taxpayer to keep and hold property.
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More pertinent to this discussion is the right of a purchaser of stock in a corporation to be provided with accurate financial information regarding the corporation.
So, if a proposed action treats all persons involved equally and fairly and there is no violation of their rights, then this is a reason to continue with the action. Conversely, if the rights of another would be violated, even to a small degree, then this is a big reason not to take the action.
A promise is a commitment, and if one has made such a promise/commitment, then one should do all in their power to honor the promise/commitment. This is an inescapable reason to pursue the course of action contemplated.
In a discussion of ethics, however, this must be taken a step further. Is there any promise/commitment beyond those that were agreed upon by the parties involved? Implied promises are generally a distinct and very important part of most transactions. For instance, if one purchases a set of golf clubs, there is an implication that the club shaft will not break or bend if the club is used properly and for the task for which it is designed. Those who purchase insurance products do not expect that when the insurance is needed, the “small print” will void their agreement with the insurer.
F It is an inherent trait of civilization that promises between persons are kept -
and most of the promises are implied. What would happen to commerce if there were no implied agreements between an employee and an employer, that the employee would show up for work every working day?
But what if you borrow some anti-freeze for your car from your neighbor with the promise to return what is not used. He later then asks for you to return what was not used as he had discovered that a cat would readily drink anti-freeze, and that when they do, they assume room temperature. And further, the cat belonging to the person across the street has been intimidating his poodle, and he is going to solve that problem, “once and for all.” Do you break your promise in this situation, knowing what the result of keeping your promise will be, that harm that will come of returning the anti-freeze would outweigh the promise? (This may be arguable with some that really, really, hates cats – but you get the point.)
1. Ethics is the discipline dealing with what is good and bad and with
A. moral duty and obligation.
B. legal consequences.
C. degrees of immorality.
D. heavy fines for breaches of ethics.
2. When ethics are discarded, those affected are
A. only the rich.
B. law enforcement officials.
C. drug dealers.
D. those who will suffer the most and cannot afford the consequences.
3. The greatest tool for ethical conduct is
A. flipping a coin and playing the laws of averages.
B. determining what you can get away with.
C. just good sense.
D. money.
4. Bad ethics are
A. inherited.
B. taught at all of the schools.
C. taught by example.
D. never involved in insurance agent’s decisions.
5. Since we all probably have our “price,” the smart person will
A. simply not put themselves in situations where they are tempted.
B. figure out what is best for them, forget anybody else.
C. increase the “price.”
D. find a way to get around the law.
6. When a person is not sure what to do as there are good reasons for the action and good reasons against it, this is called
A. a conundrum.
B. a quandary or dilemma.
C. arbitration.
D. gilding the lily.
7. Many quandaries are solved when
A. law enforcement personnel are involved.
B. attorneys sue.
C. all of the information is collected.
D. dilemmas occur.
8. In order to solve a dilemma, there should be
A. laws prohibiting one of the actions.
B. only one apparent solution.
C. arbitration.
D. another choice – other than just two.
9. “Firm adherence to a code of especially moral or artistic value” is the definition of
A. immorality.
B. immortality.
C. integrity.
D. legal codes.
10. It is an inherent trait of civilization that
A. wars are never fought over irrelevant happenings.
B. some people are just better than any other people.
C. democracy does not work.
D. promises between persons are kept, and most of the promises are implied.
1A 2D 3C 4C 5A 6B 7C 8D 9C 10D