Chapter 10 - Ethics, Education, and Excellence

Introduction

What is ethics? The concept has been described as the systematic, critical study of the basic underlying principles and concepts that are used to think about and evaluate human morals. This science of morals in human conduct has gained ground in the study of business, and many business leaders have re-evaluated its meaning. The standards of conduct that businesses may define for themselves provide the means by which employees decide on the “right” course of action. Many philosophers and other thinkers have devoted their lifetimes to study ethics, but its complexity has defied any sort of universal, harmonious agreement.

To choose the right and honourable course of action, people must look within themselves to draw on their intuitive sensibilities. Some have stated that people feel “the right thing to do” deeply within themselves at a powerful and emotional level. And in some instances, what is fair and honest is not necessarily what the law prescribes.

True ethical conduct is motivated from within the individual. The discipline of business ethics transcends various dimensions. This section focuses mainly on the responsibilities and characteristics expected of insurance professionals.

Training in Ethics

An inspiring foundation for the day-to-day choices professionals make in the course of business, such as a code of conduct or a guideline on the fair treatement of customers, can define the boundaries of acceptable behaviour and set penalties for stepping over them.

There are many rules to follow within the insurance profession that are designed to maintain integrity. Some rules are legislated, whereas others have been created as models of acceptable practice (see Example—An Adjuster’s Model of Acceptable Practice).

Example—An Adjuster’s Model of Acceptable Practice

A national independent adjusters’ association suggests that adjusters respect the following models of acceptable practice. Adjusters must

• identify themselves to claimants and insureds and, if asked, fully identify their principals;

• provide a copy of any written statement without charge to any statement maker;

• explain relevant insurance coverage to the insured; and

• not provide legal advice to or otherwise deal with claimants represented by legal counsel, unless permission by their counsel has been given.

Using training, role models, mentoring, and recognition of exemplary service that rewards and highlights good conduct are all ways to implement codes of conduct. From a practical10-5standpoint, training strengthens a member’s capacity to assess ethical issues and meaningfully participate in the creation and reformulation of ethical standards. Beneficially, ethics training leads to the following:

• Creation of a formal framework to generate, nurture, and sustain transparent

  • conduct;

  • processes; and

  • procedures.

• Encouragement of open and critical discussion of the insurance industry, including its ethical rules and obligations

• Demonstration of an overall commitment to good governance

Research has shown that people engaged in social and emotional learning programs outperform those who are not involved in those types of programs. Better attendance records and more constructive behaviour were noted when clear behavioural standards were set and social skills were taught. The environment created by the programs allowed participants to feel safe, valued, and confident, yet challenged.

It is worth noting that because society’s standards change, ethics also change over time and as one’s career progresses. Therefore, training must not only be substantive and engaging but also continual. It is important to stay in touch with what the current standards are.

Ethics Infrastructure

Core values represent the ideal virtues or habits of character that are considered worth attaining to sustain a society that all would like to live in. A strong work ethic, respect for others, perseverance, and commitment are inspirational values when developing businesses, pursuing dreams, and creating a better life. Stakeholders in the insurance community reinforce values when they share their experiences and contribute to the discussion on ethics.

Role Modelling

Actions speak much louder than words. Role modelling through visible action carries more weight than simply talking about the importance of ethics and values. Telling the truth and behaving honestly results in gaining people’s trust. Also, by entering relationships with others with dignity and by acting with dignity, others are treated with courtesy, fairness, and objectivity.

The challenge of thinking about common situations where ethics questions arise can be a very useful exercise. Doing so increases awareness of what an ethically challenging situation might entail. Shades of grey become evident when everyone does not agree on a particular course of action in a given situation, and there may be several “right” answers that conflict. In fact, there may not be one single, correct answer.

Ethical Dilemmas

Ethical dilemmas may not leap out in the moment that they appear. Because an ethical dilemma may not be readily recognized, there is concern that a situation may be dealt with inappropriately. When determining whether an appropriate course of action has been taken, one has to ask, “Has the best balance been achieved to ensure that justice is available to all parties?” Giving time and thought to any situation to identify potential ethical dilemmas is important. This10-6is not an easy task—attaining social and moral responsibility in complex situations is only a clear and unequivocal process in a perfect society.

In reality, values are taught in the work environment. Whether or not corporations take the time to intentionally teach values, they are constantly sending messages about the importance of such values. In most cases, the tone set by the leadership of an organization is pivotal in creating an ethical working environment in the business overall.

Ethics in the Workplace

Many people need guidance to learn to cherish and uphold ethical values. Character education teaches right from wrong. Features related to one’s good character in business are discipline, integrity, and responsibility—coincidentally, these are also essential skills for living a full and productive life. Since the product the insurance industry sells is based on a promise to pay, industry members must focus on their clients’ interests, conduct themselves with integrity, provide quality service, respect confidentiality, conduct themselves honourably, work continuously to maintain their competency in their chosen profession, and adhere to the principles and standards of fair treatment of customers guidelines. The following list summarizes these characteristics:

• Attention to clients’ interests—being honest, transparent, and candid in advising clients, putting their interests first, and remaining uninfluenced by the basis of remuneration for the professional

• Integrity—discharging duties to clients, the public, insurers, and peers with honesty, conscientiousness, and diligence

• Awareness of ethical dilemmas—being mindful of conflict-of-interest situations and other cases where careful consideration must be given to ensure that a responsible course of action is taken

• Quality of service—delivering high-quality service performed in a competent, professional manner that is effective and compatible with integrity (insurance professionals go above and beyond to help people protect their assets and service them when they need it most)

• Confidentiality—keeping client information strictly confidential unless disclosure is authorized by the client or required by law

• Proper conduct toward others—acting with dignity and being respectful, courteous, impartial, and objective, and upholding the principle of good faith

• Competency—being knowledgeable and proficient and competently performing services for one’s clients

• Fair treatment of customers (FTC)—practising ethical behaviour, acting in good faith, and not engaging in abusive practices

Ethical Use of Technology

In the last few years, there has been a rapid growth of generative AI, other similar technologies, and advanced data analytics that use AI in the business world. The insurance industry is no exception. When leveraged appropriately, AI, generative AI, and advanced data analytics can be useful and powerful tools to support business processes. AI and generative AI can help insurance professionals by drafting emails to clients, creating marketing campaigns, generating reports, forwarding submissions, comparing the pros and cons of quotations, and reviewing policy wordings. Advanced data analytics can use machine learning to create algorithms to improve risk assessment processes.

10-7

However, the newness of these technologies and data analytic processes means there is little regulation regarding their use, particularly in the areas of ethical use, copyright, data security, and privacy. AI algorithms may produce biased or discriminatory output. Generative AI may even produce “hallucinations”—results that appear to be correct and valid but actually are incorrect or invalid results that the AI tool has fabricated.

If choosing to use generative AI or similar types of technology or advanced data analytics that leverage AI, professionals must understand the risks, follow any company and regulatory guidelines, and exercise caution.

Ethics in Insurance

Insurance today requires that its practitioners absorb a large body of knowledge. Although there is a substantial amount of common knowledge in the industry, there is also some specific insurance knowledge that varies for brokers, underwriters, claims adjusters, and risk managers. Insurance professionals perform an essential service to others who rely on their special knowledge, and that is why it is so important for members of the industry to be knowledgeable and stay current with that knowledge.

A primary principle long advocated in the traditional professions (such as engineering and law) is the duty to serve the interests of clients in a loyal and faithful manner (this may also include serving the interests of employers). Thus, an insurance professional must always ensure that the client’s interests take priority over their own. Because the client must trust the insurance professional when transacting insurance business, the average client is vulnerable. The insurance professional must make up for this imbalance in the relationship with the client by acting scrupulously to ensure that integrity prevails. Example—Brokerage Fraud illustrates behaviour within the industry where the client’s interests are not given priority.

Example—Brokerage Fraud

A brokerage is sued for failing to act in the best interest of its clients by allegedly accepting payoffs from insurance companies to steer corporate clients their way. Other misbehaviours are cited, including outright threats against individuals who did not want to participate in the fraudulent schemes. Allegations also include price-rigging and kickbacks by insurers and insurance brokers.

An added component of many situations where insurance professionals have acted unethically is peer pressure to “do what everyone else is doing.” When observing questionable practices in the workplace, principled employees should not be afraid to report the practice or become a “whistleblower.” Insurance organizations often have instituted protections that prohibit retaliation against whistleblowers, and the law protects employees from demotion, reprisal, or termination if the employer has violated employment standards, human rights laws, or workplace safety legislation.

Operation of Trust

The notion and operation of trust enables societies to function economically. When this trust breaks down, governments impose regulations to ensure consumer protections. This means that when unethical insurance business practice comes to the attention of insurance regulators,10-8a severe backlash can be expected. There will always be rogue operators whose unethical practices cause mainstream insurance professionals to lament. For example, those who routinely deny claims without cause can expect regulators to come down hard on the entire industry with regulatory intervention and additional burdens. These actions can harm the industry’s reputation.

Raising awareness of ethics in the insurance industry is imperative. Competence in ethics can only be developed by preparing for those critical moments when one's ethics are challenged. The many varied roles held by people in the insurance industry create tremendous diversity—this adds complexity to the types of questions that prompt ethical awareness. Furthermore, insurance companies, brokerages, and adjustment firms all adopt varied approaches toward the problems of professional ethics; this results in many situations within the industry that provide information and opportunities for study and debate.

Insurance professionals must approach their clients with honesty, integrity, fairness, due diligence, and skill in all of their dealings. The law recognizes the principle of utmost good faith as a standard of conduct for insurance transactions. An important element of the insurance industry is providing high-quality service—after all, insurance itself is a service based on a promise.

Insurance professionals must respect a client’s right to confidentiality. Maintaining confidentiality has always played a role in the business of insurance, but now there are also privacy laws to uphold. Insurers are privy to a great deal of personal information gathered during the application process. They are privy to more information when handling a claim, specifically a bodily injury claim that requires access to medical records.

How should insurance professionals behave toward others? They should be respectful and courteous, and uphold the principle of utmost good faith. This seems like common sense, but, when assessing what conduct one expects on a professional level, even the things that seem most obvious may not be evident to everyone.

Insurance professionals must first acquire an appropriate level of general knowledge and then develop more focused knowledge that relates to their chosen specialty in the marketplace. Furthermore, they must remain informed of the changes within the industry.

Values and principles are the benchmarks of responsible decision making and are also the basis of ethics. Ideally, decisions are made altruistically, with the best interest of others at heart—no harm should come to anyone from such decisions. Insurance professionals protect the interests of those they serve.

Code of Ethics

Codes of ethics in the industry must include certain basic principles of professional conduct. A formal code of ethics can be shared with everyone and provides a framework for good governance through a set of principles and values that promotes transparent conduct. It can also help to restore public trust in the insurance industry and improve overall credibility.

With each graduate’s election as a Chartered Insurance Professional (CIP), they will be asked to abide by the following Code of Ethics, as approved by the Board of Governors of the Insurance Institute of Canada (refer to Exhibit—Code of Ethics). The Code of Ethics reiterates the notion10-9that CIP graduates, as professionals, should always put the interests of the public, the client, or their employer ahead of their own. They must respect laws and regulations and respond to duties and obligations that have to do with risk management and insurance.

Exhibit

Code of Ethics

Applicable to all elected Chartered Insurance Professionals and Fellow Chartered Insurance Professionals of The Insurance Institute of Canada:

• Institute graduates shall, in exercising their professional responsibilities, and in all professional matters, subordinate personal interests to those of the public, the client or employer or the Institute and profession, as the case may be.

• Institute graduates shall not violate any law or regulation duly enacted by any governmental body whose authority has been established by law, and no Institute graduates shall knowingly lend themselves, their names or their services to any unlawful act of their employer or client.

• Institute graduates shall not willfully misrepresent or conceal a material fact in insurance and risk management business dealings in violation of any duty or obligation.

• Institute graduates shall not sign or associate themselves with any letter, report, statement or representation, which they know is false or misleading, or which is prepared in a manner which might tend to be misleading or to misrepresent the actual situation.

• Institute graduates shall treat as confidential any information, documents, or papers relating to the business affairs of their employer or client, and shall not disclose or produce such information, documents or papers, without the consent of the employer or client concerned, except as required to do so by law.

• Institute graduates shall use due diligence to ascertain the needs of their client or principal and shall not undertake any assignment if it is apparent that it cannot be performed by them in a proper and professional manner.

• Institute graduates shall not fail to use their full knowledge and ability to perform their duties to their client or principal.

• In all dealings graduates shall conduct themselves with dignity and shall avoid conduct which would discredit the profession of insurance or the Institute.

Also, they must withdraw services related to unlawful acts. Additionally, graduates must prepare letters, reports, statements, or representations in an honest and clear way so that they might be understood easily. Any confidential information, documents, or papers relating to the business affairs of the professional’s employer or client shall be respected and shall not be disclosed unless appropriately authorized by law. Finally, graduates who follow the Code of Ethics must perform diligently, using their full knowledge and ability, and conduct themselves with dignity, to the credit of the industry.

Overall, there are many positive advantages to having a code of ethics. However, there are some drawbacks associated with it as well. When relying wholly on a strictly legalistic system, one can lose sight of true ethical conduct. Focusing on the spirit of the code may yield better results. In other words, paying attention to technicalities might create barriers to doing the right thing. An ethics code cannot anticipate every quandary, and so more attention must be focused on10-10education that develops character traits that help individuals deal with business transactions ethically.

At times, insurance professionals are thrown into the position of adversary because they must work out a division of wealth with a policyholder or a third-party claimant. Some conflict is inevitable in this situation, but adversarial positions can be tempered with some degree of accommodation and cooperation.

CIPs must recognize the changing nature of the business world, where perception is important. The public must perceive them as professionals who are willing and able to stake their individual performance against a published standard of ethical conduct. Those in the industry must also understand that enthusiastic compliance with a standard of conduct will ensure that the stature of their profession grows.

Trust is a fundamental principle of insurance—each participant in an insurance transaction is required to trust the other. The broker trusts that the information provided by the client on an application is correct, and the applicant must, for instance, trust that the broker is giving proper advice that is untainted by a conflict of self-interest. Full information, as it relates to a proposed insurance policy, must be disclosed by an applicant. The policyholder must trust that, should a claim be made, the insurance company will handle it fairly. Without trust, insurance cannot perform its proper function as a risk management device for companies and individuals.

Unethical behaviour can be widely and rapidly exposed and broadcast through electronic communication like email, the Internet, and social media. This creates a substantial exposure to reputational risk. Regulators have become very concerned about exposures from electronic communication because of the devastating effect a loss of reputation could have on a company’s solvency. The insurance community is a relatively small group. Engaging in unethical behaviour puts an individual’s entire career and professional reputation at stake.

No set of organizational regulations can achieve its objective unless the people behind it choose to support those objectives. In subscribing to a code of ethics, each individual accepts responsibility for their own conduct. Decisions should be made by considering personal duties as well as the rights of others. Stated principles in a code of ethics identify what these obligations might be.

To manage conflicts of interest, many companies have found it useful to provide a framework for disclosing private interests and, perhaps, certain types of financial information before an incident can arise. Appropriate enforcement measures are usually part of this equation to reinforce transparency and good governance, thus promoting trust in the insurance industry. One must ask whether an employee has personal interests that may conflict with their work.

Responsibilities of Insurance Professionals

There is a wide variety of insurance employers in this country. They range from the multi-national insurers or reinsurers, through the Crown corporations, broker-oriented companies, direct writers, farm mutuals, national brokers, and adjusters to the one- or two-person intermediary offices. Each, in its own way, feels that its practices are ideal and unique—this makes it challenging to teach a practical insurance methodology that is universally acceptable.

10-11

Participation is as essential to the process of continuing education as, indeed, it is to lifelong learning. Aside from the Chartered Insurance Professional (CIP) designation, the Insurance Institute of Canada offers the Fellow Chartered Insurance Professional (FCIP) designation, the Advanced Chartered Insurance Professional (ACIP) designation, the Canadian Managing General Agent (CMGA) program, continuing education courses, and a number of certificate courses. Institutes are directed by their members. Graduates might remain involved by volunteering their services as directors, committee chairs, or committee members, or by becoming elected executives. Doing one of these things also allows graduates to contribute to the industry while building their professional network. A much greater appreciation of the insurance industry as a whole and each of its very different sectors is gained when graduates become members of an Institute’s Governing Council because they are exposed to various points of view. The history of the Institute movement spans many years and is one of dedicated, long-term participation by many volunteers. Their work has culminated in the Institutes and programs of today.

Each new generation of insurance professionals builds on what was created by the previous generation. Each improvement in the theory and practice of an insurance professional contributes to the generations that follow. It is to be expected that people who are not in the insurance industry will evaluate the performance of those who are, and in a different way than members of the industry evaluate each other. Such evaluations are well worth keeping in mind and even anticipating because they represent the standards by which all insurance practitioners will be judged.

Insurance intermediaries should be aware of their responsibilities to know the product that they market, advise members of the insuring public as to their best interests, disclose to insurers all material information within their knowledge, and regularly review the position of each insured client. Brokers are also required to be helpful and cooperative when losses occur, render an accounting of premiums collected within the time stipulated, and perform all services incidental to the broking business in a business-like manner.

Agents and brokers must inform their clients of what types of activities they are licensed or registered to do and provide the name of the firm under which they are authorized to operate. Additionally, they must avoid knowingly entering into situations where they could be in a conflict of interest; if a conflict of interest exists, then it must be disclosed to the client. Finally, agents and brokers must clearly describe the product or service they are selling and how it will fulfill their clients' needs and protect their clients' assets.

Intermediaries have it within their power to advise the public properly and adequately and give clients the utmost benefit for each insurance dollar. They can also protect the public against future financial loss by minimizing acquisition- and operation-related costs.

Adjusters also have specific responsibilities of which they must be aware. They must be honest and impartial, and continue to improve their knowledge. The insuring public, at a time of loss and distress, needs the expert knowledge of an adjuster to understand and interpret insuring contracts. The loss adjuster is the arbiter of an insurance policy, upholding the law with respect to its interpretation. Adjusters must be aware of current investigative methods and procedures. Although they look to insurers for their compensation, adjusters are especially important because it is their responsibility to ascertain the true facts and actual values of a loss, while also guiding an insured through a claim.

10-12

Insurers must behave ethically to market their products and deliver on claims. Insurers must accept the responsibilities they have to select and train their staff and to instill in those employees that they have dual responsibilities: to their employer and to the needs, claims, demands, and interests of the insuring public, claimants, and insureds.

Insurers are expected to honour their insurance contracts and resolve differences without resorting to obscure technicalities or other indefensible positions. Fair claims handling and equitable claims settlements are essential; for example, adjusters must expedite their work so as not to delay settlements. With respect to claims that are unlawful or exaggerated, insurers must resist making payment.

Ultimately, when an individual commits to being an ethical professional, the commitment produces superior conduct arising from the depths of each individual’s conscience. This may be quite separate from legally enforceable standards. However, when individuals hold themselves out to the public as professionals, the public has a right to expect that professional standards will be observed.

Introduction

According to a 2018 research paper by RBC, 50 percent of Canadian jobs will be disrupted by automation over the next 10 years. What does this mean for the future of employment in Canada? Instead of seeing this shift as a danger, the paper states that it is creating an opportunity: “the age of automation need not be a threat. If we apply our humanity—to be creative, critical and collaborative—it can be a competitive advantage.”^[1] To be successful in a digital economy, workers will need more than just technical knowledge to complete the tasks they are given.

Interpersonal skills in the workplace have always been a priority. As the reality of digital and automation disruption increases, the value of interpersonal skills will only grow. This section reviews the following essential workplace skills:

• Collaboration

• Active listening

• Critical thinking

• Asking effective questions

• Delivering difficult messages

• Delivering presentations

Collaboration

Today, almost all jobs involve working with others at some level to achieve mutual objectives. Collaboration has advantages and disadvantages. When two or more people work together10-13toward a particular goal, the workload on any one person is lightened, and those involved can focus on tasks in their areas of strength. However, collaboration also includes the possibility of misunderstandings and confusion, particularly if there is a lack of communication.

Collaboration is important in any workplace today. The ability to work well with others is an essential skill that makes an employee a valuable asset for a company.

There are many actions people can take to collaborate more effectively. Exhibit—Collaboration provides some tangible actions that can help build strong working relationships.

When working with others, being transparent and communicating proactively will help everyone achieve their objectives.

Exhibit

Collaboration

Teamwork and Online Workplace Collaboration

Effective team collaboration is the foundation of a successful team. It allows teams to communicate and share ideas, which translates into increased productivity. When working in the traditional office environment, an effective team will do this naturally. Teams that are encouraged to be creative and offered an environment that promotes the sharing of ideas without judgment will ultimately flourish. In a bricks-and-mortar workspace, teams typically sit together and can easily talk through issues and ideas, or they are given the opportunity to step away from their individual workspaces and meet together in a meeting room or at offsite locations to work on team- and relationship-building activities.

Technology has evolved, resulting in fewer landlines and a reliance on cell phones instead. One of the outcomes of this change is the preference to text and email rather than use voice communication. With this evolution, team members can transfer information in an instant. In addition, collaboration and communication platforms such as Microsoft Teams and Skype allow teams to share information through instant messaging. Nevertheless, it is still important to consider the impact of a telephone call, which can help build relationships and avoid multiple emails that frequently occur when trying to gain understanding and insight. Fortunately, Microsoft Teams and Skype also offer voice calls.

Another feature offered by these platforms is videoconferencing. This technology is necessary with the shift to work from home and remote teams (see Example—Communicating Remotely). It allows team members to see each other and enables users to consider a speaker’s tone and body language when communicating. When the technology works as intended and the team is productive and engaged on the call, the need to meet in person is certainly eliminated.

 10-15

Example—Communicating Remotely

When working in a virtual environment, the ability to stay connected and engaged is critical. Some common examples of web conferencing technology include Microsoft Teams, Cisco Webex, Skype, Google Meet, GoToWebinar, and Zoom. While all of these applications allow for videoconferencing and document sharing, each type of technology has specific features that make it preferable depending on the type of meeting being conducted. One of the options that has become increasingly valuable is the ability to have breakout rooms to split the main meeting into separate submeetings. This has great applications for training remotely.

The ability to effectively communicate remotely is becoming increasingly important in the workplace.

Active Listening

To work effectively with others, it is important to try and understand different perspectives. Everyone has their own understanding of why things are the way they are. Often people assume that others see things the same way as they do. While people will sometimes naturally be aligned with others, it is risky to take for granted that this will always be the case.

One way to work toward seeing things from other people’s points of view is through active listening. While the concept of listening seems simple, active listening is a skill that takes time and practice to develop. It requires the ability to put aside one’s own thoughts, opinions, and judgments and focus exclusively on another person.

Furthermore, active listening is about more than just listening to words. The purpose is to identify messages a speaker may be trying to convey, even if they are doing so indirectly. By observing the tone, body language, and word choice of others, a listener may discover further meaning underlying a conversation. Active listening has two components: listening and engaging. Both are described in Exhibit—Active Listening.

 10-16

Exhibit

Active Listening

Active listening is a component of collaboration. To build consensus and develop a cooperative relationship, the first step is understanding another person’s perspective. Once that step has been achieved, disagreements, challenges, and next steps can be discussed. Active listening can help others feel acknowledged and understood. It doesn’t mean both parties will ultimately agree on everything that’s being said, but, by being on the same page, each person can work toward greater cooperation.

Critical Thinking

Critical thinking involves analyzing information and data and then using the analysis to form an objective, rational, unbiased judgment. Critical thinkers tend to have a problem-solving approach: They look holistically at the problem, look critically at the data provided with an open mind, and determine which information is required and valid and which is superfluous. Using that parsed information, they consider different solutions to the problem, compare the advantages and disadvantages of the solutions, and then continue to make a rational decision on the most appropriate solution to the problem.

10-18

Developing a critical thinking toolbox is important for every insurance professional. It enables them to prioritize information, see the connection between different information, and recognize invalid or inconsistent information. Actuaries use critical thinking when analyzing historical data to help determine pricing and products. Insurance producers, such as agents and brokers, analyze demographic and other marketing data to select the best consumers to approach. Underwriters critically assess a risk when they review a submission and determine whether to accept or decline to write it. Loss adjusters use critical thinking to investigate and assess a claim.

Professionals that extensively use critical thinking to make decisions must be careful to avoid “decision fatigue.” There are several famous CEOs who dress the same way every day: They want to remove these minor decisions so that they can preserve their mind for more important decisions affecting their companies. Studies suggest that an individual can only make a finite number of decisions per day until decision fatigue sets in. When fatigue occurs, decisions are apt to be less considered or critically thought through.

Building on one’s critical thinking skills is a necessity to build and maintain strong relationships with clients and other professionals. Critical thinking relies on data that is accurate and verified so that useful judgments can be made.

Asking Effective Questions

To communicate effectively, it is essential to be able to ask good questions to gather information, clarify assumptions, and show multiple perspectives on a problem. Good questions lead to better understanding.

Exhibit—Asking Effective Questions describes general skills that apply whenever asking a question as well as describing several types of questions. When selecting a question type, it’s critical to first think about what is trying to be achieved.

Exhibit

Asking Effective Questions

A challenge with asking questions is that they can be misinterpreted. Sometimes questions are construed as a criticism or a lack of faith in a given statement rather than a search for information. Like any other skill, it can take some time to master the art of wording a question correctly and phrasing it in an appropriate tone. Other helpful strategies are as follows:

• Avoid questions that focus on why someone didn’t succeed.

• Avoid leading questions.

• Think about how assumptions may be embedded within a question.

10-20

The purpose of asking effective questions is to create solutions (or better situations), not problems.

Delivering Difficult Messages

When working with others, there will inevitably come a time when difficult messages need to be shared. Reasons may include the following:

• An unanticipated development

• A failure to achieve a task

• A change in strategy

• An unexpected result

• A surprising disclosure

This task can be hard; few people like to feel as though they are the bearer of bad news. However, the reality is that avoiding tough conversations rarely improves problematic situations. If anything, the failure to be transparent can make matters much worse.

To deliver a difficult message in a thoughtful way, some of the strategies described in Exhibit—Delivering Difficult Messages should be considered.

Exhibit

Delivering Difficult Messages

Rather than seeing a difficult conversation as letting another person down, see it as an opportunity to build a stronger relationship. The actual delivery of a difficult message may not be the most pleasant experience, but it can lead to more trust and transparency. Example—Sharing a Difficult Message outlines how a broker can deliver bad news to a client while also maintaining the relationship.

Example—Sharing a Difficult Message

Kamilah is a broker who has been working with Todd, a baker, for over 10 years. Todd’s bakery, which is located in Fort McMurray, Alberta, has been insured with ABC Insurance since his business started, and he has had no claims. Todd’s policy is coming up for renewal, and Kamilah knows there is a high likelihood that his premiums are going to increase significantly because of increased risk of wildfire.

Kamilah: Hi, Todd. I hope you’re doing well. Your policy renewal is coming up and I’m calling to discuss some potential rate increases and what we can do to lessen their impact on your premium.

[Kamilah has framed the conversation so that Todd knows what to expect.]

Kamilah: ABC has been raising premiums in your area quite significantly because of increased risk of wildfires in Fort McMurray.

[This statement is concise and leaves no room for ambiguity.]

Todd: But my bakery isn’t located anywhere near where the big fire was in 2016! I’m on the opposite side of town, and I wasn’t affected at all. Why would my premiums go up?

Kamilah: I understand this might be frustrating. Wildfires are becoming a much bigger problem in many parts of the country, and ABC needs to ensure it’s taking in enough premium to pay for any losses that might occur because of this increased risk.

[Kamilah has acknowledged Todd’s frustration while not focusing on it; she has presented facts that support the decision.]10-23

Todd: If my premiums go up, it’s seriously going to cut into my profits. What can we do?

Kamilah: I would be happy to check with other markets so that we can compare ABC’s premiums to other insurers and see if they’re in line—and there might be potential for a better premium elsewhere. However, we need to ensure your business is still getting the same amount of protection. There are also some risk mitigation strategies you could implement at the bakery that might cause ABC or another insurer to reduce the premium. Let’s discuss some of those...

[Even though Todd is unhappy with the situation, Kamilah has presented him with some options of what can happen next. She is maintaining her good relationship with Todd and helping him achieve his objectives.]

Delivering Presentations

Insurance professionals are increasingly expected to make presentations, whether in person or virtually. Developing presentation and public speaking skills is essential for a professional’s personal and professional development.

Professionals may need to present a variety of information to a variety of audiences. The insurance professional must adapt their presentation style to the audience. Delivering a marketing presentation to a prospective insured or broker is not the same as delivering a presentation on the department’s results to the senior team, which in turn is not the same as presenting at an industry function.

To deliver an effective presentation, planning, preparation, and practice are vital.

• Planning—Create a schedule from the start of the preparation time to the presentation itself. Ensure adequate time for preparation and practice: This requires critical inward reflection to help determine how much time is realistically needed.

• Preparation—One can’t do enough preparation for a presentation. Consider the message of the presentation: What does the audience want and need to know? Is the presentation a call to action or is it just providing information on a topic? Think about how to engage the audience in the presentation; ensure that language used in the message is clear, concise, and inclusive. Create some drafts and read through, edit, and finalize. Often this will take longer than was originally anticipated.

• Practice—When the presentation has been written, it is important to practise it. Record the presentation using a smartphone or other device and play it back. Register for presentation apps that use virtual reality environments and artificial intelligence to ask questions. Try practising in front of the mirror to monitor and adapt facial expressions or body language. Also, practising in front of trusted friends, family, and colleagues will elicit constructive feedback.

Delivering effective presentations is a vital skill as it facilitates better communication and connection with others, helps convey ideas with accuracy and ease, and reduces miscommunication. It is a leadership quality that many employers look for.

1 RBC, “Humans Wanted: How Canadian Youth Can Thrive in the Age of Disruption,” July 3, 2018, https://www.rbc.com/dms/enterprise/futurelaunch/humans-wanted-how-canadian-youth-can-thrive-in-the-age-of-disruption.html.

Introduction

Contracts are an integral part of the day-to-day lives of most people—so much so that they may not even notice or recognize them. For example, people enter into a contract when they buy something, whether that is a lottery ticket, a suit, a car, or a home. This case study explores the importance of reading and understanding the terms of a contract and the impact contracts can have on stakeholder relationships.

Overview

This case study walks through how a broker helps a client who is investing in real estate. The case study covers the following elements:

1. The purchase of the property

2. Initial coverage for the property

3. Options for the final policy

Situation

Kader invests in real estate, buying and selling properties to increase the size of his portfolio of buildings. The types of buildings he owns vary in size, occupancy, construction, location, and reasoning for acquiring the property, but they are all insured by Acme Insurance Company.

One day, Kader decides to buy a vacant, old, frame building that was originally used as an ammunition manufacturing facility. The building is listed at $12,000,000, but he puts in an offer for $10,000,000. George, the vendor, deems this to be a reasonable price and agrees to the sale. The transaction is completed, and the ownership of the building changes hands.

Kader contacts his new insurance broker, Sage, to advise them of the real estate purchase. Sage is a recently licensed broker, and they have a binding authority agreement with Acme Insurance. When they speak with Kader, he has not yet reviewed the terms of the binding agreement with Acme, which outlines the situations in which Sage is allowed to confirm coverage. As a result of their inexperience, Sage congratulates Kader and advises him that he is covered should anything happen to the building.

Though Kader is entitled to some immediate coverage given the nature of his existing policy, there are limitations:

1. The type of building: Kader’s existing policy doesn’t grant automatic coverage for vacant buildings.

2. The estimated replacement value: With an insurance replacement value of approximately $7,500,000, Kader will require approval from the insurer before being guaranteed coverage.

 10-25

When Kader purchased this old ammunition manufacturing facility, he assumed his current policy with Acme Insurance would provide coverage.

Christina, the underwriter from Acme Insurance, receives the request to add the new building to the existing policy. Being an astute underwriter, she does not want to expose Acme Insurance to the full insurance replacement value of the building, since the materials used in the building are very old and have outlived their life expectancy. In the event of a loss, the old materials would need to be replaced with new materials. The cost to use new materials of similar or like kind or quality would be high and beyond the value of the insurance coverage for the building. One threat this raises is the possibility that Kader could consider arson in an attempt to profit from the loss of the building. Obviously, this would not suit the intention of the insurance policy.

Reviewing the Purchase of the Property

In the sale and purchase of the new building, the main elements of a standard contract have been met. Kader and George both have the legal capacity to make an informed decision about the sale and purchase of the building. George, being the owner of the property, has the ability to sell the building, and Kader giving George $10,000,000 in exchange for the change of ownership is deemed consideration. They both agree to the sale, and there is genuine intent on both parties to proceed with the sale. The sale of the building is not against the law, so the sale cannot be considered illegal.

From an insurance standpoint, though, it would have been advisable for Kader to consult with his broker before purchasing the building. Whenever a client invests such a large sum of money, making sure the purchase is insurable first is always a wise move. In this case, given Sage’s inexperience, that may not have helped, but brokers should advise clients to consult with them before making any major purchases.

Reviewing the Initial Coverage

When Kader told Sage about the purchase of the building, Sage advised Kader that he had coverage for anything that might happen to the building. However, Sage did not have authority under their contract with Acme Insurance to bind coverage for the building. If something were to happen to the building, both Kader and Sage could find themselves in a difficult situation: Kader would not have coverage and would have suffered a huge financial loss, and Sage could be open to an errors and omissions lawsuit.

10-26

Brokers must ensure they understand any binding authority agreements they have with insurers. It was irresponsible for Sage to say that the building would be covered without having first reviewed the contract they have with Acme Insurance. There are many types of contracts in insurance, not just the policy itself, and brokers need to be aware of all of the contracts they are party to as well as those that their clients are party to. Sage overstepped their boundaries by confirming coverage for the property.

Reviewing the Options for the Final Policy

When Christina looks at the details of the building and Acme Insurance’s tables outlining its comfort levels, Christina has several options:

1. She can advise Sage of the amount of insurance she is prepared to offer on the building and instruct them to approach other insurance companies that Sage’s office represents to find out whether they are interested in insuring the building on a subscription basis until the entire insurance values are secured.

2. She can contact one of the reinsurance companies Acme Insurance does business with to see if any of them would be interested in providing Acme with extra insurance capacity to insure the building.

3. She can ask Sage to see whether any of the other insurance companies their office represents are interested in providing insurance above the amount that Christina and Acme Insurance are prepared to accept.

Since Kader has been a long-time client of Acme Insurance, Christina wants to keep his business and come up with a win-win solution. Obviously an underwriter cannot take on unreasonable risks that will put the insurer in a precarious situation should a loss arise. However, it is important to ensure that Acme Insurance continues to appear as a competent and stable company in the marketplace that is willing to work with brokers to provide insurance coverage for their clients.

Outcome

Sage learned a lot from this experience. Luckily, they were able to get other insurance companies to participate in the policy on a subscription basis to cover the full value of the building. This is an example of a win-win-win situation. Kader, the building owner, is able to go about his business confident that his financial investment is protected. Sage, the broker, can continue to provide insurance services to all their clients and, with their good reputation, can secure referrals for more clients to obtain insurance from them. Christina, the underwriter with Acme Insurance, can be confident that she has obtained the necessary extra insurance Acme needs for the building that is beyond the company’s risk appetite; she has also proved to Sage that Acme is the insurance company they and their office should do business with on their larger accounts.

Introduction

In today’s fast-paced society, small and large organizations are exposed to many different risks. Companies need to be proactive and have a plan to identify what risks may affect their operations, measure any potential impacts, and put controls in place to protect themselves.

Some companies are large enough to employ their own risk department. Others, without the funding to support an entire department, might assign this function to the finance department. Regardless of the structure, a comprehensive risk management plan protects the organization against financial hardship.

This case study reviews how insurance professionals can begin the process of putting together a risk management plan for their commercial clients. The first step in this process is to identify exposures.

Overview

There are a variety of tools available to brokers to help commercial clients identify their exposures. This case study reviews how a broker can use flow charts, financial statements, and other documents to identify key net income loss exposures and put together a risk management plan for a company that builds custom furniture. Although the company will have many types of exposures the broker will consider, for the sake of scope, this case study specifically reviews the business’s net income loss exposures.

Situation

New Hamburg Custom Furniture has been in business since 1957. Hank and Arlene Smith started the company, and their two children, Tim and Bruce, have since taken over. The company manufactures high-end tables and chairs for residential kitchens and dining rooms. The result of a recent risk control insurance inspection identified several areas that could be improved. The main concern to the owners is the flow of raw materials to the packaging of the finished product. Exhibit—New Hamburg’s Manufacturing Process presents a flow chart showing what the current manufacturing process looks like.

 10-28

Exhibit

New Hamburg’s Manufacturing Process

Using the Flow Chart to Identify Exposures

By using the flow chart, Tim and Bruce’s broker was able to help them identify the key net income loss exposures related to their manufacturing process and to recognize the potential impact to the organization and other stakeholders. Some of the issues identified included the following:

• Supplier of raw materials: Does the company rely on a single supplier or multiple suppliers? Are the raw materials readily available? If not, storage of surplus raw materials is required.

• Breakdown of the CNC cutting machine: The CNC cutting machine is integral to the entire production process. A breakdown in that machine will affect the production process and cause a business interruption.

• Staff training for different machines: The broker identified the need to cross-train employees on multiple machines in the plant so that operations can continue if a machine operator becomes ill, suffers an injury, or resigns.

• Drying room: Operations are seasonal, and the limited space in the drying room during peak season causes disruptions to the entire manufacturing process; are alternative facilities available? Can space be expanded?

Fixing Bottlenecks

The main bottleneck in New Hamburg’s process is the drying room, which has limited space. Tim and Bruce are already working on a plan to create another drying room. At peak times during the year, they are over capacity and have to slow down production to wait for the furniture to dry.

10-29

Contingency Plan for Machinery Breakdown

Another key finding from the inspection was the need for a contingency plan in the event a machine breaks down. Machinery breakdown is one of the main causes of net income losses, since it disrupts an organization’s operations and can make it impossible to continue work. Some questions the inspection highlighted were as follows:

• Are replacement parts available quickly?

• Who will repair the machines?

• Are there backup machines available should one machine go down?

The broker knows that Bruce is a licensed millwright and maintains and repairs all machinery. The problem is that parts for their CNC cutting machine are only available in Germany and take several days to arrive by courier. If a disruption to this supplier occurred, it would interrupt the process and ultimately result in lost revenue, or worse, losing customers. Thus, there is supply chain exposure for New Hamburg.

New Hamburg's cutting machine is a vital piece of equipment in its manufacturing process that opens the company to both business interruption risks and supply chain risk. A risk management plan will help the owners develop a plan if the machine were to break down.

Having a backup CNC cutting machine to use if the main machine goes down is not a financially viable option for the time being. Therefore, Tim and Bruce’s broker suggests that they look at contractual agreements to help mitigate the losses a breakdown in the cutting machine would result in. The brothers have a contract with a competitor where both companies have agreed to permit use of their equipment during certain periods if the other company’s machine is not working. This agreement means that operations can continue if the machine breaks down, but at a higher cost. As well, overtime may be incurred once the machine is fixed to catch up on orders. These extra costs can be addressed through insurance.

Tim is also in the process of developing a plan to finance another CNC cutting machine to increase production by the end of the year.

Using the Financial Statements

The broker has been able to identify some loss exposures Tim and Bruce hadn’t considered by using the flow chart. One of the key exposures identified is the business interruption risk that10-30would occur if the CNC cutting machine were to break down.^[2] To determine how to cover this risk, the broker can use New Hamburg’s financial statements.

The balance sheet identifies all of the company’s assets and liabilities. New Hamburg has a couple of loans to suppliers, lease obligations for the company’s vehicles, and a mortgage on the building.

The income statement identifies the revenues and expenses of the company. This assists in determining the impact of a business interruption loss by identifying how much money New Hamburg could be expected to bring in during a particular year, and how much would need to be spent to run the business.

The broker plays an important part in determining a business interruption loss. As a trusted advisor, he can guide the discussion with the client to determine an adequate amount of insurance protection. The first question to answer is how long an interruption would last—that is, the worst-case scenario—and whether it would be a total interruption or partial interruption. Once the time period is established, then the financial statements provide the actual figures to determine the costs of interruption and ultimate loss of profits.

Such costs can include those that continue if production had to stop because the cutting machine broke down; the replacement cost of parts and other equipment; and property taxes, interest on loans, payroll of key employees, and lease payments. In addition, the costs would include any other contingent costs incurred by New Hamburg’s key suppliers or customers (for example, additional freight costs). The broker can also assist the client in evaluating the extra payments that would need to be made based on the production agreement with the competitor and any overtime costs for employees.

Reviewing Contracts and Other Documents

The broker should also ask to review any contracts New Hamburg has in place with suppliers, customers, employees, banks, and so on. These documents will provide insight into any financial exposures the company might have and how those exposures will be affected should there be a business interruption. For example, do Tim and Bruce have any contracts with customers that include penalties for non-performance? Are there any binding agreements with key staff that stipulate obligations to continue to pay employees during a shutdown?

It is important to review the agreement with the competitor to provide production assistance in the event of a shutdown. What are the terms of the agreement? Are the quality standards of the competitor the same as New Hamburg’s? Is New Hamburg able to inspect the finished products before they are shipped to customers? Is there a non-competition clause in place to protect New Hamburg’s customer list?

All of these contracts and other documents will help the broker put together a risk management plan for New Hamburg Custom Furniture that will provide the proper coverage, should a business interruption occur.

10-31

Outcome

By reviewing the flow chart, financial statements, and contracts and other records, the broker is able to identify New Hamburg’s net income loss exposures. This will help the broker put together a comprehensive application for business interruption insurance. This may be an exposure that New Hamburg’s owners hadn’t considered, but because of their broker’s help, they can get appropriate coverage.

The broker would obviously have much more work to do to identify and assess New Hamburg’s other property, liability, and people exposures, but this case study illustrates how identification tools can be used to address net income loss exposures. The broker might use some of the same tools to identify other exposures as well.

2 Clearly, New Hamburg has other loss exposures to consider, but, for the sake of scope, this case study focuses specifically on the net income exposures that would come from a breakdown of a key piece of machinery.

Introduction

This case study is intended to highlight the importance of the application process. The process of collecting data and negotiating premiums will always vary. However, the intent of this case study is to show how the process can break down when the initial analysis isn’t done carefully. The application process is the foundation of coverage development. The ramifications of not properly reviewing an application can be serious and include unexpected costs, damage to reputation, breakdown of relationships, and legal consequences.

Overview

In this situation, a broker is approached by a client that wants to secure quick insurance. Being able to provide a fast turnaround for coverage is a driving force for underwriters, as clients appreciate an insurer who can provide efficient service. To work quickly, underwriters need to be able to rely on the data included in the application. To make the best decisions, they need the data to be complete and accurate. If this isn’t the case, the insured can ultimately end up as the loser because they may not have valid coverage.

Situation

Roy Hughes had worked as a landscaper for most of his career. A year and a half ago, he suffered an injury from a skiing accident and stopped working. He wasn’t sure if he would reopen his business and cancelled his insurance. During his time off, he met Amanda Howard, and they became a couple. About a year after his injury, he started to receive quite a few requests for work. As a result, he decided to start working again. Amanda became the manager for the business, which was renamed Sticks N Rocks and registered solely under Roy’s name.10-32

Sticks N Rocks is owned by Roy Hughes. Even though Amanda Howard is the manager, she does not have signing authority for the company.

As the manager of the business, Amanda contacted Simon, a broker at ABC Broker Ltd., to arrange for insurance coverage. When Simon and Amanda first met, she indicated that she was part owner of the business. When asked about prior insurance, Amanda indicated that she’d had no prior commercial insurance. Roy, having been off work for some time, didn’t have recent insurance.

Amanda advised that the business had a new project starting immediately and that the business needed both liability protections and coverage for a large piece of machinery valued at $150,000. The business would require a certificate of insurance before starting any work.

When Amanda’s request came through, it was a particularly busy time at the brokerage. After the meeting, Simon considered the requests to be relatively straightforward. He figured it would be safe to submit a quote request without completing a claims check, as Amanda had indicated that there had been no recent insurance.

Needing a quick response, Simon called an underwriter he knew to be good with quick turnarounds: Shermilla at XYZ Insurance Co. Simon and Shermilla had worked together for a few years and had built a strong relationship. When Simon called and explained the circumstances, Shermilla felt comfortable approving the application and certificate. She knew that Simon’s submissions were always generally complete and well documented. Amanda signed the application and provided payment details. Simon released the certificate, and Amanda and Roy began their new project.

The policy was issued, and the declarations were sent to the insured. However, when the payment defaulted, the policy was cancelled and notice was sent to the broker and the insured. Receiving the news, Simon tried to follow up with Amanda. When he did, he discovered that she had disappeared, leaving both Roy and his business high and dry. Now, Roy was left without insurance while in the middle of working on a project.

Simon felt partly responsible for the situation at hand, as he thought he should have asked more thorough questions in his initial meeting with Amanda. As a result, he quickly contacted Shermilla to explain the scenario. She agreed to accept a new application in Roy’s name only.10-33Neither Simon nor Shermilla took the time to review or confirm the information provided by Amanda, as Roy stated that he required the coverages that were indicated on the previous policy.

Sometime later, Shermilla received a notice from the claims department about a suspicious claim on the Sticks N Rocks policy. The large piece of machinery had been stolen, and, during the investigation, the team discovered two previous theft claims under Roy’s name for a different landscaping business. Had Shermilla known about the prior losses, she would not have accepted the application. Doing so would have failed to comply with her company’s underwriting rules. However, as the original losses were not disclosed on the application, the claim was denied and the policy cancelled for misrepresentation.

Considering the scenario, what mistakes were made? How could the broker and underwriter have made better decisions to avoid the unfortunate final circumstances? What other consequences might result from the scenario? These questions will be examined below.

Verifying the Client

When Simon was approached by Amanda, he thought that everything appeared to be straightforward. There was nothing unusual about the work Sticks N Rocks was doing, nor was there anything problematic with their requests for specific coverages. However, as shown by this case, verifying ownership is always a vital step. Otherwise, claim payments will be delivered to the wrong party, or worse: Coverage can be denied. In this case, if Simon had requested the business licence, he would have seen that Amanda did not have signing authority and that Roy was identified as the sole proprietor of Sticks N Rocks. This would have avoided the initial cancellation.

Damaged Relationship Between Broker and Underwriter

Simon had built a strong relationship with Shermilla. He knew that he could rely on her to provide a quote in a short period of time. Shermilla was relying on the fact that Simon’s previous submissions were well documented. She trusted that Simon had done his due diligence in confirming the information on this application. Simon has now put Shermilla in a difficult situation. She quickly pushed through the submission at Simon’s request, omitting some underwriting reviews that may have caused her to question ownership and loss history.

However, when Shermilla was approached the second time to approve a new application for Roy, she again failed to question what other information may have been missing or incorrect. These are also questions that Simon should have posed to Roy before approaching Shermilla the second time.

The relationship between broker and underwriter is vital for negotiation of coverage and premium. A mutual trust must exist, and both parties need to operate with utmost good faith. When this doesn’t happen, the client suffers as negotiations are slow or the parties cannot agree upon the best premium. Building a solid, trusting relationship can take numerous interactions over a great deal of time, but it only takes one negative incident to undermine that work.

Misrepresentation of Loss History Leads to Loss of Coverage

There are several reasons why a policy may be voided. Failing to disclose loss history is one thing that can compromise coverage. Amanda may have been telling the truth about her own loss10-34history, but she was not well enough informed to speak about Roy’s. When she indicated that Roy hadn’t had any recent insurance, Simon should have followed up with Roy to confirm the specifics of his previous insurance and losses. Simon relied on the fact that Amanda had told him they were a couple and therefore assumed that she was informed on Roy’s position.

When Amanda disappeared and the policy had to be rewritten, Simon should have taken the time to review Roy’s information. He shouldn’t have relied on the information provided by Amanda in the beginning. He was in a hurry to maintain the policy (likely to ensure that his commission was not affected). Shermilla should also have insisted on a more thorough review. For her, the penalty for not following company guidelines could negatively affect both her authority and the loss ratio of her portfolio of business.

Competing Priorities

When it comes to complications in interactions between clients, brokers, and underwriters, time can be the biggest culprit. Often, clients want fast turnarounds; brokers don’t want to spend a lot of time on small accounts (or on less profitable accounts). However, to assure proper protection, underwriters need time to properly review a submission.

In this case, time was of the essence for the client, as Roy and Amanda were starting a job immediately. For Simon, this account represented a relatively small premium with a small exposure. The more time he spent on it, the less he had for his larger, more profitable accounts. However, Shermilla needed the time to review the client’s history and past losses. It also would have been beneficial to review Sticks N Rocks’s security measures to protect against theft.

One of Shermilla’s priorities was to maintain a profitable book of business. This situation caused a large hit to her loss ratio. She was also responsible for following her company’s underwriting guidelines. By failing to secure important information, she violated her authority.

Simon has damaged his professional reputation by failing to accurately collect information from the client. Moving forward, he will have to regain Shermilla’s trust (and the trust of any other underwriter who heard about the events). In addition, Simon ultimately failed to manage expectations, as his client has been left without insurance. While there were mitigating circumstances, it was Simon’s responsibility to uncover any potential element that would have led to a result of no coverage.

Summary

A code of conduct is a formally adopted statement of applied ethics, or a statement of what is expected in practice from the members of a company, organization, or association that has formally declared its operating values and principles. Using training, role models, and recognition of exemplary service that rewards and highlights good conduct are all ways to implement codes of conduct.

Core values represent the ideal virtues or habits of character that are considered worth attaining to sustain a society that all would like to live in. Every stakeholder in the insurance community reinforces values when they share their experiences and contribute to the discussion on ethics.

10-35

An insurance professional must always ensure that the client’s interests take priority over their own. Because the client must trust the insurance professional when transacting insurance business, the average client is vulnerable. The insurance professional must make up for this imbalance in the relationship with the client by acting scrupulously to ensure that integrity prevails.

Insurance professionals must approach their clients with honesty, integrity, fairness, due diligence, and skill in all of their dealings. The law recognizes the principle of utmost good faith as a standard of conduct for insurance transactions. Insurance professionals must respect a client’s right to confidentiality. Maintaining confidentiality has always played a role in the business of insurance, but now there are also privacy laws to uphold.

It is necessary that codes of ethics in the industry include certain basic principles of professional conduct. A formal code of ethics can be shared with everyone and provides a framework for good governance through a set of principles and values that promote transparent conduct. It can also help to restore public trust in the insurance industry and improve its overall credibility.

Being successful in today’s workplace requires more than technical knowledge—it requires the ability to work well with others. Some of the skills that will help build trusting relationships are critical thinking, collaboration, active listening, asking effective questions, delivering difficult messages, and delivering presentations.

In the case study on explaining the contract, the five elements of a standard contract were discussed in relation to the contract to purchase the property: agreement (an offer to purchase the property), consideration (the purchase price), capacity to contract (both parties are of legal age and are considered of sound mind), genuine intention (desire to buy the building), and legality of object (the sale of a building a person owns is not against the law). The three additional principles of an insurance policy were also included: insurable interest (Kader is the new owner of the building), indemnity (should something happen to the building as a result of an insured peril, Kader would be compensated for the loss as outlined in the insurance policy), and utmost good faith (the policy is based on an honest description of the building and intentions for its use).

The case study also explored how contracts can impact stakeholder relationships. Sage made a serious error in confirming coverage without having the binding authority to do so. This error could have become disastrous in many ways: If Kader had experienced a loss, he would not have had coverage; if Sage were not able to find other insurers to sign on to the subscription policy, they would have damaged their reputation with their client; and if a loss had occurred, Sage would have been open to an errors and omissions lawsuit. They were lucky that Christina is an experienced underwriter who understands the value of maintaining relationships. The stakeholders were able to work together to provide a win-win-win solution, and Kader never knew about Sage’s error.

Several loss exposure identification tools can be used and applied to identify the key loss exposures a business has and assess the likelihood of loss and its resulting impact on the organization. This process will assist in determining the amount and scope of insurance protection required, as well as the degree of risk the company is willing to assume or retain.

10-36

The application process lays the foundation of the policy, and it is vital that the information collected is accurate and relevant. When the process is manipulated or circumvented, the consequences can be amplified down the line. As the case study demonstrates, pushing an application through too quickly ultimately ended up hurting all parties involved: The client ended up without coverage; the broker could face a lawsuit from the client for his failure in the application process, further damaging his professional reputation; and the underwriter could face a reprimand, restrictions, or even dismissal based on her handling of the situation and the size of the loss.

Though fast service is becoming increasingly important for customer satisfaction, the case study highlights some of the potential pitfalls of failing to follow proper procedures.