Ethical Guidelines for Insurance Professionals

Contingent commission

A commission that an insurer pays, usually annually, to an independent agency that is based on the premium volume and profitability level of the agency's business with that insurer.

Comparative negligence

A common-law principle that requires both parties to a loss to share the financial burden of the bodily injury or property damage according to their respective degrees of fault.

Morale hazard (attitudinal hazard)

A condition of carelessness or indifference that increases the frequency or severity of loss.

Moral hazard

A condition that increases the likelihood that a person will intentionally cause or exaggerate a loss.

When considering an ethical dilemma from a situation-based perspective, which of the following best explains the process used in making the decision?

Analysis of who will be helped and who will be hurt by the decision

The insurance professional who has identified an ethical dilemma always has the responsibility for determining how to resolve the situation.

False - When an ethical dilemma has been identified, the insurance professional must identify the stakeholders, including the appropriate decision maker, who may be another person.

To fulfill the high level of trust needed for insurance transactions with the public, an insurance practitioner should possess and exhibit the traits of professionalism:

Commitment to high ethical standards Professional competence Sense of altruism Commitment to continuous education Participation in an association or a society Ability to think and act independently Public recognition as a professional

Which of the following factors must insurance professionals balance with regard to their responsibility to insurers?

Customers' needs for a fair price and comprehensive coverage Insurance professionals' duty to market adequate coverage at a fair profit

he ethical standards to which insurance professionals must adhere are rooted in three general areas:

Regulatory requirements Social responsibility Economic outcomes

The first step in resolving an ethical dilemma involves gathering information, starting with ____________.

Identification of stakeholders

Insurance professionals must be cognizant of the ethical responsibilities owed to three disparate groups:

Insurers Policyholders The public

Which of the following interactions create insurance professionals' responsibility to policyholders?

Rights and duties under insurance contracts Policyholders as consumers of the insurance product Policyholders as beneficiaries when payments are made to them under first-party coverage All the above

Ethical behavior is based on moral conduct, which implies

One knows what is right and what is wrong.

Which of the following would not be physical barriers to ethical decision making?

Organizational values have not been articulated

An insurance professional is responsible for his or her thoughts, decisions, and actions. Knowledge, skill, and expertise guide decisions and ensure that the insurance professional utilizes his or her ___________________ to the benefit of your clients.

Professional judgment

The ethical standards to which insurance professionals must adhere are rooted in three general areas:

Regulatory requirements Social responsibility Economic outcomes

Tort law

The branch of civil law that deals with civil wrongs other than breaches of contract.

Contract law

The branch of civil law that deals with contracts and settles contract disputes.

Subrogation

The process by which an insurer can, after it has paid a loss under the policy, recover the amount paid from any party (other than the insured) who caused the loss or is otherwise legally liable for the loss.

It is important that insurance practitioners maintain high ethical standards for all of the following reasons, EXCEPT:

To ensure short term profitability of their employers.

An insurance professional has ethical responsibilities to insurers, policyholders, and the public.

To meet the responsibilities owed to each group, the insurance professional must keep in mind each group's perspective and interests.

Ethical decisions entail determining the right thing to do when more than one answer could be considered right.

True

For an insurance transaction to be ethical, it must first be legal.

True

In general, organizations and individuals who demonstrate high ethical values are more successful over the long term.

True

In order to aspire to become a professional, the insurance practitioner must understand the traits of a professional and what is involved in professional work.

True

Ethical behavior is founded in

morals, laws, and ethics

Ethics involve deciding between

multiple "right" courses of action in a given situation.

Laws are codes that

protect society by governing behavior

Morals entail deciding between

right and wrong