The agent must act ethically in order to conduct business. Experience alone will not be enough to meet this extremely important responsibility.
Ethical Responsibilities to the Insurer
The duties of an insurance professional to his/her insurer are established by the concept of "Agency.” This concept is represented by the agent contract, which both parties agree to and sign. In carrying out his/her duties, the insurance professional is the direct representative of the insurer. The professional must keep this in mind. His/her day to day activities will be a direct reflection on the insurer within the community.
Ethical Responsibilities to Policy-Owners
By filling needs and providing quality service, the insurance professional can meet his/her ethical responsibilities to policy-owners. Service is of utmost importance since proper service will often lead to future sales and referrals.
In addition, to quality service, the agent owes the policy-owner loyalty. The agent must also meet ethical responsibilities to policy owners by timely submission of all applications, prompt policy delivery and confidentiality.
Ethical Responsibilities to the Public
Fortunately, the insurance professional has much more control over shaping the public's attitude toward insurance than do the other army of sales representatives for other consumer products. The nature of the way insurance is sold creates this advantage. The insurance professional initiates contact with a prospect, then determines if and what the insurance needs are. Upon completing these tasks, the agent recommends certain products. During the course of making these recommendations the agents provides a professional sales presentation and attempts to develop a long-term relationship with quality service after the sale.
Since this unique situation requires a great deal of contact between the consumer and the agent, public perception of the industry itself is based on this relationship. Such perceptions of the industry hinge on the behavior of the agent. One can now understand the importance of ethical behavior in a business setting.
The professional agent has two ethical responsibilities to the public:
- To strive for the highest level of professionalism in any and all public contact in order to maintain the strongest positive image of the industry as possible; and
- To keep the public informed about the insurance with the highest level of professional integrity.
Ethical Responsibilities to the State
Although the responsibility to regulate the insurance industry is shared by both the federal and state governments, the states carry the burden of regulating insurance affairs, including the ethical conduct of licensed insurance agents.
In some states, the regulation of ethical conduct falls under marketing practices while other states refer to is as unfair trade practices. Regardless of its monitor, all states have established a code of ethical standards for insurance agents by defining through laws the proper behavior expected from an agent. Though these laws differ from state to state, there are enough similarities to discuss them in general terms. As we study the legal framework, one must remember these laws provide the industry with a set of absolutes. There are situations which are legal but not ethical. On the other hand, there are a few situations, which are illegal, but ethical.
Knowledge of such laws is important because they provide the insurance professional with guidelines, pointing the way to stay out of trouble. Staying out of trouble is very important due to the heavy penalties that can be meted out for various violations of the law. Penalties can include suspension or revocation of any insurance license. Penalties can also include the payment of monetary damages and could quite possible end a promising career.
In the absence of fraud, all statements made by applicants or Insureds will be deemed to be representations and not warranties. No statement made for the purpose of affecting coverage will avoid coverage or reduce benefits unless contained in a written application signed by the Contract Holder and a copy of such documents has been furnished to the Contract Holder.
Eligibility for coverage under this Contract is determined by medical risk classifications applicable to the applicant and his or her dependents. Among the factors we consider when making our underwriting decision are the medical information requested on the application, and the sex and age of the applicant and his or her dependents.
Material Misrepresentations, omissions, concealment of facts and incorrect statements made on an application or a medical statement by an applicant, Insured or a Contract Holder which is discovered within two years of the issue date of the Contract may prevent payment of benefits under this Contract and may void this Contract for the individual making the misrepresentation, omission, concealment of facts or incorrect statement. Fraudulent misstatements in the application or medical statement discovered at any time, may result in voidance of this Contract or denial of any claims for the individual making or responsible for the fraudulent misstatement.
In the event of fraud or misrepresentation pertaining to, but not limited to, medical information, geographical area, or the sex and/or the age of applicant or his or her dependents made on an application or medical statement by an applicant, Contract Holder or Insured, the sole liability of YOUR INSURANCE COMPANY shall be the return of any unearned Premium, less benefit payments. However, at our discretion, we may elect to cancel the Contract with forty-five (45) days prior written notice (Time may vary by state regulation &/or company practice) or continue this Contract provided that the Contract Holder makes payment to us for the full amount of the Premium which would have been in effect had the true facts been stated by the applicant, Contract Holder, or Insured.
C.A.
Bernadette was diagnosed with breast cancer in Oregon. Her doctor in Oregon told her that she needed surgery as soon as possible. However, since she was not employed and had no insurance, she decided to move back home to Indiana.
She found a job in Indianapolis, but it had no benefits. Therefore she applied for an individual major medical policy. She did not tell the agent about her cancer and the policy was issued on a standard basis with no riders.
60 days after the policy was issued she had a "routine" mammogram" which "discovered"
(Continued from previous page) the cancer. She told the radiologist at the clinic that she had had a mammogram about a year earlier, at a public health clinic. She did not mention the finding, however. She was immediately admitted to a hospital in Indianapolis and a mastectomy was performed.
During a routine claims review, the insurer sent an inquiry to the Public Health Service in Oregon, which duly reported the earlier findings. Based upon these findings, the insurer canceled the policy based upon a material misrepresentation and refused to pay for any of the medical costs.
Ethical Responsibilities to the Insurer
The duties of an insurance professional to his/her insurer are established by the concept of "Agency.” This concept is represented by the agent contract, which both parties agree to and sign. In carrying out his/her duties, the insurance professional is the direct representative of the insurer. The professional must keep this in mind. His/her day to day activities will be a direct reflection on the insurer within the community.
Ethical Responsibilities to Policy-Owners
By filling needs and providing quality service, the insurance professional can meet his/her ethical responsibilities to policy-owners. Service is of utmost importance since proper service will often lead to future sales and referrals.
In addition, to quality service, the agent owes the policy-owner loyalty. The agent must also meet ethical responsibilities to policy owners by timely submission of all applications, prompt policy delivery and confidentiality.
Ethical Responsibilities to the Public
Fortunately, the insurance professional has much more control over shaping the public's attitude toward insurance than do the other army of sales representatives for other consumer products. The nature of the way insurance is sold creates this advantage. The insurance professional initiates contact with a prospect, then determines if and what the insurance needs are. Upon completing these tasks, the agent recommends certain products. During the course of making these recommendations the agents provides a professional sales presentation and attempts to develop a long-term relationship with quality service after the sale.
Since this unique situation requires a great deal of contact between the consumer and the agent, public perception of the industry itself is based on this relationship. Such perceptions of the industry hinge on the behavior of the agent. One can now understand the importance of ethical behavior in a business setting.
The professional agent has two ethical responsibilities to the public:
- To strive for the highest level of professionalism in any and all public contact in order to maintain the strongest positive image of the industry as possible; and
- To keep the public informed about the insurance with the highest level of professional integrity.
Ethical Responsibilities to the State
Although the responsibility to regulate the insurance industry is shared by both the federal and state governments, the states carry the burden of regulating insurance affairs, including the ethical conduct of licensed insurance agents.
In some states, the regulation of ethical conduct falls under marketing practices while other states refer to is as unfair trade practices. Regardless of its monitor, all states have established a code of ethical standards for insurance agents by defining through laws the proper behavior expected from an agent. Though these laws differ from state to state, there are enough similarities to discuss them in general terms. As we study the legal framework, one must remember these laws provide the industry with a set of absolutes. There are situations which are legal but not ethical. On the other hand, there are a few situations, which are illegal, but ethical.
Knowledge of such laws is important because they provide the insurance professional with guidelines, pointing the way to stay out of trouble. Staying out of trouble is very important due to the heavy penalties that can be meted out for various violations of the law. Penalties can include suspension or revocation of any insurance license. Penalties can also include the payment of monetary damages and could quite possible end a promising career.
In the absence of fraud, all statements made by applicants or Insureds will be deemed to be representations and not warranties. No statement made for the purpose of affecting coverage will avoid coverage or reduce benefits unless contained in a written application signed by the Contract Holder and a copy of such documents has been furnished to the Contract Holder.
Eligibility for coverage under this Contract is determined by medical risk classifications applicable to the applicant and his or her dependents. Among the factors we consider when making our underwriting decision are the medical information requested on the application, and the sex and age of the applicant and his or her dependents.
Material Misrepresentations, omissions, concealment of facts and incorrect statements made on an application or a medical statement by an applicant, Insured or a Contract Holder which is discovered within two years of the issue date of the Contract may prevent payment of benefits under this Contract and may void this Contract for the individual making the misrepresentation, omission, concealment of facts or incorrect statement. Fraudulent misstatements in the application or medical statement discovered at any time, may result in voidance of this Contract or denial of any claims for the individual making or responsible for the fraudulent misstatement.
In the event of fraud or misrepresentation pertaining to, but not limited to, medical information, geographical area, or the sex and/or the age of applicant or his or her dependents made on an application or medical statement by an applicant, Contract Holder or Insured, the sole liability of YOUR INSURANCE COMPANY shall be the return of any unearned Premium, less benefit payments. However, at our discretion, we may elect to cancel the Contract with forty-five (45) days prior written notice (Time may vary by state regulation &/or company practice) or continue this Contract provided that the Contract Holder makes payment to us for the full amount of the Premium which would have been in effect had the true facts been stated by the applicant, Contract Holder, or Insured.
C.A.
Bernadette was diagnosed with breast cancer in Oregon. Her doctor in Oregon told her that she needed surgery as soon as possible. However, since she was not employed and had no insurance, she decided to move back home to Indiana.
She found a job in Indianapolis, but it had no benefits. Therefore she applied for an individual major medical policy. She did not tell the agent about her cancer and the policy was issued on a standard basis with no riders.
60 days after the policy was issued she had a "routine" mammogram" which "discovered"
(Continued from previous page) the cancer. She told the radiologist at the clinic that she had had a mammogram about a year earlier, at a public health clinic. She did not mention the finding, however. She was immediately admitted to a hospital in Indianapolis and a mastectomy was performed.
During a routine claims review, the insurer sent an inquiry to the Public Health Service in Oregon, which duly reported the earlier findings. Based upon these findings, the insurer canceled the policy based upon a material misrepresentation and refused to pay for any of the medical costs.
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