Only
a few days ago the country celebrated its 41st anniversary of
Independence from Britain. It was a time for reflection and to assess what have
been the achievements during the past four decades. Admittedly, forty years is
a very short time in the life of a country but we cannot continue pleading that
we are still an infant nation since we must grow up and accept responsibility
for our actions or inactions. The
insurance industry was principally foreign-owned and controlled until the
decade of the 1970’s so it is relatively young in terms of local ownership.
However, the industry leaders have been taking stock especially in the area of
business ethics since this is a matter that concerns all persons involved in
the insurance business.
The
very core principle of insurance is that of “utmost good faith”. This is unlike
the principle that is found in most commercial transactions –i.e. “buyer
beware” or caveat emptor. In insurance, the law recognizes that parties to a
contract must exercise utmost good faith both on the part of the buyer as well
as the seller. It simply means that the buyer must provide complete and
accurate information of his risk so that the insurance company can make an assessment
while the insurance company must act in manner that is not intended to deceive
the buyer and consequently it must make good its promise.
In
the real world and in particular with regard to Trinidad and Tobago the
principle of utmost good faith is not scrupulously practised and in many
instances buyers of insurance withhold pertinent information which at the time
of a claim turn around to haunt them and in some cases they are not able to
collect on their claim. Some insurance companies are equally at fault because
they pursue practices that are inimical to the interests of their customers and
view the insurance business as any other commercial enterprise where the
principle of “buyer beware” is applied.
How
times have changed! The old school taught you that your word was your bond and
if even there was no written contract you were expected to honour your
agreement. There were instances where a claim would have occurred but no policy
had been issued but you would have been paid your claim. Those were the good
old days! Today, there is a feeling within the insurance industry that those
principles no longer apply and all decisions must be reduced to writing
otherwise there is every chance that verbal agreements will not be honoured.
The
question has to be asked- how did we arrive at this stage? There are many
reasons and that is not only a local situation but rather the business has
evolved where standards of behaviour have changed worldwide. Many leaders in
the insurance industry around the globe are calling for a return to ethics
since they see ethics as the bedrock of professionalism and reputation. This
issue has not been lost on the local insurance industry either since ATTIC has
been addressing this issue as it is acknowledged that the industry must have an
up to date code of conduct at least for its members.
Much
of what is done in insurance relies on trust- between the various parties
whether they are the insurance companies, the agents or brokers and the
customers. However, if this trust is lacking then steps must be taken to
restore confidence. How does one behave in an ethical manner? It is all too
easy to behave unethically especially if through conduct and example there is
no intention to act fairly.
There
is a view that ethics and ethical behaviour must be inculcated from very young.
There must be a clear understanding of what is right and what is wrong and
these are judgments that you arrive at by learning from the home environment.
The modern world has been teaching that “wrong is right” as long as you are not
caught and if caught there is some loophole through which you can escape. There
is too much play on words and semantics and an obsession with spin-doctoring
and public relations in order to confuse rather than taking the moral high
ground and owning up to the misdeed. Greed has been the underlying cause of all
the financial scandals but at least the authorities are taking steps to punish
the wrongdoers and that in itself must be a lesson for us in Trinidad and
Tobago.
The
various professional bodies have been attempting to treat with this matter by
shaping thinking and practice. In the past, breach of ethics would have been
dealt with through a disciplinary procedure that could lead to disbarment and
or other sanctions. While these still remain, there is likely to be a more
proactive approach in which persons are introduced to ethical behaviour as a
component of professional training. Management competence is another key pillar
in the determination of ethical conduct since a study carried out in the United
Kingdom concluded that managerial incompetence has been the root cause of every
collapse in the insurance industry.
In
spite of rules and regulations scandals do take place because people circumvent
rules and it is only if the rule of right or wrong is applied then this might
have prevented such a situation. At the heart of regaining trust by the public
will be the modernization of the written code of conduct but more importantly
there must be a return to core principles of utmost good faith and ethical
standards of behaviour. In short, insurance companies must provide their
customers and the public with a high quality service by paying their legitimate
claims in a fair and timely manner but equally they must guard against the
increasing insurance fraud which is a worldwide phenomenon. They must uphold
the public trust at all times and exercise prudence in the management of their
business which is the hallmark of successful companies.
Article
prepared by Bernard K. Aquing, Chartered Insurer and Consultant to Association
of Trinidad and Tobago Insurance Companies (ATTIC)
E-mail:
daquing@cablenett.net