Author: Bill Wilson

During Ethics Awareness Month, we ran a contest with three ethical dilemmas, asking our newsletter readers to respond with their answers. Below is one of those questions, along with many of the responses we received. If you have any thoughts you'd like us to add, email them to Bill.Wilson@iiaba.net.

The Case of All's Fair in Love, War and Insurance
"The right to do something does not mean that doing it is right." -- William Safire (b. 1929), U.S. political writer

An agent/broker had worked diligently for over three years to land a major account, even going so far as to spend time at the public library and on the internet to become more knowledgeable about the prospective client's industry. His effort and perseverance finally paid off when he landed the account and spent substantial time booking the business. The only problem encountered was that the workers comp had to be placed in the assigned risk plan.

The servicing carrier assigned to the client had previously considered this account, but did not pursue it because the nature of the business would have necessitated significant time and expense to determine insurability. During the process of gathering information and conducting a preliminary audit and loss control survey necessitated by the workers comp assignment, the company decided that this could be a desirable account.

Based in large part on the information gathered by the company and that provided by the agent, the company's representative made an impressive and informed sales presentation just before the next renewal. The deal was too good for the client to pass up, so he accepted it. When the agent was informed of his customer's decision, he was devastated.

Did the insurance company behave ethically?
If you'd like to submit your opinion, email it to: Bill.Wilson@iiaba.net

The following are unedited responses to the ethical question above.

Grand Prize Winner...Jacquelin J. Lawrence, HDL Insurance, Inc., Foley, AL:
No!!!! The company was way out of line to make direct contact with the insured. If the company was too lazy to write the business the first time, and then only snatch it from the agent at renewal time, they have no right to that account. I would review the contracts with the assigned risk program to see if our agency had any type of recourse. This does pose another question though. Did the original agent take care of his client? After all the hard work put into that account, something is wrong...my clients would rather have me, their local agent, take care of their insurance than going direct with a carrier.

Other responses:

The insurance company did not behave ethically. In essence it is almost like using insider information for their own gain. When they did the information gathering on a previous occasion they did not develop information to be interested in the risk. But their information added to the agents information made the risk attractive. While the information they used was available in the public domain and not privileged or proprietary, it was not ethical of them to use it to gain an advantage against a servicing agent who gathered it. It would be like a reinsurer using information sent to them from a primary carrier as part of the reinsurance transaction to pursue the account on a direct basis if they wished to do so. It is a matter acting in good faith and ethically.

No, they did not. Period.

No, this carrier did not act ethically. They had no write to use the information gathered for assigned risk to take the business away from the agent. Very naughty of them to do so.

While I don't believe the following quote, but have often reminded myself of this in situations like this, "Life sucks and then you die."

The insurance company did not behave ethically, but it happens every day. Companies that are unwilling to even quote a particular business have been known to write it for a competing agent.

NO, NO, NO!!!

Absolutely not, I believe it's illegal to obtain and use for their purposes information which was obviously passed along to the correct person to pursue someone else's account. This information was the property of the agent for the purposes to obtain insurance thru the carrier not for their use to write the policy directly.

Yes. Been there and had that done to me.

Since the carrier used information they obtained in their capacity as servicing carrier they were unethical. There is an implied, if not express, expectation from agents that use the involuntary market that when they provide the carrier with information it is for the benefit of the insured, not the carrier marketing department. Such action should jeopardize the carrier's participation as a servicing carrier. In Tennessee we addressed this matter several years ago by making the use of this information illegal. "Anti-Piracy Law (56-8-104(12)). It is unlawful for the servicing carrier or residual market assignment (e.g. workers company assigned risk plan) to use information obtained in the application or during the servicing of the account for the purpose of soliciting any form of insurance."

No.

The decision to bypass the hardworking agent with a direct representative is an inappropriate one and shortsighted. A professional agent is an important resource for the future development of good business and to "cut the grass" of this kind of agent will probably end up losing opportunities for good business in the future. Furthermore, that agent will most likely spread the word about the way he was treated and impact the relationships with other agents. Even without the selfish reasons for not making this decision, it simply is not right to abuse the privileged information and bypass the representing agent.

No. The insurance company has no ethics. My belief is that insurnace companies and agents should be working together for the customer not trying to stab each other in the back- The Insurance Company had all the information and as an agent that represented them had the account they should not have gone behind their back.

Nope.

Not an ethical decision (but a common one) since this is the agent's account, and the carrier had turned down the business and were writing it originally because of the assigned risk plan. The fact is that they had an opportunity before and did not want to do the work to write the risk originally.

The insurance company did NOT behave ethically. The rules of the assigned risk plan in most jurisdictions prohibit a servicing carrier from utilizing information from the assigned risk account to attempt to write the account directly. The agent may have legal recourse.

Yes, I feel they behaved ethically.

Absolutely not.

The agent, if he was the producer when the company considered the risk previously, should approach the company for production and commission credit. If the company is direct writer and he was not involved before, he should congratulate the insured and tell him the whole story. Also, he should register a complaint with the "pool" authority and the State Insurance Department.

This company did not act within moral decency to the agent. They were the W/Comp carrier assigned by NCCI for that risk. If they chose to actively go after the account at the renewal of the "assigned" policy, they should have had the decency to notify the agent by letter and NCCI should have been notified by the company that there was now a conflict of interest in that they had determined that this account would have been accepted in the standard W/Comp program and they intended to market the account directly with the client at the expiration of the "assigned" policy. Although NCCI would probably not have done anything about it anymore that the agent could have, this would have at least put everyone on notice of the conflict of interest which cost the agent part of his income and possibly his reputation if the client rightly or wrongly assumed that the agent could have done the same and did not.

Yes, I believe the insurance company was extremely unethical and should lose the account. That was pretty sneaky and low in my opinion.

The company should have kept the producer informed and pointed out the advantages to the insured and producer. If properly, done, the agent would have looked good to the customer and this could result in future referrals. Companies need to negotiate with a WIN-WIN for everyone-this enhances the insurance industry image which needs all the help it can get. Companies and producers need to work closely together since insurance contracts are contracts of utmost good faith and trust for all all parties. A solid business relationship is needed for future business activities.

The servicing carrier should not have contacted the client directly, but, rather, should have contacted the agent of record and jointly pursued this good account. Partnership is what the company-agent relationship should be all about.

Yes, I feel the insurance company acted unethically. Based on the original decision of the insured to accept the WC through an assigned risk pool, the insured probably was sold on the commitment the agent had in familiarizing himself with an industry for so long and all his hard work. The agent may have promised excellent service during the policy but this would be earth shattering to hear at renewal that the company went behind his back and did this.

I think not .they should have informed the agent on what they were doing so the agent could have gone to his client to let him know. The client could have said, I want everything to go thru my agent. I feel that the company did not behave in an ethical way.

The insurance company did not act ethically.

The company could have notified the agent, however, is it unethical to do as they did? In this case, probably not.

No they did not. The insurance company should have went through the current agent.

The agent was paid a commission for the time that he/she had the account. The fact that the appointed servicing carrier took the account on a direct basis at renewal isn't fair, however I do not believe that it is unethical. If the carrier provided information regarding this account to one of it's appointed agents in an attempt to write the risk out of the pool, that would be unethical.

Yes the decision was "ethical" but not necessarily "moral". If you have a better solution for a client it should be offered to them. Not doing so would have been unethical. However, the agent should have been consulted and "cut in" on it. It should not have been a complete surprise to him. He should have a word with his company about this. As far as his being devastated "get over it". This type thing happens all the time. Whether it is a company we have a relationship with or some other agent that walks in with a better deal, this is a fact of life.

Yes, it is devastating to work so hard and lose the account but this is part of the insurance business. I would ex-date the quote and quote next year before the account expires. The bulk of the work is finished and next year it will be easier to quote.

The insurance carrier was highly unethical. Shows how much they value agents. They should at least, split the commission on the new business with him or compensate him in some other way. Under GLB, their actions might even be illegal.

While I do not think the company handled this ethically. Clearly the agent/broker did the majority of the research, and the company representative used that information to secure the risk. Shame on the company representative.

Yes, the company acted ethically, as long as the current agent retained the account. The years and time spent landing the account are part of doing business. Once the information is gathered and known, it is between the agent/client/company as to whom they want to share the information with. Next time, the agent might offer to do the pre-qualifying legwork on the account for a higher commission.

If the company knew that the agent was trying to land the account, they weren't being very ethical. However, if the agent was being asked questions about the prospective client, that should have been a red flag and maybe the agent should have presented his offer before the other company had a chance. Even though the other company may have the account now, keep making contact with the prospective client - someday the tables may change. Maybe the other company will not be ethical in the areas that are most important.

The company absolutely did not behave ethically. In Tennessee, it is unlawful for any "servicing carrier of a residual market assignment to use information obtained in the application or during the servicing of the account for the purpose of soliciting any form of insurance." If this law or something similar is not on the books in all other states, it should be.

In my opinion, the answer to this question is obvious. The company representative overstepped his bounds in making the presentation. If the company deemed the account worthy of writing in a standard market, they should have contacted the agent on the account. No company representative should ever undercut an agent based on information he received due to the agent's research. In fact, no company representative should ever undercut an agent of the company.

As it is sometimes true that all is fair in love, war and insurance, the company should give credit to the agent/producer who put in the ground work. Will they? Probably not. Could it come back to haunt them? I think so.

Absolutely not. It’s the same thing where an account has been brought to me by another agent asking me to broker it with one of my carriers. I would never go behind his back to take the account away. HE brought it to me...he deserves his share of the commission.

No. Clear and simple.

That's a tough one but I guess they did - I've been through a similar situation (in that you do a lot of work & get quotes & then they place the business with another agent exactly as YOU quoted). It's very disappointing and upsetting but beyond an agent's control.

In my opinion, the Insurer was unethical in presenting the renewal proposal without the agent being involved. This is particularly true in view of the fact that the agent was the agent of record and had previously asked the insurer to write the account on a "standard" basis. What they should have done is provide the agent with the proposal to present to his insured. In that way everybody wins.

More ethical dilemmas....

Copyright 1998-2002 by William C. Wilson, Jr. Used with permission.