Producers responding to our query had three general ethical expectations for all of their dealings with underwriters:

o Integrity: Deal with producers in a straightforward and honest manner, and deliver what was promised.

o Confidentially: Do not discuss information disclosed with any unrelated party.

o Fairness: Do not be arbitrary, but do be fair. Discuss plusses and minuses with producers.

Producers responding suggested general ethical responsibilities for underwriters during three different time periods: pre-underwriting, during underwriting and post-underwriting.

First, before the underwriting begins, producers expect to have a submission acknowledged.

Second, as some submissions for the same risk may come from different agency or brokerage sources, producers believe the underwriter should look for other submissions on the account, know the rules for agent or broker letters of record, and follow those rules uniformly.

Third, producers believe underwriters should approach each submission with an open mind and not prejudge a particular applicant based on a belief that the class of business is generally not desirable. “There are good risks in bad classes and bad risks in good classes. Good business can only be written when each applicant is judged on its own,” wrote one producer. Another put it this way:
“Be fair, equitable and nondiscriminatory in approaching the risk.”

During the underwriting process, producers consider it ethical for the underwriter to read and consider all the information provided. As one producer put it: “Resist the easy-way-out thinking that no' means less work.”

Another producer recognized that sometimes an “acceptable” risk might have to be declined: “Underwriters do not have to accept a risk. If the underwriter's book contains too much of a certain class, it may have to be declined. An underwriter has a duty to see that the insurance company survives.”

If one request provided to the underwriter is a desired price, underwriters should not consider that as necessarily critical. A professional producer and a good insured appreciate positive suggestions from the underwriter that may increase both coverage and premium. Producers responding believe ethical underwriters will also want to know other attributes of the insurance or insurance-related services that the underwriter may be able to offer that may require a higher premium.

Producers responding want underwriters to be honest in expressing their concerns about a submission. Misconceptions or misunderstandings should not lead to a rejection. “I can't read the underwriter's mind and, for that matter, the underwriter can't read my mind,” wrote one agent. “Unless the submission is an obvious rejection, I owe it to both my client and the underwriter to openly discuss any areas of concern before a policy is issued or a loss occurs.”

Underwriters should clearly communicate their decisions. “When coverage is not available, it should be clearly outlined in any responsive proposal, including any binders and contracts that are subsequently issued,” said one agent.

While no producer responding suggested it as an ethical duty, the clear inference was that when an underwriter offered coverage at different terms and conditions than requested, an explanation of why the coverage alternative was offered is helpful. As to pricing, one producer suggests:
“Pricing should be easily understood, with no hidden charges.”

Above all, ethical underwriters treat all confidential information confidentially. “An ethical underwriter does not need confidentiality laws. He or she will automatically recognize and protect confidential information,” one producer said.

In the post-underwriting phase, producers believe an underwriter has an ethical obligation to clearly disclose all that must be done prior to binding and to give a specific time frame in which to accomplish the necessary tasks. Then, once the underwriter is fully satisfied, they should deliver a contract that accurately reflects the agreed upon coverage and physically prepare a contract for the insured within a reasonable time period.

All of the producers responding addressed not only the underwriter's ethical responses to a particular submission but also consistency in the underwriter's approach over multiple submissions. This was usually phrased as building positive, ethical long-term relationships. “Good, long-term company-producer-client relationships are developed when trust is part of the equation,” said one agent.

Producers also suggested that underwriters not take rejection of an underwriting proposal personally. “The application for insurance is a business proposition, not a personal one,” wrote one agent. Further, if an underwriter has experienced good success in writing business with a particular producer, the underwriter should “not allow a good, long-term relationship to breed complacency,” an agent noted.

No underwriter responding disagreed with the producers' ethical expectations for them (see “Underwriter Ethics” graphic).

One underwriter noted that a “key component of ethics is to place the interests of others above your own. An ethical underwriter has an obligation to both the producer and the insured to advise of obvious coverages needed that were not requested. Underwriters are also in an excellent position to offer risk management suggestions to safeguard the insured's assets.”

Another respondent noted that the ethics of the underwriter, while very important, is not the sole ingredient in the ethical and successful placement of insurance: “The ethics of the underwriter are equally important as that of the client and the producer. Ethical behavior is crucial to success for all parties to the triangle.”

As a final note, an internationally known risk management consultant offered one other ethical duty for an underwriter so that no appearance of conflict of interest would be present: “Do not accept gifts from producers or insureds.”

Peter R. Kensicki is a professor of insurance at Eastern Kentucky University in Richmond, Ky., as well as a member of the Ethics Committee of the CPCU Society in Malvern, Pa.

What's Next For

A Question Of Ethics?

In this and the previous column we addressed the ethical responsibilities of professional producers and underwriters in procurement of insurance. The third side to the insurance procurement triangle is the applicant.

What are the ethical responsibilities of applicants for insurance? Are there similar ethical responsibilities for the applicant as there are for the producer selling the coverage and for the underwriter who must evaluate the risks proposed for transfer?

Please e-mail your responses to Peter R. Kensicki at [email protected], or mail them to Mr. Kensicki at Eastern Kentucky University, 107 Miller Hall, Richmond, Ky. 40475-3101. All responses will be kept confidential.

Reproduced from National Underwriter Edition, April 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.