A property underwriter cited an example of an orphanage in a flood zone that would have to close due to an unaffordable premium unless someone “modified” the flood report. Society and the children would be better off with the orphanage, and there would be a small chance the insurer would be harmed.

However, he wrote, “insurance is governed by utmost good faith with relevant facts disclosed without concern about where the facts take us. Without that trust, risk and premiums increase for all. I do not believe it is ever ethical to be unethical in the insurance business.”

A Midwestern operations manager agreed: “We have a duty to our policyholders and owners to conduct ourselves in an ethical manner. Rates reflect losses and must be based on claim settlements appropriate to the merits of the claim. I cannot think of a claims example where unethical decisions are ethical.”

An insurance executive from Florida added additional support: “I can see instances where lying to save someone's life or protect an innocent person would be acceptable in dire circumstances. However, these situations do not arise during the course of a normal insurance transaction.”

He added that “insurance is based on trust that the company will make good on its contractual promise to pay if the premium is paid. Unethical behavior destroys that trust and cannot be tolerated or accepted.”

An insurance attorney was very clear: “In the insurance business it is NEVER ethical to be unethical. Never say never, but I cannot think of any examples to the contrary.”

He added that “conducting any part of the insurance business is a privilege, not a right or entitlement. Most clients expect ethical behavior and we should, too. We should reject doing business with unethical clients, and while that may be costly, maintaining ethical stability should be paramount. There is only ethics, and one cannot separate personal lives from professional lives. Unethical behavior follows the person, not the job.”

The respondent concluded that “in the final analysis, no unethical act can ever be rationalized as ethical behavior regardless of the motivation or outcome.”

The speeding example in the question was rejected by a large number of respondents. For example, a Florida insurance consultant noted: “Ethics are founded on 'who you are' and laws on 'what you should do.' Ethics is broader, has a global application and is not confined to legal rules and regulations. Ethics cause you to do the right thing.”

This respondent added that “failure to disclose information relevant to a risk or payment of an uncovered claim for humane or compassionate reasons, while seemingly justified, cannot be considered ethical behavior. It is not ethical to be unethical in the insurance business or elsewhere.”

The other side presented situations where they believe an unethical decision would be ethical. One such straightforward response was from an insurance education director: “To help a grieving parent or loved one, it is always fine to say something that would make them feel better even if it was a white lie. Some folks need to remember the good in others and the truth could always wait in the wind.”

In a similar vein, one person wrote: “A priest was asked the difference between a sermon and a eulogy at a funeral. The priest replied, 'The sermon must be the truth.'”

A residual market executive cited an example of an agent considering representing themselves to an insurance company as the insured to assist the insured with a claim or policy issue. The agent believes it is the best way to resolve the situation and that acting as the insured will result in a better response. “This could be that time to be unethical and misrepresent yourself,” the agent wrote.

A Pennsylvania educator and insurance consultant noted that while contracts sometimes clearly exclude certain losses, the situation surrounding the loss may be such that the claim should be paid.

“I recall an incident when an estranged husband, not living at home and angry with his wife, burned their home,” this respondent noted. “Both husband and wife were named insureds, and an exclusion clearly eliminated coverage if either named insured deliberately caused the loss. The innocent wife would be penalized. In my opinion, it would have been ethical for the insurer to acknowledge the technical application of the exclusion but pay the claim to the wife.”

A Pennsylvania underwriter used a similar argument to justify an otherwise uncovered auto loss: “A mother accidentally locks her very young child in the car on a hot day. The husband is an hour away, a locksmith can be there in 45 minutes, and the fire department strongly suggests doing anything to get the child out of the car immediately. The mother smashes the window to remove the child.”

Again, a deliberate act exclusion applies to the comprehensive or other than collision loss, noted the underwriter, while reporting that “if a passerby or the fireman had broken the window, there would be coverage, but there was no coverage for the mother's act and the adjuster denied the loss. On review, the insurer reversed the decision and paid. Sometimes a 'right' coverage decision is the 'wrong' decision. I guess this speaks to situational ethics.”

A New York broker identified these types of situations this way: “One has to define what is either ethical or unethical because there are shades on the spectrum open to different interpretations by different ethical people. What is clearly unethical to one is ethical to another.”

He called for human judgment in decision-making, citing this example: “A contractor operating north of New York City may do a favor and help someone in the city once every five-to-10 years. A computer model underwriting program will reject any applicant who 'works in NYC.' I do not believe 'once in five-to-10 years' qualifies as 'works in NYC.' Yet if I strictly interpret the phrase, an excellent risk will be rejected. Oh, for a human being to whom I could explain this insignificant incidental exposure and ethically and morally have the contractor insured.”

An Arizona underwriter had similar views: “Unfortunately, ethics is in the eye of the beholder. While it seems ethics are a set standard, it doesn't always work out that way. Sometimes a strict ethical 'standard' must be ignored and a decision made based on right or wrong.”

He gave two examples. The first involved a potential technical violation of the law. “An insured with a six-figure premium is paying less because the agent contributed some commission to reduce the premium. This may be a violation of an anti-rebating law. But the client, the agent and the insurer benefit by providing the best insurance and risk management program available. This is an exception that should be made, and I do not see it as unethical.”

His other example involved an underwriting manager with a bias against a class of business. “An underwriter aware of this bias, perhaps based on verbal instructions relative to writing this class of business, is required to decline the risk. The underwriter could 'mentor' the agent to appeal an actual or potential declination to a manager further up the ladder, who would judge the risk on its merits and not on prejudice for the class. This, too, is not unethical, in my opinion.”

An anonymous respondent provided this example of what they considered an ethical yet unethical decision: “A risk must be rejected only because of redlining by an insurer. An underwriter will be unethical if he or she rejects the risk because redlining is illegal. The underwriter will be unethical if it accepts the risk because that is a clear violation of an underwriting rule. I believe the proper, yet technically 'unethical' decision, is to accept the risk if it is otherwise qualified.”

An Indiana claims executive responded that “it is okay to break the law or violate a company rule if the law or rule didn't contemplate the current situation, and the behavior is in the best interest of the parties involved.”

This respondent cited an example “from the early days of the self-storage business. Originally such facilities were classified and rated as classic warehouses. Some underwriters decided to independently rate them based on the actual risks rather than traditional warehouse class risks. Having said that, one needs to be very careful before going down that road. If you wouldn't want your action as the lead item on Action News, your action is probably not ethical in any event.”

An association executive began his response: “Your question is paradoxical. By definition an act cannot be ethical and unethical at the same time–just as something cannot be hot and cold simultaneously. But the question gets to the heart of ethical absolutes versus ethical relativism.”

He noted that many scholars searched for absolute ethical standards by which all actions could be measured–much like we have in mathematics or physics. This is, in part, why ethical codes are developed to identify what actions are either ethical or unethical. “What conduct is not congruent with the code is 'unethical' by definition.”

He then cited an example of the use of deception, which is generally considered unethical. “Wasn't it ethical to lie to a Third Reich SS officer asking if you are hiding a Jew in your home? I believe that while lying to the SS officer would be unethical, being unethical in that case was the right thing to do.”

He concluded that “in a perfect world, what is ethical would always be moral. But ethics in its application today is more about rules of behavior, while morals remain about right and wrong conduct.”

In summary, the two sides are not that far apart. Almost everyone would agree that based on ethics codes as written, and assuming that the code defines a breaking of a law as unethical per se, violating any law or established rule of conduct to which we have subscribed is unethical.

However, as the association executive noted, we do not live in a perfect world where moral conduct and ethical conduct are always in sync. Therefore, while it may not ever be “ethical to be unethical,” it may be more important to be moral and, despite the rules and the consequences of violating an ethical code, to do the right thing.

In other words, it is more important in some instances to be moral rather than to be ethical.

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. He may be reached at [email protected].