Ethics is the practice of behaving with honesty and integrity. In the insurance industry, ethical behavior is required of those who sell insurance policies, and insurance companies often come under scrutiny regarding ethical behavior.
Benefits
Insurance is often a confusing topic to the consumer. Ethical practices by insurance companies and agents help ensure that insurers serve the best interests of the consumer. For instance, an agent should sell a consumer coverage he does not need or cannot afford.
Considerations
Insurance companies are not the only ones who could be guilty of unethical behavior. Policyholders who commit insurance fraud to obtain claim payments they are not entitled to are also engaging in unethical and possibly illegal behavior.
Methods
Insurance agents and brokers who sell insurance must adhere to a strict code of ethics when dealing with consumers. In many states, part of the agent licensing requirements includes passing an exam containing questions about ethical procedures for handling money, as well as replacing the policies of other insurance carriers with their own.
Prevention/Solution
One way to determine if an insurance company is committed to ethical practices is to ask a company representative if it is a member of the Insurance Marketplace Standards Association, an organization that promotes ethical practices in the insurance industry. To become an IMSA member, a company must submit to and pass a review of internal and external business practices.
