National Underwriter - October 3, 2011

Your Turn: Reader Comments On The Web

WIth eVeRy aRtICle we publish on PropertyCasualty360.com, we invite our readers to share their thoughts and air their opinions.

E the article “‘40 hours and I’m an Insurance agent!’” led David Berry to comment: “I’ve always lived by this philosophy: take the most challenging and educational continuing-education classes available. that only makes you a better agent. It is sad that someone with a bunch of misdemeanors and a three-day course can get a texas insurance license as long as he can pass the test.”

coverages for the flood-insurance amount
versus the amount of the loan exposure.
Given the october rate increase, the
requirement to purchase this incremental
amount of insurance to get to the
replacement-cost value seems like another
tax on borrowers. I don’t think it is the
government’s responsibility to make sure I
spend more for coverages in excess of the
bank-exposure loan amount.”
the severity has increased along with the
medical cost.”

E our report “nFIP extension In Jeopardy With threat of d.C. Closure” earned this response from Tom: “the big banks are routinely requiring replacement-cost

E the article “Study Says WC Premiums tied to Stock-Market Performance Rather than Claims” elicited this comment from Jmoore: “no surprise at all. Insurance companies have only two sources of income: investment and premiums. If the investments go down, the base premiums have to go up. also no surprise is that while the frequency of claims has decreased,

E the report “Crop Underwriters Say obama tax Plan Cuts Federal Program too Much” provoked sunforester to respond: “With all the loud demands on our government to cut back on its spending, how can farmers be surprised at losing their free money these days? If farmers really want to protect themselves, they need to step up and truly protect themselves with insurance purchased with their own money.” NU

A QUESTION OF ETHICS

continued from page 34

cal decision but rather a business decision.” a client executive for a large broker agrees: “It is a business decision. In third-party claims, these decisions are made all the time, and it should be no different in first-party claims. the indication of a range of value indicates imprecision in value.”

the former risk manager is concerned with overall claims costs that, one way or another, would be passed on to insureds: “a claim that gets settled and closed quickly costs far less than claims that drag on and stay open. In some circumstances, it may be ethical and good business to pay more than indemnity value.”

PROTECTING THE INSURED’S INTEREST

Many other ethical considerations were
presented by those responding. a com-
mon ethical duty noted was to protect the
insured in third-party claims.
the oregon adjuster notes, “as always,
it is important for the adjuster to protect
the insured’s interests in the claim.” an
Indiana adjuster adds, “there is an ethical
obligation so as to not expose the insured
to a judgment in excess of the liability limit
and to notify the insured of the potential
for an excess judgment.”
the d.C. attorney agrees: “one external
factor would be the insured’s desire to settle
within policy limits to avoid an excess judg-
ment. It may also avoid a subsequent first-
party bad-faith claim against the insurer.”

NEXT QUESTION

ETHICAL RESPONSES TO
PAINFUL INSURANCE-
COMMISSIONER DECISIONS

THE DILEMMA: The insurance commissioner in a state in the Northeast recently denied an insurer a rate increase that would have anticipated a 3 percent underwriting gain. The justification of the commissioner was, given the state of the economy, the insurer should not profit at all. What are the ethical actions employees of the insurer could take to minimize the impact of this type of regulatory decision?

Please forward your responses to Dr. Peter R. Kensicki at peter.kensicki@att. net or via mail to his attention at 105 Bittersweet Drive, Richmond, KY 40475. All responses will be kept confidential. Please include your role in the insurance business—agent, adjuster, risk manager.

the Indiana adjuster identifies a duty to
all policyholders: “Insurers have an ethical
obligation to pay what is owed so that premi-
ums for all policyholders are not artificially
increased. although the interests of the in-
sured must be considered, I believe the great-
er ethical obligation is to all policyholders.”
two other comments are worth noting.
the well-known educator writes, “If the limits
offer is made as a business decision to avoid
trial, and the claimant does not accept the of-
fer, the insurer may not be permitted to walk
away from defense of the claim and would be
required to continue to defend the insured. It
may still incur significant defense costs.”

ETHICS SUMMARY

overall the vast majority of those responding generally believe that, ethically, defense costs should not be included in any decision of an adjuster assigned to a claim. however, supervisors and management may ethically decide to include such costs.

the impact of paying more than an honestly determined indemnity value will have an impact on the individual and all insureds. this should be considered in any business decision.

Finally, the interests of the insured involved in any claims must be protected and, as noted by many respondents, the insurer’s interests should never be considered more than the insured’s interests. NU