Académique Documents
Professionnel Documents
Culture Documents
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Ethics 311
Review Notes
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ASSIGNMENT
Educational Objective1
Distinguish between these terms:
Morals
Laws
Ethics
Key Points:
Morals, laws, and ethics form the foundation of ethical behavior.
A. Morals
1. Moral principles and rules of conduct dictate the appropriate response when decisions must be made between right and
wrong, such as decisions between honesty or dishonesty, paying
or stealing, playing by the rules or cheating, and so forth.
2. These decisions generally are based on what feels like the
right thing to do or on what one was taught todo.
3. Moral values come from a number of sources. They are defined
by society, religion, governmental entities, and individuals.
4. Societal peer pressure ensures that individuals and groups
uphold defined moral values.
5. Governmental entities establish rules and regulations to
encourage moral behavior and discourage immoral actions.
a. The business of insurance is highly regulated.
b. Insurance professionals who fail to act in accordance with
applicable laws or regulations are subject to fines or lost
business opportunities, and can even lose their livelihood.
Study
Tips
Remember to register for your
exam by calling The Institutes
at (800) 644-2101.
B. Laws
1. Laws impose a sense of societal decency and order. They exist
to protect people and property and to establish a code of appropriate behavior.
1.1
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Traits of Professionalism
Required Reading
ASSIGNMENT
Educational Objective1
Support the position that insurance practitioners should possess and exhibit the characteristics of
professionalism.
Key Points:
Because a high level of trust is needed for insurance transactions with
the public, a successful insurance practitioner must exhibit professionalism.
A. Traits of Professionalism
Several traits characterize professionalism:
1. High ethical standards
a. A professionals work should always reflect integrity in order
to earn and deserve consumer trust.
b. In the insurance industry, a standard of utmost good
faith exists to ensure the ethical nature of the relationship
between insureds and insurers.
c. An insurance practitioner must act with integrity, be honest
and trustworthy, have a sense of equity and fairness, and
accept personal accountability.
To act with integrity, the insurance practitioner must be
open and candid.
Honest and open communication fosters an authentic
relationship between the parties to the insurance contract as well as with third parties who may be affected by
the contract.
Insurance practitioners cannot be fair with insureds
and claimants if they do not know what constitutes
fairness. A sense of equity allows the practitioner to
consider the needs of all stakeholders.
Personal accountability requires insurance practitioners
to consider their conduct and its influence on outcomes.
Study
Tips
Rewriting key concepts in
your own words can improve
retention.
2.1
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2. Professional competence
a. The insurance practitioner must be knowledgeable about
insurance products, know how different coverage applies
in particular situations, and understand the implications of
risk and its affect on individuals and society.
b. Beyond mere knowledge about these issues is the ability to
efficiently and effectively apply that knowledge to a given
situation for the benefit of all stakeholders.
c. Professional competence includes the ability to perform the
tasks of an insurance professional in a thoughtful, organized
fashion.
d. Professional competence includes a personal awareness of
the level of competence at which the practitioner is able to
work and acknowledgement of limitations.
3. Sense of altruism
a. Altruism is an unselfish concern for the welfare of others.
b. Although insurers strive for profitability, an insurance practitioner must practice altruism when interacting with and
serving insureds.
c. Altruism serves the needs of the individual as well as of
society by reducing burdens to society and stimulating economic growth.
4. Commitment to continuous education
a. Most insurance professionals hold at least one degree of
higher learning and/or certification from a recognized insurance education provider.
b. They also are often trained in specific job functions:
Underwriters must learn how to apply rates, rating factors, and underwriting requirements, and they must
come to understand insurance as a tool of risk management.
Agents must learn the risk exposures faced by a wide
variety of individuals and businesses in order to select
and acquire appropriate coverage.
Claim adjusters must learn skills such as property valuation, negotiation, and investigation techniques and be
able to apply the law to a given set of facts.
c. To perform at an optimum level, an insurance professional
must continually update his or her knowledge in response
to changes in the legal environment, new regulations, and
new statutes.
d. Formal education that requires testing serves to certify the
extent of knowledge gained from the course of study and
qualifies the knowledge of the insurance practitioner.
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
Contingent commission
A commission that an insurer pays, usually annually, to an independent agency that is based on the premium volume and profitability
level of the agencys business with that insurer.
Key
Words
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
ASSIGNMENT
Educational Objective1
Summarize why it is important that insurance professionals maintain high ethical standards.
Key Points:
Because the insurance transaction is based on honesty and trust,
insurance professionals must maintain high ethical standards. The
ethical standards to which insurance professionals must adhere are
rooted in three general areas:
Study
Tips
Pace your study. Dont cram.
A. Regulatory Requirements
1. For an act to be ethical, it must be legal.
2. An insurance professional must understand applicable regulations and maintain knowledge of current regulatory issues
through a lifelong pursuit of continuing education, to know
what is legal.
3. An insurance professionals maintenance of high ethical
standards requires compliance with all regulations. Such
compliance can be complicated, particularly when insurance
operations involve multiple states with multiple regulatory
bodies.
a. Every state has a department of insurance and an insurance commissioner or regulator who is either elected or
appointed.
b. The National Association of Insurance Commissioners
(NAIC) protects the public interest by encouraging consistency among the states regulations.
c. States regulatory needs vary due to the economic activity in
the state, past catastrophic occurrences, or the basis oflaw.
4. Because the insurance product is a financial instrument, the
industry is considered to be part of the financial services sector.
a. Insurance being regulated at the state level, while banks
and other financial institutions are regulated at the federal
level, can generate regulatory complexities.
3.1
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
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c. Insurance rating systems also encourage social responsibility. The opportunity for preferred rates motivates
individuals and organizations to become more responsible
in their actions.
d. Insurance company investments also serve to demonstrate
insurers awareness of their social responsibility.
By investing money in municipal bonds for the building
of roads or other public projects, for example, insurance
professionals play a key role in improving the lives of
others.
Insurers can also foster innovation and new industry
through investment in corporate equities and bonds.
4. By developing more diverse insurance products and then
making these products available to customers at a reasonable
price, insurers enable more consumers to purchase the products, enhancing economic confidence and setting the scene for
even more innovation to improve the world.
C. Economic Outcomes
1. Insurers collect premiums in exchange for the promise that
they will pay for covered losses. This creates a relationship of
trust and establishes an insurance professionals fiduciaryduty.
2. In general, individuals and organizations that demonstrate high
ethical standards are more successful in the longterm.
a. They avoid legal issues because their activities comply with
applicable laws and regulations.
b. They avoid allegations of negligence that could lead to an
action intort.
c. They honor their contracts and perform as agreed.
d. The organization is free to focus their attention on their
core business goals.
3. Both highly skilled employees and consumers are attracted to
ethical organizations.
4. The net result of maintaining high ethical standards from an
economical standpoint is a reduction in operational expenses
and reduction of costs relative to fines or legal defense.
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or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
ASSIGNMENT
Educational Objective1
Give examples of an insurance professionals ethical responsibility to these groups:
Insurers
Policyholders
The public
Key Points:
Ethical responsibilities arise from duties owed to stakeholders. Insurance professionals must be cognizant of the ethical responsibilities
owed to three disparate groups:
A. Insurers
1. Insurers must provide customer service and protection from
harm while earning a fair profit. They do that by assisting consumers in managing their risk exposures.
2. Insurance professionals have a responsibility to support the
goals of the insurers they represent.
a. For example, the claim adjuster must consider and evaluate the plaintiffs pain and suffering, weighed against an
insurers fair offer in settlement of theloss.
b. Agents must not only sell policies but assess the profitability
of prospective policies and consider prospective policyholders prior loss histories as well as their level of commitment
to safety and loss control.
3. Insurance professionals must weigh and fully consider competing interests to ensure that decisions are ethical.
4. Insurers have direct contact with the public at two primary
contact points:
a. When the insurance coverage is purchased
Agents and underwriters have an obligation to review the
policyholders risk exposure carefully to place appropriate
coverage.
Study
Tips
Many of the exam questions
are based on the Key Words
and Phrasesremember to
review them thoroughly.
4.1
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
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Moral hazard
A condition that increases the likelihood that a person will intentionally cause or exaggerate a loss.
Key
Words
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Ethical Dilemmas
Required Reading
ASSIGNMENT
Educational Objective1
Given an ethical dilemma, identify:
The stakeholders
The motivation for the actions taken
The relevant ethical issues
Key Points:
To resolve an ethical dilemma involving more than one ethically
proper answer, the insurance professional must identify the stakeholders, determine the motivation for the actions taken, and analyze all
the relevant ethical issues.
A. Stakeholders
1. The first step in resolving an ethical dilemma involves identification of the stakeholders. The question to ask is, Who are
the stakeholders, and what are their rights?
a. The insurance professional should first consider those
directly involved in the situation that produced the
dilemma.
b. The insurance professional also should consider persons
directly affected by the alleged improper behavior, as well as
those who would not have been affected if the ethical lapse
had not occurred.
c. Innocent bystanders also may have unwittingly become
involved in the dilemma.
2. Once the stakeholders have been identified, accurate information about them must be obtained, requiring scrutiny of the
source of the information for reliability and relevancy.
3. The insurance professional must determine who is responsible
for the resolution of the dilemma.
a. The person ultimately responsible for resolving an ethical
dilemma may not be the insurance professional.
Study
Tips
Are you interested in joining a
formal class on this material?
Go to our Web site,
www.TheInstitutes.org, for a
complete listing of public
classes.
5.1
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or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
This material is solely for use in connection with the Ethical Guidelines for Insurance Professionals course. The material is copyrighted and is used with the permission of the copyrightholder
for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
ASSIGNMENT
Educational Objective1
Apply these theories to an ethical dilemma using the decision-making tools:
Rules-based
Situation-based
People-based
Key Points:
Insurance professionals must exercise independent judgment and
reasoning in addressing ethical dilemmas while relying on accepted
ethical approaches and applicable codes of ethics. Decision-making
theories guide the decision process from three perspectives:
A. Rules-Based Decision Making
1. The insurance industry is based on law, beginning with the
insurance contract, or policy, itself.
a. Contract law governs the formation and performance of the
insurance contract.
b. Tort law applies to determining a wrongdoers responsibility
when an accident or other harmful event occurs.
c. State and federal laws in the form of regulations must be
followed when an insurer sets rates or reports financial
information.
d. Licensing laws dictate the minimum requirements for
applying for, attaining, and renewing licenses.
2. When using rules-based decision making, the insurance professional must consider whether any laws, regulations, or
standards apply in a given situation. The insurance professional
is duty-bound to follow the applicable rule if it prescribes mandatory conduct.
3. Rules-based decision making is based on the perceived duty
owed and on what should be done. It does not consider
individual situations and makes no accommodations for unexpected or unexplained events.
4. Rules-based thinking is relatively easy and quick to apply.
Study
Tips
After you complete the last
assignment in the Review
Notes, you should be ready
for the exam. For complete
information regarding exam
dates and fees, visit our
Web page,
www.TheInstitutes.org/forms,
where you can access and
print exam registration
information.
6.1
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5. Problems can occur when a decision maker selects an inapplicable rule or when the rules conflict.
B. Situation-Based Decision Making
1. Also known as ends-based, situation-based decision making
analyzes the potential outcomes of possible decisions given the
circumstances.
2. It considers who will benefit from, and who will be damaged
or hurt by, a decision, and the extent of the ramifications of
potential outcomes.
3. Situation-based decision making also requires placing group
needs over individual needs. The insurance professional should
evaluate possible results and determine the best outcome for
the broadest group.
4. Because the situation-based decision-making process requires
a certain degree of speculation, outcomes for similar circumstances may vary depending on the assumptions made by the
decision-maker.
C. People-Based Decision Making
1. People-based decision making is founded in the principles of
philosophical and religious schools of thought and rules for
living that embody the Golden Rule: Do unto others as you
would have them do untoyou.
2. This approach requires the person making the decision to consider the personal circumstances of any decision and calls for a
degree of empathy, including the ability to consider a decision
and its outcome from someone elses perspective.
D. Other Tools for Ethical Decision Making
1. Codes of ethics
a. Insurance organizations have developed codes of ethics,
sometimes referred to as codes of conduct or codes of
market conduct, to help resolve conflicts.
b. These codes support compliance with laws and regulations
and provide guidance in ambiguous areas when decisions
are not clear.
c. A code of ethics generally includes a statement of the organizations values.
d. By articulating values and providing examples or suggestions for conflict resolution, ethics codes help promote
consistent management standards and practices.
e. A code of ethics can increase public trust and enhance an
organizations reputation and that of all of its stakeholders.
f. From legal and economic perspectives, a code of ethics can
offer protection against lawsuits.
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
Key
Words
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
ASSIGNMENT
Educational Objective1
Summarize the barriers to making ethical decisions.
Key Points:
The insurance professional must identify barriers to ethical decision
making when faced with an ethical dilemma. After identifying barriers, the insurance professional can analyze their influence on the
decision-making process. By doing so, the insurance professional then
can support the organizations goals of profit and social welfare maximization.
Study
Tips
Set aside a specific time
each day to study.
A. Physical Barriers
Actual physical barriers can prevent an insurance professional
from reaching an ethical decision.
1. During the information-gathering phase of the decision-making process, the insurance professionals investigation may be
hampered because of destruction of key documents, unavailability of witnesses, or even threats to personal safety.
2. A decision-makers needs, such as the need for employment,
also must be considered and may serve as a barrier to ethical
decision making if an ethical position might threaten ones
employment.
a. Jobs have been lost and careers derailed by ethical professionals who have come forward with truth when faced with
ethical conflicts.
b. Negative reactions to ethical behavior led to the creation
of federal whistle-blower statutes to protect individuals who
report unethical activities.
B. Procedural Barriers
Procedural barriers arise when insufficient guidance is available
regarding ethical behavior, when organizations have not articulated their values clearly, or when internal and external pressures
prevent insurance professionals from following codes of conduct.
7.1
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
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i. Promotion of constructive social change by raising awareness of ethical issues and articulating means for dealing
with ethical dilemmas
j. Promotion of market efficiency by rewarding the most ethical producers for adhering to the code in the performance
of their duties
3. An insurance professional who fails to follow an organizations
ethical code may consequently act unethically.
4. Weak attitudes toward ethical practices can prevent creation of
a code of ethics and/or undermine its support.
C. Administrative Barriers
1. Administrative barriers occur under different conditions:
a. When tools or processes for making ethical decisions are
not known
b. When the processes are cumbersome or complicated
c. When insurance professionals fail to take the appropriate
steps or actions necessary as outlined in a code of ethics
2. The Sarbanes-Oxley federal law requires that publicly traded
companies establish codes of ethics, create anonymous hotlines
for reporting unethical behavior, and identify principal ethics
officers.
a. Most privately held companies and other organizations,
such as not-for-profit and charitable groups, also adhere to
these requirements.
b. This compliance may have little or no impact on organizational culture.
3. If an organization harbors a culture of greed or noncompliance
with regulations, administration of a code of ethics will be difficult, if not impossible, because of the pressures of that culture.
a. A profitable organization can foster a culture of greed, creating an atmosphere that prevents anyone from questioning
the organizations business practices.
b. If executive management does not support an ethics code,
an employee reporting unethical behavior may find the
reported information is ignored.
4. Some stakeholders believe that loyalty to the organizations
processes and procedures is more important than correcting
ethical behavior, especially when knowledge of the unethical
behavior becomes public and the organization suffers financial
setbacks because of the report.
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
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5. After a code of ethics is created, it is important for the insurance organization to constantly emphasize the beliefs outlined
in the code and update the code as situations and market conditions dictate. If the organization does not do so, the code may
be circumvented, or possibly deemed outdated or archaic.
6. Other administrative barriers also pose problems.
a. Employees may focus their attention on production and
revenue generation rather than following procedures that
support the highest ethical standards.
b. Suspicion that a companys anonymous hotline is not,
in fact, anonymous could cause an employee considering
reporting unethical behavior to fear becoming a victim of
retaliation at a laterdate.
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or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
ASSIGNMENT
Educational Objective1
Given an ethical dilemma, apply Ethical Guidelines for Insurance Professionals to arrive at a resolution.
Key Points:
Ethical Guidelines for Insurance Professionals consists of seven individual Canons that each prescribe a specific goal for all insurance
professionals to strive to achieve:
A. Canon 1Altruism
1. Canon 1concernsthe public interest and the supporting roles
of altruism and ethical obligations asthe backboneof thecode.
2. Nothing in Canon 1 or the entire code sets or suggests standards for legal relationships orlegal duties.
3. The essence of Canon 1 is altruism, or unselfish concern for
the welfare of others (selflessness).
a. In the context of ethics, it is the doctrine that the general welfare of society is the proper goal of an individuals
actions, as opposed to egoism.
b. One application of this canon would be to conflict-ofinterest situations that can harm both the organization for
which an insurance professional works and the public at
large, particularly other insureds.
Study
Tips
Read How to Prepare for
Institute Exams to learn more
detailed study tips. Download
a copy from our Web site or
call Customer Service to
request one.
8.1
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for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
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This material is solely for use in connection with the Ethical Guidelines for Insurance Professionals course. The material is copyrighted and is used with the permission of the copyrightholder
for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
Fiduciary
A person or entity that holds a position of trust, manages another persons or entitys affairs or funds, and has a duty to that person or entity
to act in a trustworthy manner.
Key
Words
This material is solely for use in connection with the Ethical Guidelines for Insurance Professionals course. The material is copyrighted and is used with the permission of the copyrightholder
for the purpose of this educational program. The material may be printed or viewed online by users of this course, but further distribution in whole or in part to unauthorized users in electronic
or print form is strictly prohibited. Copyright American Institute For Chartered Property Casualty Underwriters and subject to all copyright laws.
ASSIGNMENT
Educational Objective1
Apply ethical theories and decision-making tools, including the Ethical Guidelines for Insurance Professionals, to
resolve these kinds of ethical dilemmas:
Conflict of Interest
Privacy
General business
Key Points:
To successfully complete the first case study, students should be
familiar with the Code of Professional EthicsEthical Guidelines for
Insurance Professionals, identify each canon that might apply, and
consider the situation within the context of each applicable canon.
To successfully complete the second case study, students should use an
ethical dilemma decision-making flow chart.
To successfully complete the third case study, students should follow
these steps:
1. Identify the problem
2. Gather information
3. Look for an applicable code or standard
4. Determine who is responsible for resolving the conflict
5. Consider whether there is a duty or loyalty to uphold
6. Evaluate the dilemma from various perspectives
7. Decide on a course of action or inaction
8. Monitor the outcome of the decision or actions
9. Learn from the experience
Study
Tips
Have you contacted The
Institutes to schedule
an exam?
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9.1