Insurance Ethics for a More Ethical World: Volume 7

The insurance industry has been marked by exponential growth over the recent decade with more and more individuals and corporations appealing to the long-term security, which this service sector provides. As facts about ethical lapses and outright fraud emerge; however, the refuge that insurance companies were entrusted to provide may not be as embracing as first appears. As insurance CEOs and management teams are paraded before cameras into courtrooms, details about payoffs and kickbacks are disseminated, and financial reporting practices are scrutinized by authorities, public trust in this industry wanes. At best, public perception is tentative in light of recent scandals.

Occasional, highly publicized examples of unethical behavior by executives of major businesses such as the unethical/illegal brokerage and financial reporting practices uncovered recently by New York Attorney General Eliot Spitzer's investigation of the insurance industry may be thought to have arisen from some rather unique set of ethical problems that differ significantly from the ethical dilemmas encountered daily by those working in the business. In reality, they did not. Instead, these highly publicized unethical activities on the part of leading brokerage firms and insurers are shown to be attributable to several of the same key ethical issues identified repeatedly by insurance professionals as presenting the greatest ethical challenges for those working in the insurance industry over the last decade and a half.

American International Group, Inc. (AIG) has recently been charged with reporting bogus transactions that hid losses and inflated its net worth. The New York State Attorney General Eliot Spitzer alleges that AIG inflated reserves used for paying claims by millions of dollars and that AIG's CEO Maurice Greenberg repeatedly directed AIG traders late in the day to buy AIG shares to prop up its price, among other allegations. We examine the accounting errors for which AIG and Greenberg are being charged and analyze the opportunities missed by the auditors to detect problems, within the framework of corporate governance. That is, we evaluate the corporate environment that supported these lapses and provided an environment conducive to the perpetration and acceptance of fradulent reporting. We discuss how corporate governance not only promotes better financial reporting, but provides a level of scrutiny that encourages more ethical behavior at all levels of the corporate hierarchy, and we discuss the imperative for accounting education.

The insurance industry often experiences criticism for unethical and frequently illegal activities. This document suggests that insurers operate in an uncompetitive environment and that the nature of insurer operations leads otherwise ethical individuals in the direction of questionable ethical decisions throughout the operations of an insurance company.

This contribution suggests a preliminary, broad definition of responsibility and presents different dimensions of the concept. Next, the concept of shared responsibility is developed by combining different criteria to a number of typologies. These concepts and typologies are then illustrated with reference to the relationship between insurance customers and the insurance industry. The paper concludes with formulating some next steps for future empirical studies of interdependent insurance marketing and insurance consumer ethics.

The practice of insuring essentially involves the determination and assignment of risk to individuals. Such determinations are made almost exclusively on the basis of statistical models. As such, the determination of an individual's risk in relation to a particular form of insurance, and thus ultimately to the determination of the cost and availability of that insurance for the individual, is made in relation to her inclusion in certain statistical groups. However, a number of questions, both practical and philosophical, can be raised about the way in which an individual is assessed upon the basis of such statistical modeling. In this paper, I explore some of these issues in relation to questions of fairness. I begin by examining the basic structure of statistical risk assessment for insurance purposes. I argue that the underlying ethical concern involved with such cases involves the manner in which the attributes of the statistical groups used for insurance purposes can be said to fairly represent the individual qua individual. As such, I go on to explore the general philosophical issues involved in applying statistical models to individuals and the fairness of using such applications to make determinations about individuals for insurance purposes.

Few issues in business ethics are as polarizing as the practice of risk classification and underwriting in the insurance industry. Theorists who approach the issue from a background in economics often start from the assumption that policy-holders should be charged a rate that reflects the expected loss that they bring to the insurance scheme. Yet theorists who approach the question from a background in philosophy or civil rights law often begin with a presumption against so-called “actuarially fair” premiums and in favor of “community rating,” in which everyone is charged the same price. This paper begins by examining and rejecting the three primary arguments that have been given to show that actuarially fair premiums are unjust. It then considers the two primary arguments that have been offered by those who wish to defend the practice of risk classification. These arguments overshoot their target, by requiring a “freedom to underwrite” that is much greater than the level of freedom enjoyed in most other commercial transactions. The paper concludes by presenting a defense of a more limited right to underwrite, one that grants the legitimacy of the central principle of risk classification, but permits specific deviations from that ideal when other important social goods are at stake.

Health care spending in the U.S. continues to outpace inflation and wage growth, which is likely to keep the burden of rising health care costs in the spotlight. As health care costs increase, health insurers face the challenges of providing quality health care at a reasonable cost. Some health care providers and insurers use economic measures such as return on investment to assess the effectiveness of health care. How does one measure the value of health? What are some of the advantages and disadvantages of using economic measures to evaluate health care?

This paper looks health care costs and who pays for them. What portion of health care costs is borne by employers? What portion by employees? Who does or should pay for health care of people who are uninsured? What is the role of insurance? If people do not have health care insurance, does it matter whether the reason they are uninsured is because they cannot afford it or because they choose not to be insured?

Selvam (2002) belives that the number one ethical dilemma in the U.S. is how to address the almost 40 million Americans who lack health care coverage. With rising hospital costs, even the hardest-working and most prudent persons are at risk. Many workers do not have health insurance and even if they are covered, they may not get what they need. What are some of the ethical issues facing patients, health care providers and insurers? What role should government have in assuring that all people receive quality health care?

Managed care organizations use physician incentives to control costs and ensure their financial viability. While the efficacy of incentives may be questioned, substantial challenges exist for physicians who must balance the well-being of their patients and the focus of their professional training with organizational financial concerns. Many physicians experience difficulty in discussing incentive pay with patients (Pearson & Hyams, 2002), even though patients want to know (Pereira & Pearson, 2001) and tend to trust physicians more who are forthright about the issue (Levinson, Kao, Kuby, & Thisted, 2005). Of interest here are patients’ perceptions of the ethicalness of commonly used physician pay incentives. The results of our findings suggest that patients may view these incentives from a different perspective than health policy experts and physician executives. Specifically, our findings indicate that patients perceive incentives based upon patient satisfaction and clinical efficiency more ethically than incentives based upon revenue generation. These views are significantly related to physician visits. We offer suggestions for future research in light of recent pay disclosure regulations.

This paper examines why ordinary people engage in aberrant consumer behavior (ACB), and pays particular attention to the extent to which consumer perceptions of corporate ‘unfairness’ lead to a response in kind. The study examines five ethical scenarios including insurance claim exaggeration and software piracy, using data from 344 UK consumers. Ajzen's theory of planned behavior (TPB) provides an initial analytical framework. The study also adopts an additional variable, perceived unfairness, referring to the extent to which an actor is motivated to redress an imbalance perceived as unfair.

In comparison to TPB, the study reveals different components of ACB. Furthermore, analysis of variance indicates that consumer perceptions of unfairness by insurance companies provide a significant reason for claim exaggeration. This suggests that ACB is one form of market response to unfair corporate performance. Thus it is argued that an examination of ACB will not only help to understand which ethical aspects of corporate performance might be perceived as unfair, but also to evaluate the extent to which it contributes to a negative perception of particular industries and corporations. The closing discussion considers how a consumer negative response to corporate performance might relate to pricing, product attributes and customer relationships.

Motion pictures can serve as an educational tool to shed light on ethical issues in the health insurance industry. To the chagrin of the health insurance industry, this light has oftentimes been unfavorable, as illustrated in such motion pictures as: Damaged Care (Winer, 2002), John Q (Cassavetes, 2002), and The Rainmaker (Coppola, 1997). In reaction to this unfavorable portrayal, health maintenance organizations have taken action to cast themselves in a more positive light. The objectives of this article are: to demonstrate how motion pictures that feature the health insurance industry can serve as a vehicle to illustrate management concepts such as planning, decision making, ethics, and conflict resolution; and to underscore the interrelationships and mutual dependencies of the ethical decisions, the decision-makers, and the context of the ethical dilemmas. Suggestions on how environmental response strategies can be used to improve public perceptions of the health insurance industry are also provided. The teaching method proposed in this article can be used in undergraduate level and graduate level principles of management, organizational behavior, and ethics courses.

A slight acquaintance with the writings of Walker Percy probably would not lead someone to link his thought to the world of business. Indeed this Catholic existentialist might seem as far from the market place as possible. Nor would Percy's life immediately suggest that this Southern doctor turned writer was either interested in the world of business or had anything of significance to say to those who labor in the business vineyard. It would seem that Percy never had a regular job that enabled him to support himself, his wife, and their two daughters. Can someone so distant from and perhaps disinterested in the world of commerce have anything important to say to those who labor daily as business people? Indeed he can, perhaps precisely because, in his life, circumstances distanced him from the world of commerce and gave him the leisure time to reflect on just what is and what is not important in life.

This paper examines the corporate policies on workplace relationships in the insurance industry. It consists of identifying whether the 48 insurance companies found in the Fortune 500 have any policies that restrict employees from dating each other within their organization and if so, what were these restrictions. In addition, 235 employees in the insurance field were surveyed to determine their perceptions of the positive and/or negative effects of romantic relationships had in their workplace environment. These results were examined from a Platonic perspective with a recommendation for a code of ethics developed from policies existing in other insurance companies and suggested by the current literature.