Ethical decision making is the best response to individual accountability

  • 18 November 2020

The rise of individual accountability has raised concerns amongst insurance people about the consequences of getting something wrong. And this is being heightened by the complexity of issues like fairness and discrimination that the regulator is paying close attention to. One alternative to sleepless nights is to strengthen your people’s capabilities on ethical issues like these. This doesn’t mean everyone becoming experts in fairness and discrimination though. What it does mean is insurance people being familiar with, and comfortable applying, ethical decision making.

Three things have changed in recent years to make this a more important capability than most insurers realise. Firstly, the regulator has shown that it is prepared to extent their accountability net to deal with specific issues. The introduction of an attestation provision requiring confirmation from a senior manager that the firm’s pricing practices comply with new rules is an example of individual accountability as a regulatory device.

Secondly, the regulator’s growing appetite for data (again evidenced in the pricing review) has increased their ability to identify the impact of individual decisions, and the people making them. And the FCA is confident about this, as evidenced by their reassurances in 2019 to the UK Treasury Select Committee.

And thirdly, and more generally, I think regulatory attitudes have changed. Practices seen as acceptable say four years ago now being seen as at least questionable, potentially unacceptable. This is down to their growing realisation that data and analytics have been driving some insurance practices beyond the bounds of regulatory tolerance.

Bridging the 'Thinking and Doing' Gap

How then should insurers respond? One approach is to raise awareness of fairness and discrimination amongst relevant staff. And this is important, but not enough. It’s one thing being aware of an issue, but it is quite another thing to move from awareness to action, from thinking to doing. The difference lies in the outcomes that the action generates, which, after all, is what matters.

Another response can lie in good policies and procedures. Again, these are important, but not enough. Policies and procedures do guide people but also suffer from two weaknesses. Firstly, they can feel like a standard that people have to attain, but which can often feel unattainable. To use an analogy, they tend to be too much about the top of the ladder, and not enough about how to climb it. And secondly, they can sometimes become just ‘things on paper’, progressively ignored in the hurly burly of business decisions.  

That’s why for every policy on conflicts of interest, fairness or equalities, for every piece of discrimination training, there needs to be equal attention to ethical decision making. It is the ability to make decisions within your firm’s and your profession’s ethical framework that can often make the difference between the ‘thinking about it’ and ‘doing something about it’ that I mentioned earlier.

Four Elements to Ethical Decision Making

I see ethical decision making being built around four elements:

  • An understanding of ethics and how it applies to the insurance sector
  • The core knowledge and skills to deliver ethical decision making
  • Techniques for dealing with more complex situations: in other words, ethical dilemmas
  • How to provide leadership on ethics, whether you’re a team leader or board member.

What these four elements together deliver is a grounding in the various layers of ethical decision making that can take you from recognising a situation, to responding to it. And as some of you will be aware, I’ve put together some learning resource on each of those four elements. The focus of this learning resource is twofold: it’s based around insurance, and it’s based around that vital leap from ‘thinking’ to ‘doing’.

I believe they fill a gap in most learning provision within insurers, which when it comes to ethics tends to lean too much towards ‘this is what we want you to do’ and not enough towards ‘this is how you do it’. And in these times of increased individual accountability, that’s a gap that’s becoming ever more important. To read about what each of these four courses cover, click on this link to go to the page with the download link. If you have any queries, feel free to get in touch for an informal chat.   

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  1. Why insurance executives need to think like a decision architect
  2. Why cognitive diversity can boost ethical performance

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