The Ethical Risks in Insurance Claims

Claims functions face some of the most complex ethical risks in insurance. That’s because the claimant knows about their loss, and the insurer knows about the policy’s cover. This mutual imbalance of information creates ethical tensions that require careful management in order to deliver a trusted claims service.

The main ethical risks in insurance claims fall into these four categories…

  • Conflicts of interest
  • The question of fairness
  • Data ethics and privacy
  • Ethical culture

None of these four risk categories are new to insurers, yet the scope and depth of the ethical issues they encompass is often under-estimated by insurers. 

Guidance

Conflicts of Interest in Insurance Claims

Conflicts of interest in insurance claims are the most fundamental ethical risk in insurance. This is because the insurer has to manage the conflict between their public interest in providing a fair settlement, with their private interest in operating a profitable business. And because there are always claims to be settled, and there are always performance results to be achieved, conflicts of interest are an ethical risk that just never goes away.

And because it is one of those ‘always present’ risks, the question is less about whether you can fix it and make it go away, and more about how well you are managing them. This realisation needs to be integrated into your conflicts policy. I’ve seen some that only talk about potential and perceived conflicts of interest, and not actual conflicts of interest. These insurers had a blind spot that often took a lot of work to put right.  

 So has your claims function undertaken an assessment of conflicts of interest risk? It needs to reach upstream through your supply chain, and downstream through brokers and customers. Here’s a free guide on how to do an assessment of conflict of interest risk. What you achieve through such an assessment will ripple through your claims function, influencing many associated trust issues such as fairness and privacy.

Opinion

The Fairness of Insurance Claims 

The fairness of insurance claims is a perennial question that hangs over the relationship between customer and insurer. Customers often talk about the insurer not offering them a fair settlement. And insurers often talk about customers wanting more in settlement than is fair. This has created a narrative of mistrust that has hung over the sector for a long time.

In response, the regulator has had a rolling programme dedicated to the fair treatment of customers. And insurers have invested heavily in counter fraud operations. Yet that narrative of mistrust remains. Indeed, far from being tackled, it feels more weaponised. More is clearly needed.

I foresee growing regulatory scrutiny of the fairness of claims. Instead of sweeping aside the ‘fair treatment’ programme, they will use supervisory technologies to evidence good and bad practices. Some claims functions could find themselves on the back foot and on a steep ethical learning curve.

There are many good people in insurance claims. In recent years, they’ve learnt the language of digital, and the language of counter fraud. Now they need to learn the language of fairness, and how to operationalise its delivery.

Quote  |  The CEO of the UK Financial Conduct Regulator, 2013

So for leaders today – both in business and regulation – the dominant theme for 21st century financial services is fast turning out to be a complicated question of fairness.

Insight 

Assessing the Fairness of a Claims Service

This framework allows you to break down that "complicated question of fairness" in a simple but structured way... 

How to weigh up the fairness of your claims service

Article  

Ethical Risks from Data and Analytics 

Data and analytics are helping deliver some important changes in how claims are serviced and assessed. Yet they are also introducing some pretty unique ethical risks. In this article, I set out twenty data driven changes that are generating ethical risks in insurance claims. Use it to map out those developments you should keep an eye on.

20 Changes influencing the Ethical Risks in Insurance Claims

Before reading the article, why not list those changes you can think could have an ethical impact on insurance claims. You can then compare it with my '20 changes'. 

Insight 

"The big reputational risks that insurers will face over the next 3 years lie in claims and counter fraud" 

From developments I read about, and from practices I’m told of, I believe these reputational risks are not fully appreciated by insurers, and therefore are not being properly assessed and controlled. 

This 'Insight Paper' will help you to identify where you need to take a closer look. It outlines the developments and practices that form the backbone of this reputational risk, and it suggests steps that insurers can take in response. Download it for free below - no email required. 

Insight 

Managing Culture to reduce Ethical Risk

Claims people make lots of decisions every day and a strong culture helps bring consistency to them. Yet that strong culture can introduce behaviours that generate ethical risk. This is the field of behavioural ethics and four behavioural risks are worth noting by claims and compliance people. I explore them in these four articles...

Consultancy

A Different Perspective

I often work with insurers to help them see complex issues from a different perspective. My insight and lateral thinking help them gain an extra level of understanding, orientated around ethics and trust. Their executives are then able to make more informed decisions, based upon a more complete picture. Some firms have retained me for a number of years, while others use me on an occasional basis. 

Get in touch if you'd like to have an informal chat.

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