Trust in insurance has to be earned, by doing the things that build a firm’s trustworthiness. The four pillars of that trustworthiness are competency, reliability, honesty and goodwill. And the framework for all that trustworthiness activity is defined by:
- the purpose the firm has set for itself;
- the code of ethics that interprets that purpose into standards of behaviour;
- the ethical risks and targets that guide decisions.
These are central to guiding your firm’s ethical culture so that it supports its strategy. Remember the saying – “culture beats strategy, every time”. What this means then is that just as much as your firm prepares its strategy, it also needs to prepare a purpose and code to support its delivery, and understand the ethical risks it could face.
We’ll explore these three components in a little more detail below…
Purpose and Values in Insurance
Many insurers have developed a strategy and built a business model to deliver it. In so doing, they have formulated, either explicitly or implicitly, what their purpose is. So purpose is not something new to the sector. The big change happening now is while most insurers had an implicit purpose, they now need to be explicit about it.
With ethical values, the situation is different. Most insurers have established what their ethical values are, and they like to talk about them in the ‘about us’ section of their websites. All very clear and open. Unfortunately, being open is not the same as being ethical, because of the ‘say-do gap’. Some insurers have a set of explicit ethical values, but may work to a set of quite different implicit ethical values.
The change happening now is twofold. It’s about the extent to which that purpose and business model are aligned. And it’s about the extent to which the ethical values people are working to are the same as those the firm expounds. In other words, the elimination of the ‘say-do gap’ and the reputational exposures that go with it.
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Ethical Risks and Objectives
Insurers work in a complex landscape of ethical risks. Some of those risks are permanent and obvious, like conflicts of interest (that can sometimes make firms complacent about them though). And other ethical risks are novel and emerging, like those around data ethics.
What the sector understands though, is that ethical risks have a habit of rearing their heads and making headlines. The eventual cost is often measured in tens of millions, but that seems small compared with loss of reputation and trust.
What we’re increasingly seeing are people from outside the sector challenging insurers on the ethics of some of their practices. The sector needs to be better prepared for this, ready to engage before situations escalate. A good ethics risk radar would signal this, enabling more discussion and less disruption. Calibrated with expectations as well as prioritisations, it helps bring situations under control.
The natural follow-on from any risk assessment is of course a set of controls and targets to manage the key risks. Ethics is no different. Yes, setting targets for ethics can seem tricky at times, but so long as you’ve done your work on ‘issue maturity’, then the expectations will have been defined around which targets can be structured, numeric or otherwise. What often makes a big difference is having an independent eye on hand to help in a ‘critical friend’ role.
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Codes of Ethics
Research I undertook in 2018 found that insurers’ approach to codes of ethics was hugely variable. It stretched from ‘we do not have one’, to long, detailed documents covering a lot of issues. Overall, the sector came across as defensive and slow. Codes seem to have been a focus of attention and then left to gather dust.
Some may say that as a firm’s purpose and values are invariably steady, long term things, why should codes of ethics need regular attention? It’s a reasonable point, but one which fails to recognise two things. Firstly, ethical risks change, at all levels that firms are exposed to. And secondly, expectations on firms change too.
This brings us around to a key point – who are codes of ethics for? Employees of course, but one most insurers fail to recognise, is the consumer. After all, who is going to be experiencing the impact flowing from all those decisions and behaviours with a firm, through the products, prices and settlements that result.
Codes of ethics need to be kept up-to-date and relevant. When they are, employees are more likely notice them and pay attention to them. Customers are more likely to think of the firm as one they could trust. So make sure your code of ethics is accessible, relevant and practical. It’ll make a difference.
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