Ethical Risks and Objectives in Insurance

Ethical risks in insurance create exposures for the firm both financially and reputationally. They emerge in two ways: through decisions and behaviours within the firm, and through developments and expectations in the insurance market and in wider society. The challenge for an insurance firm is to develop a schedule of ethical risks that is both objective and prioritised to reflect the needs of the business and its key audiences. This schedule of ethics risks should cover...

  • market level risk – this brings in the broad ethical concerns associated with the market your firm operates in, that could affect your firm either directly or indirectly;
  • firm level risk – this recognises the influence of the firm’s strategy, processes and culture on the ethical risks it faces;
  • employee level risk – this brings in how the firm manages individual employees and the decisions and behaviours arising from this.

Calibrated then through prioritisation and the level and maturity of expectations, these risks can then be fed straight through into your process for developing ethical objectives.


A Forward Looking Perspective

It’s common for insurers to have a code of ethics, but less common for them to have a structured assessment of ethical risks relating to their business. This is a problem, for those codes needs to address the ethical risks being faced by the firm. If it doesn’t, key audiences will start to question what sort of commitment that firm has actually signed up to. And when that happens, the insurer moves onto the backfoot when it comes to ethics. Not a great position from which to deal with challenges as they arise.

Knowing your firm’s main ethical risks helps you move from a hindsight view of the ethical challenges being faced, to a forward looking perspective that helps your firm prepare controls to contain the problem and reinforce the right attitudes around the issue. It offer those in charge the opportunity to set out a position on leadership on ethics, for both themselves and their firm.

Assessing your ethical risks is not straightforward though. To be done well (and why do it badly anyway), the business needs to turn a critical eye to what it is doing and ask itself some serious questions about what it finds. It requires quite a bit of honesty to see yourself as others see you. However it is only when you do so, that the situation reveals its true nature. And at that point, you can then address it in meaningful ways.

There are three things to particularly watch out. Firstly, beware of setting too narrow a scope for your ethical risk assessment. Secondly, remember that your firm has many good people, but also that good people can sometimes make poor decisions. And thirdly, listen to your own people, for they’re often aware of the ethical problems circulating around your business. 

This free guide will help you to identify your firm's ethical risks, prioritise them and calibrate your commitment.  

The Big Ethical Challenges

Every year, I prepare an overview of what I see to be the big ethical challenges for insurers in the year ahead. It's influenced by the big things already on the radar, and the trends from a range of emerging issues. Here are my overviews from the last two years....

The Big Ethical Challenges of 2021

The Big Ethical Challenges of 2020  

Many insurers rely on their three lines of defence to track ethical issues. It's not as reliable as they think though...

The Three Lines of Defence is not Working for Insurers


Getting Started

Here is some 'food for thought' for those at the start of their ethical risk assessment...

7 Reasons Why Assessing Ethical Risks is a 'Must Do' for insurers 

Where do You Start Looking for Ethical Risk?

Insight / Guide

Conflicts of Interest 

Conflicts of interest are an on-going feature of every insurance business. And that means that a proper understanding of COI risk is essential, in terms of both scope (where firms often fall short) and depth. This free guide will help you with this...    

How to Assess Conflict of Interest Risk


Horizon Scanning

I help insurers to explore the ethical challenges and trends that their business is likely to encounter. A key part of this is guiding them through the expectations on them to address an issue. This is often done as part of a small team, bringing together a planner, an operations person and myself as an independent eye.  

This ethical landscape for insurers contains both opportunities and risks. My role is to bring in an external perspective so that a balanced programme can support the firm's plans. Often I'm asked to give a second opinion on a set of targets or interpret output coming from a set of metrics. 

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


Setting Ethical Targets

These two guides will help you to plan the next steps for your ethics programme. Just click on the cover to go t othe download page... 

ethical targets
measuring ethics

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