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The question of ethics in an insurance company arises recurrently. A good business is generally enhanced by ethics. Ethical practices are therefore crucial aspects of every insurance company management and leadership. Abramowitz & Les (1998) says that “at least every insurance company has an image problem” (p. 5). The relationship between an insurance company and its clients, other companies and organizations they transact with is very vital and should be governed by corporate and ethical principles. These ethical principles and moral practices should be based on for example integrity, honesty and trust. The principles do not only ensure the success of the company’s work processes and behavior but also bring a positive perception about insurance companies in the society.
Grange Insurance Company is a corporate company which operates insix Western states (WA, OR, ID, CO, WY and CA). The company has been insuring farming families in smaller western communities since 1894. The company is on its way to becoming the best regional Property Casualty insurance company in the Western States. Grange Insurance Company operates on steadfast rural values (honesty and integrity), outstanding claim service and offering competitive rates to its customers. The commitment of the company has been to design programs that meet the needs of their preferred customers.
Flanagan & Ferguson (2007) commented that “the insurance industry has been marked by exponential growth in the recent decades with more and more individuals and corporations appealing to long term security” (p.1). They continue to say that as facts about ethical lapses and outright fraud emerge, the refuge that insurance companies were entrusted to provide may not be embracing as it appears. The insurance industry thus is not exempt from dilemmas. They further said to suggest otherwise would be to ignore the reaches of the insurance industry.
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In order to curb these dilemmas Flanagan & Ferguson identified some ethical practices and policies which must be integrated to the daily running of insurance company (2007). These ethical issues should be inline with responding to the customer problems. They include firstly identifying customer needs and recommending the products and services that meet those needs. This ethical issue is very important for the success of Insurance Company because customers are of great value to the company. Management of an insurance company should emphasize on recruiting workers who meet the required knowledge and skills to complementally meet and execute their duties. Knowledge plays a vital role in the running of departments such as claims because such departments require a great deal of trust and understanding from both parties.
According to Flanagan & Ferguson (2007) the second ethical issue avoiding conflicts of interest involving business or financial relationships with customers or competitors. These parties influence ones ability to carry out his or her responsibilities. To manage conflicts of interest the an insurance company should ensure that client interests come first or in a way that agents put the interests of policyholders and purchasers ahead of their own. Another important ethical issue as suggested by Flanagan & Ferguson (2007) is to ensure that the products being offered to customers are of the right fit. This is achieved by ensuring the products meet the consumer needs. The underlying principle is to promote consumer confidence in the insurance industry through outlining the best practices which can thereafter be used for managing business situations or conflicts when they arise.
Provision of timely and honest responses to customer inquiries is the third ethical practice that should be emphasized by the management of an insurance company (Flanagan & Ferguson, 2007). They therefore said that insurance companies should focus on ensuring customer satisfaction through reducing response time and ensuring that customers develop a positive attitude towards the agents, adjusters and all the parties involved in client related transactions.
Performance in an insurance company is very important. The leadership and management of a company should focus on performance based on both upstream and downstream. Buytendijk (2008) states that an insurance company should make sure that it has reinsured its risks work and collaborate with other financial institutions. He also says that the company should relate in an appropriate way with the regulators, customers and shareholders. In order to articulate this performance related issues the company should set a certain level of transparency needed to collaborate with its stakeholders (Buytendijk, 2008). Buytendijk continues to say that “trust between the stakeholders should be geared towards forming a single value proposition” (p.248).
Building a strong performance network is another important feature which should be emphasized by the management of an insurance company. Buytendijk says that “insurance performance management and its networked business model should be well aligned” (p.251). This is achieved by actively seeking opportunities to evaluate how the company’s stakeholders could contribute additional performance and ensure that the company attains a greater leverage. With performance network in their strategic business plan the company can design and implement it and in turn drive the company’s management towards an outward looking and collaborative approach, leading to increased innovation and competitive advantage (Buytendijk, 2008).
Transparency promotes trust, openness and provides a certain level of clarity in the insurance industry. To further emphasize on the need of better relationship between the customers, partners the company values should be build on transparency. Buytendijk outlines that “there should be information supply that helps the channel partner to evaluate the business relationship with the insurer or even better” (255). Transparency according to Flanagan & Ferguson (2007) should be reflected in the accuracy of books, records and reports. This in turn reduces the processing time frames in some departments such as claims. The company should also come up with benchmark against which information that allows the company to measure it performance against its peers.
Customer service is also an important feature of an insurance company. Customer service therefore plays a major role in the success of an insurance company. Abramowitz & Les (1998) stated that “insurers should learn great deal about customer service by looking at the complaints to state departments” (p.42). They further said that the complaints make excellent training tools for workers in different departments in the company. Looking at these complaints objectively the company can significantly improve its customer service. Flanagan & Ferguson state that “while consumer’s judgments of unfairness of the insurance industry may only be perceptions they offer an evaluative window on the ethicalness of corporate activity in terms of pricing and product attributes” (p.6).
Blacharski (2006) determined that an insurance company should ensure improved customer service. He further says that the only chance for customers to see the value of the money they remit is how better the insurance company treats them. Thus the internal corporate culture should be reflected in the company’s statement of values and should also revolve around serving the customer (Blacharski, 2006). The company should also create a customer service culture. Blacharski outlines that a customer service culture is not something that just happens in a day but instead it is a process that involves several steps (2006). Blacharski (2006) suggests that the steps of creating a customer service culture include: knowing who the customers are, creating a customer service strategy, customer service training, implementing standards and record metrics and hiring the right employees in the customer service or care department.
In addition to these ethical practices accountability should take a center focus. Corbin (2006) says that some one cannot be ethical without accountability. The management of an insurance company should train their workers to find their own accountability upon which they can build their ethics. The company should note that the important thing is to know where their ethical foundation lies and to whom they have made themselves accountable (Corbin, 2006). Integrity is another ethical issue that should accompany an insurance company. Workers should embrace integrity because it helps them to act consistently with their beliefs, no matter the circumstances they face.
Leadership within the company should exist to enforce accountability and all the other professional ethics. Business ethics should be imparted by both official policy and practical examples by the leaders. The insurance company should read the moral direction by the way the management of the company treats such matters as the proper licensing of employees, fair treatment of competitors, full disclosure to insurers and faithful control over other people's money (Corbin, 2006). Corbin thus outlined that “if the manager has moral clarity and a disciplined will, the worker will be governed by the manager's integrity”. On the other hand he also states that if the manager has moral clarity and integrity but an undisciplined will, the worker will also be governed by the manager's hypocrisy. These clauses demonstrate how crucial leadership is to an insurance company.
A high degree of professionalism should be adopted by employees who work to pursue responsibilities in an insurance company. This is a major ethical practice that should govern the employees. Corbin (2006) states that “to be an insurance professional means having a passion about coming alongside people to help when they are experiencing some of the worst moments of their lives”. He thus says that a professional in an insurance company, views a person who buys a product or service as a client and not as a buyer. The insurance company should understand that a client is someone who is under the care of their professionals thus the right knowledge and skills should be a requirement for all the employees. This also indicates that the management should train their employees to become more of professionals than normal workers. Professionalism can also be achieved by ensuring that the company recruits the right competence of employees with the required knowledge and skills.
Corbin (2006) states that caveat are essential ethical practices in insurance companies. This is because once the insurance company assures their client that they will protect them against all or specified risks of loss, it means that they have expanded the ordinary legal duty of a producer and made themselves vulnerable to lawsuits (Corbin, 2006). He therefore states that unless the company intends to incur greater liability in exchange for competitive differentiation, it should maintain a working ethic to treat all policyholders as clients, without actually communicating such promise to its clients.
Strategic management is also very vital to ensure the success of an insurance company. The management should focus on how the company is going to edge its competitors in the market. Attaining strategic goals is not possible without a clear cut objectives and goals. The management should realize the need to press on in the right direction and that the key to growth is accountability. Accountability comes with responsibility hence the two should work hand in hand. Some of the most important management concepts in an insurance company that require a strategic view include planning, decision making, ethics and conflict resolutions (Flanagan & Ferguson, 2000).
Insurance companies should also focus on strategic risk management. Its purpose is to manage the interrelationships among the life company’s assets, liabilities, and exposures to risk from external forces so that they bear a prudent relationship to available capital. The risk management objectives should be well defined. One way of achieving this is through quantifying the objectives. Raymond (1996) for example says the management should state the goals such as, “our objective is to manage our risk so there’s less than a 5% chance that this year’s earnings will deviate by more than 10% from our average earnings over the last five years” (p.2). In this case the company is able to compare it achievements against its objectives and determine where and the cause of slow performance.
Flanagan & Ferguson (2007) suggested that responsibility sharing can be used as way of framing the issues involved in insurance industry. They thus said that shared responsibility involves shared risk and should be governed by ethical principles. Although shared responsibility could appear challenging at the initial stages it should be well implemented. With a clear understanding the company is capable of building liable workforce thus building an ethical business environment in the insurance industry.
Strategic managers in an insurance company should focus on: creating, managing and implementing a team focused on processes and procedures (Gibbs, 2008). They should also analyze, develop and present restructuring plans of the current business environment in order to improve business process flow, operations and company objectives. In addition they should ensure increased employee satisfaction, work production, and sales revenues by consistently observing and providing coaching feedback to the employees. Strategic managers in an insurance company should provide oversight on the direction of the organization; how to maximize existing human capital with the least amount of resistance to achieve company goals and objectives (Gibbs, 2008).
Research obtained from the secondary literature demonstrates the key areas that the management and leadership of an insurance company should primarily focus on. These include ethical practices, professional ethics governing the employees, performance management, customer service, strategic management, good leadership, accountability, conflicts of interest management and transparency. Adopting and practicing these ethical practices can help the company to achieve its competitive advantage in the market. Grange Insurance Company should reinforce these management, leadership and ethical practices in order to improve the work and behavior of its employees.
Strategic leadership and management are essential ingredients for providing the direction in which the managers want to drive the company. In this case Grange Insurance Company can apply the strategic management and leadership features which in turn can help them to set the companies goals and objectives. Leadership comes in place of ensuring that the strategic goals are achieved within the set timeframe. Although being a manager does not guarantee that he or she is a good leader managers should demonstrate a certain level of leadership. Good leadership traits coupled with the required working skills and ethical principles should be imparted to the subordinates to ensure continuity in the absence of managers and directors.
Customer service is an important feature in the insurance business. Grange Insurance Company should work towards ensuring that they eliminate the negative altitudes people have about insurance companies. Excellent customer service can be achieved by ensuring the provision of honest responses to customer inquiries and requests. Customer service should comply with professional ethics and moral practices of Grange Insurance Company. Abramowitz & Les (1998) stated that “to the typical customer, all insurance policies seem to be alike” (p.77). The main issue here which should be emphasized by the management of the company is to treat individuals who buy products and services as clients and not buyers. Once a company creates its customer service culture it should ensure that the culture is maintained and adhered to in every single day (Blacharski, 2006). Good customer service should not be demonstrated by professional who deal directly with clients only but it should be embraced by the entire company.
Grange Insurance Company should fully impose the rules and guidelines which are used to resolve conflicts of interest. The management should therefore understand that conflicts of interest should be handled without bias. When handling cases related to conflict of interest the managers in charge should demonstrate integrity and exercise fair and unbiased judgment. Professional ethics should be exercised in such occasions (Flanagan & Ferguson, 2000). To mitigate such occurrences the company should come up with guidelines that can be used to resolve matters related to conflict of interest. These guidelines should be designed such that junior staffs are able to use them to solve small issues on their own thus allowing the managers and directors to handle the complicated matters.
Transparency is also important for the company. This ethical feature can help Grange Insurance Company to maintain a good relationship with its clients. According to Buytendijk (2008) Grange Insurance Company should channel the necessary information to its customers and stakeholders in order to promote transparency. Using this ethical practice the company can promote and build a good relationship with its clients and stake holders based on trust. Besides maintaining a long term relationship with its clients transparency also promotes professional ethics among the workers.
Core beliefs play an important role in the success of an insurance company (Corbin, 2006). Grange Insurance Company should build core beliefs based on honesty and respect for its clients. This ethical feature can promote the relationship between the company and the parties involved. Honesty therefore is an important ethical practice which can be used to promote the behavior of the workers when dealing with clients. Respect for other peoples property and emotional well being are the other forms of ethical practices which should be observed by the company staff. This also means that clients will be assured of getting value added services.
In conclusion, while Grange Insurance Company would like to achieve its goals and objectives the focus should be based on first promoting the existing ethical and moral practices. This in turn can be used to advance the behavior and work practices of the company’s employees in general. It is therefore clear that ethical practices play an essential role in encouraging the behavior of workers in an insurance company besides assisting the provision of better relationship between the company and its clients. Grange Insurance Company should therefore always strive towards winning the respect of the public, clients, policyholders, the business community, agents, and regulatory authorities.