Ethics in Claims Adjusting
January 18, 2021
As adjusters, we face difficult decisions every day. These decisions have a lasting impact on the public we serve. Sometimes the right choice — the ethical or moral choice — is clear-cut and easy to see. But there are other times when the best choice is harder to recognize.
Note: Each IA firm has their own Code of Ethics. Please refer to them for specifics.
What are ethics?
The Oxford dictionary defines ethics as “moral principles that govern a person’s behavior or the conducting of an activity.” Ethics then are guiding principles that are based upon moral values. Moral values are defined by society, religions, governmental entities, and individuals.
Why is it important to be ethical?
Firstly, it’s the law. There are both state and federal laws that deal with licensing, rebating, privacy, unfair claims practices, discrimination, and other matters. But it’s not only the law — it’s good business to be ethical. Customers want to do business with a company or person they can trust. 65% of consumers have cut ties with a company or brand over a singular poor experience (source); you don’t want to ruin your reputation, or the reputation of your firm or the insurer.
Not only is being ethical the law and good business, but insurance is built on utmost good faith. The policyholder, agent, insurer, and adjuster all must give accurate and complete information necessary to underwrite the business, adjust the claim, and/or pay a claim. If all of these roles work together, the end result is a long-term relationship that is profitable to the insurer, agent, and adjuster, and provides piece of mind and indemnity for the policyholder.
Is it ethical?
Sometimes it’s tempting to bend the rules to achieve a rewarding objective. However, adjusters, agents, or managers who encourage or ignore unethical behavior do so at the peril of their job or business. Making the decision to be unethical or ‘bending the rules’ comes with consequences, such as loss of a job or contract, or legal ramifications. Here are some questions to ask yourself when trying to figure out if it’s ethical:
- Is it legal?
- Does it comply with your firm’s Code of Ethics and/or other applicable policies?
- How will it affect others, such as policyholders, employees, and the citizens we represent?
- How will it look to others?
- Is it something I would be proud to tell my grandmother?
- How will it make me feel?
- How will it affect my firm’s status as a trusted decision-making entity?
- Would I be comfortable defending the decision in a public forum?
- Is it the right thing to do?
What is considered an unfair claims practice?
Investopedia defines unfair claims practices as improperly avoiding a claim or an attempt to reduce the size of a claim. These are tactics that insurers practice to reduce costs or delay payments to policyholders, and many times it’s illegal. The insurer has an obligation under unfair claims practices acts to settle the claim both promptly and fairly. Below are unfair claims practices that adjusters should avoid:
- Misrepresenting facts related to coverage
- Failure to recognize and act promptly upon communications
- Not returning phone calls
- Failing to promptly investigate claims
- Not attempting to effectuate prompt, fair, equitable settlements where liability has become clear
- Compelling insureds to institute litigation to recover amounts due under a policy by offering less than the amounts ultimately recovered
- Failing to promptly provide claims forms
- Failing to settle one portion of the claim where liability has become clear in order to influence settlement under other portions of the claim
Finally, the work of adjusting insurance claims engages the public trust, therefore adjusters are held to a high ethical standard. Adjusters must put the duty for fair and honest treatment of the policyholder above the adjuster’s own interests in every instance. Do your due diligence to research individual states’ Codes of Ethics, as well as your IA firm’s Code of Ethics.
Here are some basic guidelines:
- Do not discriminate, be prejudiced, or be biased
- Be honest
- Have integrity
- Be fair
- Be loyal
- Be thoughtful
- Have compassion
- Take care with the rights of others
- If it’s not right, don’t do it
- If it’s not true, don’t say it
- Give each claim its due diligence
- Take special care with the elderly
- Do not negotiate with lawyers
- Keep legal advice to yourself
- Do not take advantage of a person’s mental, physical, or emotional state
- Adjusters must uphold the principle of good faith
- An adjuster shouldn’t approve every claim regardless of suspicion or flaws in the claim
- An adjuster shouldn’t be so protective of the insurer that he or she denies every claim
- Disclose any financial interest
- Accept responsibility to uphold laws
- Inform claimants of rights
- Stick to proper insurance forms
- Avoid conflicts of interest — when a personal relationship influences a business decision, conflicting with the proper discharge of a person’s duties or leading to a disregard of a public or corporate duty
- Avoid accepting gifts from agents, insurers, or policyholders, including but not limited to food, beverages, tickets, invitations, floral arrangements, any goods or services for which a cost or fee is usually charged