There have been a few cases in the past when a client has mentioned something that they'd prefer I not to share with their insurance company, sometimes implying that I should treat this information with a “wink and a nod” – also known as the “I didn’t hear you say that” response.
I can recall times where I’ve asked a current or prospective client a question and they’ve replied by asking me to advise them what the “correct” answer is. For example, perhaps I need to know which vehicle Junior is usually driving and they answer by asking, “Which vehicle is least expensive to say Junior is usually driving?” (While I enjoy providing clients with pricing information to assist in making decisions, there have been cases in which I've felt a client was actually asking for coaching on how to answer the question.)
Here’s one I found very tough. I’ve had two different cases where I became aware that clients (who were also personal friends) were using their personal pickup truck to plow snow for others for pay. (They may not have known this, but plowing for compensation is strictly unacceptable on any personal Auto policy.) In one case, my friend and client offered his services on Facebook after a storm, and in another case a friend and client offered to add me to his post-snowstorm plowing rounds. Now that I as their agent was inadvertently made aware, what was I to do now?
Which brings me to the ethical dilemma: what is appropriate for me, as an agent, to do when I become aware of relevant undisclosed information? Or how about when my client asks me to coach them on how to answer a question? And, secondly, what ethical standards should insurance consumers meet, when dealing with their insurance company?
Honesty as an agent
First, let me talk about the ethical implications for me, as an agent. You may not realize this, but your insurance agent (whoever that might be) is technically not “your agent” at all. Rather, he or she is an agent of your insurance company. Legally speaking, an agent is someone who represents and acts on behalf of another. Because “your agent” is a legal representative of your insurance company, he/she can accept your application for coverage and your payment and bind the insurance company to cover you.
The fact that I legally represent the insurance company places certain legal obligations on me, to do nothing to harm their interests as their representative and pass on all relevant information to them.
Let’s also examine the practical side of this ethical question. As an agent, I have two primary stakeholder groups that are counting on me to do the right thing and be honest and forthcoming with them. These two stakeholder groups are my clients and my insurance companies. I owe the same debt of honesty and good faith to both.
When it comes down to it, my business relies on the currency of trust. Let me explain. When you stop by the grocery store, you come home with a loaf of bread or a gallon of milk. When you visit your dealer and purchase a car, you come home with an automobile. When you visit my office and buy insurance, all you come home with is contract of thirty or forty pages that is often simply file away without reading past the first page. If you don’t have a basis to trust me as your agent, why would you ever agree to this transaction?
Some consumers might think they’d prefer an agent willing to practice the “wink and nod” method in withholding information from their carrier so as to provide them with more favorable rates. However, if your agent is willing to be deceitful with the insurance company he or she is legally required to represent, why would you trust your agent to always be honest with you?
Honesty as an insurance consumer
Let’s now consider this question from the standpoint of the consumer. The average consumer may not think of his or her insurance carrier as a stakeholder deserving their goodwill. Indeed, many consumers see their insurance company as a big corporation with plenty of money who doesn’t deserve any special care or concern from them. But this way of thinking may be a little shortsighted.
First, there is the issue of material misrepresentation. If you knowingly lie or withhold requested information from your insurance company or their agent, it is possible that this act could lead to your claim being denied in the future. For example, if you lie and say you don’t have wood heat and then a chimney fire causes your home to burn down, this could be a basis to deny your claim, potentially leaving you homeless and destitute.
Putting aside the possibility of material misrepresentation, I really don’t believe that practicing deception for perceived financial benefit is an ingredient you’ll find in the recipe for a happy and prosperous life. I have observed a number of individuals over the years that are always trying to “beat the system” and my impression of most of them is that they often seem to go from one self-induced calamity to the next.
It is often said that honesty is the best policy and that your own word is the most valuable possession that you have. Once you surrender your integrity in one arena (such as the financial transaction of insurance) you will continue to do so in other aspects of your life. A lack of honesty in your dealings with others will lead to a multitude of problems on many levels and won’t bring either inner peace or personal wealth.
As I’ve alluded to already, the insurance transaction is all about good faith. Good faith on the part of the insurance company that both their agent and policyholder has disclosed accurate and complete information. Good faith on your part that the insurance company will protect you according to the terms of the contract, should a loss occur and that your agent has your best interest in mind and will be there for you if and when you need him or her.
Now I’m nearly positive that you’ve heard of at least one example in which an insurance agent or carrier acted horribly in bad faith. But witnessing such behavior in others should not be relied on as an excuse to follow their lead; rather we should all take it upon ourselves to exemplify a higher standard for others to emulate. Honesty is indeed the best policy, and if you expect good faith from others you should first offer it to them.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.