6/C - Fiduciary Duty and Ethics Flashcards
Fiduciary Duty
The Adjuster’s Responsibility: Fiduciary Duty
Adjusters have a fiduciary duty toward their employers
Fiduciary Duty: a legal relationship of confidence and trust, requiring honesty and good faith
Adjusters’ Fiduciary Duties:
- Uphold the financial interest of the principal (usually the insurer)
- Be truthful in all representations of the principal
- Ensure that the claimant receives accurate indemnification
Liasion
The adjuster is a liasion between the insurer and the claimant
- Insurers don’t want to pay more than is necessary
- Claimants want to collect as much as possible
Ethical Behavior
Adjusters must always act ethically.
Ethics: a system of moral values
Ethical Behavior: acting in accordance with these values so as to make good decisions
Ethical behavior involves:
- Honesty
- Integrity
- Fairness
- Loyalty
- Thoughtfulness
- Compassion
- Care for the rights of others
The Adjuster’s Ethical Situation
Adjusters frequently make decisions involving large amounts of money
- Even small changes in damage assessments can make a big difference in claim amounts
- These changes can affect the adjuster’s income
Adjusters looking for a long career:
- Always determine a fair and equitable settlement that abides by the insurance contract
- Avoid even the appearance of unethical behavior
Bias Towards Insurer
Ethical Challenges: Bias toward the insurer’s interests
As an employee, you want to:
- Please your boss
- Keep your job
- Perform well for people you know and may like
As an independent adjuster you want to:
- Please client insurers
- Build up your company with repeat customers
Unruly Claimants
Ethical Challenges: Dealing with unruly claimants
Traumatic events that cause losses mean that claimants are often:
- Desperate for money
- Needy
- Rude
- Insulting
Adjusters may be tempted to let the claimant’s behavior affect their job.
Always determine a fair, equitable settlement that abides by the insurance contract, without letting your opinion of the claimant get in the way.
Bias Towards Claimant
Ethical Challenges: Bias in favor of the claimant
An adjuster may want to settle a claim in favor of the claimant because of:
- The emotional appeal of catastrophic losses
- Emotional manipulation, bribes, or kickbacks offered by the claimant
- Commissions: adjusters are sometimes paid a percentage of the settlement, meaning that larger settlements make more money
Unethical Behavior
Adjusters must avoid unethical behavior.
Unethical behavior
Pursuing self-interest over the interests of others, leading to:
- Dishonesty
- Disloyalty
- A lack of concern for the feelings of others
- A disinterest in the consequences of one’s actions
- Selfishness or self-serving behaviors
Some unethical behavior is also criminal:
- Theft
- Fraud
Note: it doesn’t have to be a crime to be wrong.
Inducements
Unethical Behavior: Inducements
Inducement An action, item or promise made to someone to motivate him toward certain desired actions, including: - Cash or in-kind bribes - Kickbacks - Favors - Gifts - Trades - Sexual favors
NEVER ACCEPT INDUCEMENTS Consequences include: - Losing license - Reputation loss - Lawsuits - Jail time
Kickbacks
Money or favors offered to the adjuster in exchange for referring business to specific repair shops or contractors
- Contractors may want the adjuster to refer customers to them, in return for a kickback or commission
- Never accept kickbacks for side business deals related to adjusting
Settlement Padding
Increasing the settlement amount dishonestly in order to increase commissions
- When adjusters are paid a commission based on settlement amounts, they may be tempted to pad settlements
- Padding is unethical and criminal, and is usually discovered
Misrepresenting Coverage
- The adjuster may be aware of coverage or policy provisions that the claimant is not considering
- The adjuster must never withhold material information or misinform a claimant regarding his rights in order to save money for an insurer
Salvage Misappropriation
After a loss, salvaged property usually goes to:
- The insured
- The insurer, to recoup losses paid
Adjusters must never misappropriate salvaged property for their own use or the use of others
The Adjuster’s Responsibility
The adjuster’s job is to:
- Investigate the damages
- Evaluate the claim
- Provide a fair and equitable settlement based on the insuring contract
- Never let unethical self-interest affect behavior in any way
Fiduciary Duty and Ethics
The insurance adjuster owes both the claimant and the insurer a just outcome.
A good adjuster will:
- Not be swayed by emotions, greed or pressure
- Listen to the claimant and other witnesses and research in the claim honestly
- Base decisions on a thorough understanding of the facts
Adjuster Code of Ethics
Rule 1: Disclosure
Adjusters must disclose all direct or indirect financial interest they have in adjusting a claim.
Equal Treatment
Rule 2: Equal Treatment
An adjuster must treat all claimants equally
- Do not favor your nice clients
- Do not disfavor your rude clients
Avoid Prejudice
Rule 3: Avoid Prejudice
Adjusters must never be prejudiced in their investigations, adjustments, or settlements.
Truthfulness
Rule 4: Truthfulness
An adjuster must make truthful and unbiased reports of the facts after making a complete investigation.
Honesty and Integrity
Rule 5: Honesty and Integrity
An adjuster must handle every adjustment and settlement with honesty and integrity.
Diligence
Rule 6: Diligence and dispatch
An adjuster should act with speed and care in completing the adjusting process
- Every claim is important
- Failure to settle a claim in a timely manner can result in disciplinary action by the insurance commissioner
Report Violations
Rule 7: Report Violations
An adjuster must promptly report licensed insurance representatives who violate any insurance law, rule or order.
Elderly Claimants
Rule 8: Be careful with elderly claimants
An adjuster should exercise extraordinary care when dealing with elderly clients:
- Take extra precautions to ensure they get a complete and fair settlement
- Do not let failing memory or impaired cognitive processes disadvantage the claimant
- Clarify the facts with the claimant’s relatives or neighbors
Attorneys
Rule 9: Dealing with Attorneys
A claimant has the right to representation by an attorney.
Adjusters are strictly prohibited from dealing directly with a claimant who has hired an attorney, in order to circumvent the advice of that attorney.
Witnesses
Rule 10: Interviewing witnesses
An adjuster can interview any witness, or prospective witness, without the consent of opposing counsel or party
- Adjusters must avoid any attempt to influence witnesses
- Witnesses have the right to a copy of any signed or recorded statements
Right to Attorney
Rule 11: Right to Attorney
An adjuster should not advise a claimant to refrain from seeking legal advice, or advise against the retention of counsel to protect the claimant’s interest
Traumatized Claimants
Rule 12: Traumatized Claimants
Adjusters should not attempt to negotiate with, or obtain any statements from, claimants or witnesses who are in shock or under severe emotional distress.
Never take advantage of emotional condition to get clients to accept similar settlements.
Advising of Rights
Rule 13: Advising of Rights
An adjuster must advise claimants of all their claim rights in accordance with the terms and conditions of the contract and of the applicable laws.
The adjuster:
- Probably has more experience with insurance contracts than the claimant
- Must make it clear to the claimant what losses are covered in a particular situation
Release Forms
Rule 14: Release Forms
An adjuster should not draft any form of release, unless he has the insurer’s written approval.
This ensures that the adjuster is properly representing the intentions of the insurer.
Competence
Rule 15: Competence
An adjuster should not deal with a claim that he is not trained to take on.
