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OopsRecently, the ethics of insurance “agency” came into discussion when a sales agent of Guardian suggested he intervene in the decision-making process in order to “assist” an insured he sold a policy to obtain an approval decision.

While I’m all in for favorable decisions, I question the ethics of a representative “agent” of Guardian also putting forth to the insured he is an advocate and has enough clout to obtain favorable decisions.

The definition of an insurance agency found on the Internet explains:

“An agent is a person who represents an insurance firm and sells insurance policies on its behalf. Independent agents may represent many insurance firms and receive commission for their services accordingly. On the other hand, there are captive agents who are exclusively employed by a particular insurance firms and sell policies of the same. Their services can be rewarded in the form of salary, commissions, and yearly renewals.”

Insureds have been telling me for years that their insurance agent is “like a friend of the family”, or, “is my personal friend”, and I have no doubt it’s true. Still, in the back of my mind at least is the thought that insurance agents receive annual “renewal bonuses” when their insureds continue to pay premium and keep policies in force. It’s to their advantage to keep the people they sell policies to, fed, happy, and paying premiums.

Insurance is also an industry where the ethics of it tends to encourage “picking a side.” For example, I have no vested interests with any insurance company. I work strictly for insureds and have no conflict of interest to do what is best for anyone except my clients. Insurance agents who seem to think they can represent both the insurance company AND insureds as a advocate are in fact violating an ethical boundary.

I have no doubt but that Guardian (or any other insurance company) expects its agents to act in the best interests of the company, which unfortunately, are often in conflict with the interests of insureds. In addition, agents are whole giant steps away from the claims process and often have no idea what goes on internally. Agents lose touch quickly when their major interest is selling and writing policies.

Recently, I recommended to a client that we file formal complaints internally, and with the State of New Jersey because Guardian was delaying approval of a significant Life Waiver of Premium. The insurance agent, “a personal friend”, wanted to delay the filing of a formal complaint until he had time to throw his weight around and try to resolve the issue with a Guardian approval. Anyone want to guess why he didn’t favor filing a DOI complaint against his employer?

Furthermore, any insurance agent who thinks he has enough clout to push favorable decisions is deluding himself with grandeur. One agent said, “I give Guardian a great deal of business by writing policies and sending business their way. I could just have easily recommended Mass Mutual or some other insurer.”

Another agent yelled at me, “I have fiduciary duty to act in the best interests of the insured!” That’s true, but only insofar as it pertains to the selling, writing of, disclosure  and delivery of insurance policies. Agents are NOT fiduciaries within the claims process generally because the issue of “fiduciary” is not relevant to non-ERISA policies.

Agents do not have fiduciary duty to advocate for favorable decisions which is way outside the realm of their job description since they aren’t qualified to adjudicate claims. I also suspect that management doesn’t want insurance agents nosing around the claims process either, trying to influence claims decisions because of the amount of business they write for the company.

I don’t think I’m wrong when I say that the “ethics” here are a little shady. “Agents” per se cannot BOTH support the agenda of the insurance company they’re working for AND advocate for insureds in the claims process. In the end, whether advocate or agent, you do need to “pick a side.”

I have no problem with insurance “agency” relationships when there is full disclosure by the agent. For example, when an agent says to his/her insured, “I work on behalf of the insurance company, but I’ll make a few calls.” Making sure that insureds understand who the agent is actually working for is paramount in any ethics discussion.

Believe me, I get it, when insurance agents become “friends of the family.” Still, let’s be honest about who insurance agents work for and where their interests are.