Testing Tenet: ‘Utmost good faith’

Only a few days ago the country celebrated its 41st anniversary of Independence from Britain. It was a time for reflection and to assess what have been the achievements during the past four decades. Admittedly, forty years is a very short time in the life of a country but we cannot continue pleading that we are still an infant nation since we must grow up and accept responsibility for our actions or inactions. 

The insurance industry was principally foreign-owned and controlled until the decade of the 1970’s so it is relatively young in terms of local ownership. However, the industry leaders have been taking stock especially in the area of business ethics since this is a matter that concerns all persons involved in the insurance business. The very core principle of insurance is that of “utmost good faith”. This is unlike the principle that is found in most commercial transactions -i.e. “buyer beware” or caveat emptor. In insurance, the law recognises that parties to a contract must exercise utmost good faith both on the part of the buyer as well as the seller. It simply means that the buyer must provide complete and accurate information of his risk so that the insurance company can make an assessment while the insurance company must act in manner that is not intended to deceive the buyer and consequently it must make good its promise. In the real world and in particular with regard to Trinidad and Tobago the principle of utmost good faith is not scrupulously practised and in many instances buyers of insurance withhold pertinent information which at the time of a claim turn around to haunt them and in some cases they are not able to collect on their claim. Some insurance companies are equally at fault because they pursue practices that are inimical to the interests of their customers and view the insurance business as any other commercial enterprise where the principle of “buyer beware” is applied. How times have changed! The old school taught you that your word was your bond and if even there was no written contract you were expected to honour your agreement. There were instances where a claim would have occurred but no policy had been issued but you would have been paid your claim. Those were the good old days! Today, there is a feeling within the insurance industry that those principles no longer apply and all decisions must be reduced to writing otherwise there is every chance that verbal agreements will not be honoured.

The question has to be asked- how did we arrive at this stage? There are many reasons and that is not only a local situation but rather the business has evolved where standards of behaviour have changed worldwide. Many leaders in the insurance industry around the globe are calling for a return to ethics since they see ethics as the bedrock of professionalism and reputation. This issue has not been lost on the local insurance industry either since ATTIC has been addressing this issue as it is acknowledged that the industry must have an up to date code of conduct at least for its members. Much of what is done in insurance relies on trust- between the various parties whether they are the insurance companies, the agents or brokers and the customers. However, if this trust is lacking then steps must be taken to restore confidence. How does one behave in an ethical manner? It is all too easy to behave unethically especially if through conduct and example there is no intention to act fairly. There is a view that ethics and ethical behaviour must be inculcated from very young. There must be a clear understanding of what is right and what is wrong and these are judgments that you arrive at by learning from the home environment. The modern world has been teaching that “wrong is right” as long as you are not caught and if caught there is some loophole through which you can escape.

There is too much play on words and semantics and an obsession with spin-doctoring and public relations in order to confuse rather than taking the moral high ground and owning up to the misdeed. Greed has been the underlying cause of all the financial scandals but at least the authorities are taking steps to punish the wrongdoers and that in itself must be a lesson for us in Trinidad and Tobago. The various professional bodies have been attempting to treat with this matter by shaping thinking and practice. In the past, breach of ethics would have been dealt with through a disciplinary procedure that could lead to disbarment and or other sanctions. While these still remain, there is likely to be a more proactive approach in which persons are introduced to ethical behaviour as a component of professional training. Management competence is another key pillar in the determination of ethical conduct since a study carried out in the United Kingdom concluded that managerial incompetence has been the root cause of every collapse in the insurance industry. In spite of rules and regulations scandals do take place because people circumvent rules and it is only if the rule of right or wrong is applied then this might have prevented such a situation. At the heart of regaining trust by the public will be the modernization of the written code of conduct but more importantly there must be a return to core principles of utmost good faith and ethical standards of behaviour. In short, insurance companies must provide their customers and the public with a high quality service by paying their legitimate claims in a fair and timely manner but equally they must guard against the increasing insurance fraud which is a worldwide phenomenon. They must uphold the public trust at all times and exercise prudence in the management of their business which is the hallmark of successful companies.

E-mail: daquing@cablenett.net