Ethics: Responsibilities, Obligations, and Codes

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The Fiduciary Responsibilities The agent is often the only personal contact the consumer has with the insurance company and is the one best positioned to gather accurate information to aid in making quality underwriting decisions. The fact that the insurance companies grant the insurance agents fiduciary responsibilities is a direct reflection of the high degree of trust the company expects from their agents. The future of any insurance company depends on the actions of their agents. Derived from Roman law, the term "fiduciary" refers to persons having certain duties to act primarily for another's benefit in matters regarding a particular task. Legal Representation Agents and producers are considered to be legal representatives of the insurers they act for by virtue of the common law of agency. As such, they are fiduciaries of their principals. This status entails specific responsibilities and obligations to the insurer on the part of the agent, chief among them to remain loyal to the best interests of the insurer, to remain faithful to the insurer's objectives, and to carefully and diligently protect the insurer's interests. Fiduciary Duties Owed the principal by the agent, the important fiduciary duties can include: Disclosure - to disclose all material facts, which could influence in any way the principal's decisions, actions, or willingness to enter into a transaction; Confidentiality - to safeguard the principal's lawful confidences; The Duty of Good Faith - to maintain total truthfulness, absolute integrity, and total fidelity to the principal's interest; The Duty of Care - to exercise a reasonable degree of care while transacting the business entrusted to the agent by the principal; Honesty and Integrity - to act with fidelity and truthfulness, grounded in sound moral principle and character; Obedience or Faithful Performance - to obey all legal instructions given by the principal and to apply best efforts and diligence to carry out the objectives, which conform to the purpose of the agency relationship; Loyalty - to refrain from acquiring any interest adverse to that of a principal, unless providing full and complete disclosure of all material facts and obtaining the principal's informed consent; Accounting - to safeguard any money, documents, or other items entrusted to the agent by the principal. To summarize the agent's fiduciary responsibilities, it could be stated that the agent must exercise the utmost of good faith in all actions with the consumer and the insurance company or companies the agent represents. This good faith must be based on a thorough knowledge of the applicable state insurance laws, insurance company procedures, and a proactive approach to practicing his or her profession with sound principles as the cornerstone.

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and InsuranceEthics101.com, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.