Ethical Decision Making in Risk & Insurance
Ethics is a process
Ethics 311 focuses on how to decide, not just what to decide. Know the major lenses: consequentialist thinking weighs outcomes; deontological thinking weighs duties and rules; virtue ethics asks what a person of integrity would do. Insurance adds fiduciary duties, fairness, confidentiality, objectivity, competence, and compliance with unfair-claims-practice rules.
Where dilemmas appear
Typical conflicts include pressure to meet closing or reserve targets, handling a claim involving a friend or relative, learning damaging information about a claimant, using social-media or AI-derived data, and discovering suspected fraud. Bad faith and unfair settlement practices often begin with small rationalizations: delaying a file, misstating coverage, or failing to document a decision.
Traps
Legal is not the same as ethical; “everyone does it” is not a test; good customer service does not cure an unfair outcome. Do not assume confidentiality has no exceptions-fraud reporting, regulatory inquiries, and legal process may require disclosure under defined rules. Watch for answer choices that protect the company at the expense of a clear duty.
Decision rule
Use a repeatable test: state the facts; identify stakeholders; check policy, law, and professional standards; list options; apply the legality test, the fairness test, the publicity test (“would I be comfortable if this appeared in a regulator’s report?”), and the mirror test; document your reasoning; escalate when unsure.
Example: an adjuster is told to deny a valid claim to hit a ratio. The ethical response is to evaluate coverage accurately, document the pressure, and escalate-not to misrepresent the loss.