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Overview on Business Ethics
Business ethics is a form of applied ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known
as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Businesses can often attain shortterm gains by acting in an unethical fashion; however, such behaviours tend to undermine the economy over time. Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt). Meaning of Ethics:Ethics in Latin Language is called “Ethicus” and in Greek, it is called “Ethicos”. In fact, this word has originated from “ethos’ meaning character or manners. Ethics is thus said to be the source of morals; a treatise on this; moral principles; recognized rules of conduct. The character of a man is expressed in terms of his conduct (ref: Diagram 1)
Decided by Charter of a Man Conduct of a Person
Leads to Series of Actions
Taken together Considered as
Good or Bad, Right or Wrong, Moral or Immoral
By which we can judge again
Known as Moral Judgment Moral Standards Requirements
Meaning of Ethics
Ethics thus can be considered as the source of character of a person expressed as right or wrong conduct or action.
Introduction to Business Ethics:Ethics is a social science that deals with what is good and right, and with moral duties and obligations. Ethics is a science of morality that guides and helps to achieve objectives through legal and moral means. Business ethics regulates the activities of business firms towards society and other on social, legal and moral values.
Code of Conduct for Business Practices:-
In order to adopt fair business practices, trade associations, chambers of commerce, Council for Fair Business Practices, and others have framed code of conduct for businessmen. The code of conduct is to be followed by the members of the association. The code of conduct states what is to be done and what should not be done by businessmen. A code of conduct is framed by Council for Fair Business Practices (CFBP) for its members. The following are the highlights of code of conduct of CFBP: 1. To charge fair and reasonable prices. 2. To ensure accuracy in weights and measures. 3. To ensure that intermediaries do not manipulate the prices. 4. To fulfill social responsibility towards various sections of the public such as employees, customers, shareholders, government, suppliers, competitors, dealings, and the general public. 5. To pay attention to consumer rights. 6. To provide product warranty in clear terms 7. Not to engage in hoarding and profiteering. 8. Not to adulterate the goods. 9. Not to trade in sub- standard products, and also smuggled products. 10.Not to undertake misleading and deceptive advertisements. The members of the CFBP are expected to follow the code of conduct. The code is framed in the interest of business community and in the interest of the society. Adoption of the code of conduct would enhance the image of the business firms in the society. An award has been instituted by CFBP to encourage members to adopt fair business
which adopts high level of ethical practices. The award is given to the organization. Why Study Business Ethics? 1) Business executives and budding managers study the various ethical theory. practice of virtuous acts. Students understand the nature of ethical problems critically analyse it. by offering amenities and services not otherwise available to the needy of the community. ethical principles and ethics judgements. Use conceptual tools and also leads the students to respecting opposite views and reflecting upon them. resolving dilemmas at the work place will go a long way in their spiritual . Ethical behaviour is important for business leaders as they influence the ethical climate for everyone else. 2) It will help build and groom a value based organization.practices. A business has to share pat of its prosperity with the community. 4) Making them better individuals study of ethics. 3) It creates awareness about their social responsibility. In a value based organization there is a high degree of trust and integrity and it empowers all the stakeholders.
as mentioned earlier. Such managers. A brief explanation about such measures is given below: 1) Measures at the Business/ Organizational Level:- a) Adoption of code of conduct for dealing with employees. Considering the importance. efforts made to popularize and spread the message of doing business ethically because it benefits everyone.realised conduct which would give a new vision “drishti” of “aham bramhasmi” – “I am bramham” 2: Measures to Improve Ethical standards in Business Majority of the businessmen follow ethical values and principles in conducting business and dealing with various social groups. ethical conduct would be a self. government and society’s level to spread the message and improve the working of business ethically. they would not amass wealth out of selfish motive but as a trustee of the community to which they belong. actions Should be taken at the organizational. shareholders and other social groups . Thus. Such managers will not be slaves of material possessions. consumers. who practice business ethics would be led by divine thought within and through their relentless ethical conduct. However. lead a life of dharma and realize godliness.development.
d) To arrange training programmes on ethical standards for executives and employees. 2) Measures at the Government Level:a) Government policies. f) To penalize those employees who willfully violate rules of ethical standards. employees and other social groups. b) Excessive or unwanted controls over business working be lifted or reduced.b) To hire the services of expert in business ethics and arrange for his lectures. c) Strict enforcement of laws relating to protection of interest of shareholders. e) To introduce open and free communication system and bring total transparency is business working. d) There should be political discipline and corrupt politicians must be punished seriously. c) To make social audit compulsory to identify the ethical and unethical conduct of business. e) The working of Lok. consumers.Adalat should be popularized. procedure and working should be simplified. f) Quick dispersal of legal cases relating to unethical business practices. 3) At the Social Level:- .
building garden. b) Trade Associations and chambers of commerce to prescribe code of conduct to its members and they must be made to observe it strictly. For e.: Tata Group of company has a very good reputation of business ethics. integrate and motivate and empower all the stakeholders thereby building a strong organization which can compete in a globalised economy. hospitals. . c) Social organisations like Consumers Guidance Society of India. It also funds important projects which are for welfare of the community. schools. and Council for Fair Business Practices should play active role in spreading the message of ethical values in business. Advantages:1) It builds a value based organization: Ethical behaviour is important for business leaders as they imbibe high degree of trust.a) Social boycott on the products made by companies involved in unethical business.g. 2) It creates awareness about the corporates social responsibility of business: A business is a part of the society and it shares its prosperity by offering various facilities and services to its immediate community. For eg: .
3: Role and Importance of Business Ethics and Corporate Governance Role:Governments around the world are now well aware of the need for trust in capital markets. requires serious financial management of US listed companies to have ethical codes and for management and auditors to report on the effectiveness of internal controls over financial reporting.3) Business ethics is a practice: Managers has to study the theory of business ethics and practice it in their professional life as they understand the nature of ethical dilemma and analyzing it they are better equipped to practice business ethics. The United States learned the hard way how fragile trust can be and responded with the Sarbanes-Oxley Act which. among other things. This has resulted in wholesale review and documentation of policies and procedures. 4) Practising ethics at work place: It makes the individual associated with the organisation aware about their divine nature and brings peace and harmony to all of them. .
Little research has been carried out on ethical practice in companies and the role accountants play. ACCA has already revised its own code of ethics for its . Company boards too are now becoming much more aware of the need to have the right ethical culture. Partly this is because interest in the subject is relatively new and partly because ethics is one of those soft areas where it is hard to make objective judgment. and it is the foundation for other internal controls. One important piece of research was published by the Institute of Business Ethics in the UK. but it is the corporate culture which determines when they are followed. Management may set out the policies and procedures which it wants followed. The culture of an organization is probably the most important aspect of system of internal control. The accounting profession globally has taken steps enhance the importance of ethical behavior and decision making. amended or ignored. The International Federation of Accountants (IFAC) has launched a revised code of ethics based on a set I fundamental principles to be adopted by individual accountancy bodies. This found that there was a strong correlation between companies which have established ethical codes and a number of measures of corporate financial performance. Good ethics are vital to good corporate governance. suggesting strongly that good ethics is the right thing to do not just because it is the right thing to do: it also makes for successful business.
to be consistent with the IFAC standard. . are often regarded as the keepers of the ethical conscience of their organizations. These codes are about accountants' professional ethics. There is however no generally-accepted approach to doing this and it is not just about documentation. over half the respondents to this survey say they have processes in place for assessing adherence to their company's code of ethics. but related. For nearly 40%. particularly at board or at top management level. this important subject tends to be given less attention than it deserves by companies and their auditors. matter Accountants in business. Theoretically. This goes beyond simply complying with rules: the reputation and the future of the company and individual board members are at stake. Not surprisingly. the US SEC rules which give effect to Sarbanes-Oxley require companies and their auditors to assess the ethical environment. company culture is a cause for concern. The challenge of living up to one's ethical values is evident from the survey findings. accountants set an ethical example to others.members. This is a higher percentage than we would have expected and it would be interesting to research further and learn more about what companies are doing. As well as following their own professional codes of ethics. Interestingly. Boards set the values and standards for their organizations and we believe that in future boards will insist on knowing how well their companies are living up to these. Business ethics is a different.
or reducing litigation and regulation costs. companies that follow certain moral codes attract better people . don't present misleading information.Importance:1) Standard of behavior: When we talk about business ethics. It goes without saying that ethical companies are less likely to undergo the costly scrutiny of courts and regulators. For example. Also. Also it's important to understand that people don't engage in unethical behavior . 3) Short Term Gain and Long Term Pain V /s Short Term People normally like to take a short cut Pain and Long Term Gain : to success not realizing that short term gains lead to long term pain. Companies known for ethical standards usually have an ethical code stating that they treat everyone with dignity.whether in building sales. usually we're ·speaking about standards of behavior in the workplace as well as with customers and partners. people are usually willing to pay premium prices to feel good about the products they buy. 2) True North Principles to lead a Business: Having a moral compass leads to more effective business practices .and these people often are willing to work harder with less compensation. retaining employees. and scrupulously follow rules and regulations.
because hiding that first misdeed usually requires more misdeeds . needs to be tempered with a stakeholder theory of the firm. which may provide needed insight. because shareholder money gets spent in ways that does not maximize returns. This. this can lead down a path ill destruction.and these are all interactions that should be encapsulated in a company's code of ethics. as these people should provide a great deal of moral leadership. However. customers. Keep in mind also that unethical behavior usually breeds more unethical behavior . board members turn a blind . They tend to engage in unethical behavior when the incentives are large. 5) Moral values of employees: Milton Friedman once stated that the employees of a firm have the moral obligation to maximize shareholder value. which deals with how employees interact with suppliers. This limits their capacity to understand the viewpoints of other people.and for some businesses. is like a form of taxation without representation. partners. like Enron. 4) Value Based Leadership creates Ethical Practices: Most of the time people in positions of power tend to become more egocentric and self-focused. Deviating from this directive. he believed. But in some cases.when the incentives are small. and their co-workers . an ethical company that values the contributions of its employees is more likely to be innovative in the marketplace. 6) Strong and Independent Board: Business ethics are critical for members of company boards. I think.
and this balance is increasingly important for innovation and creativity. Ethical companies do their best to protect company assets without making people feel stifled .and these externalities. as economists call them.eye to developing problems. and this can make bad situations worse. 8) Role of Information Technology & Business Ethics: Some of the biggest issues with ethics and technology can be found in security and privacy concerns. are sometimes best addressed by regulation. board members often find it difficult to fulfill their ethical duties. 7) Role of Regulation in Business Ethics: Legislating some ethical behavior can help keep the marketplace free of monopolistic behavior and safeguard stakeholders such as partners. What's more. and investors. customers. Board members who are zealous about fulfilling their duties often get punished by not being selected for boards at other companies. Still. . a transaction between two organizations can affect other parties .
3) Product Promotion : Using sales promotional techniques one free offers. 4) Customer Service: Appointing female executives to get new business and then sending recovery agents for outstanding dues is unfair business practice.5: Unfair or Unethical Business practices (I) With Respect to Customer: 1) Pricing: Differential pricing for different class of customers as low quality. Special pricing similarly low price identified factoring discount are all forms of unfair business practices. 5) Price Fixing: Collaborating with other companies and fixing prices which are on higher side so that customers does not have any choice. . 2) Advertisement : Marking false claims using advertisement to confuse or confuse the customer with exaggerated claims and colorful copy. free trial buy two get to lure the customer in purchasing the products Similarly in industrial goods giving bribe to get the order. etc. are used like demo pack.
liquors and drugs. False claims made by sales executive. 6: Ethical Issues . future projects etc. e) Manufacturing. Investors buy or sell shares of the company based on this sensitive information. which he should not disclose to anyone. (c) Industrial Espionage: This is spying for either personal or companies benefit. (d) Occupational Crimes: They are wrong actions of employees like: a) b) c) Using office telephone or PC for personal use.g. transporting & selling products that are prohibited by law e. d) Damaging the property of the company. Similarly a huge amount of money is invested· in training of employee and he leaves the organization which has trained him and takes his expertise with him. Theft or pilferage. (b) Giving Information which is Confidential (Insider Information): An employee has confidential information about financial status. he must protect the information of his previous employer.(II) (a) Unethical business practice of employees: Job Switching: When an employee changes job.
for example. near Arantangi in Tamil Nadu. leather tanneries in South. There is no point in making statutory provisions for enforcing ethical conduct.How Ethics Can Make Corporate Governance More Meaningful? 1) Corporate governance is meant to run companies ethically in a manner such that all stakeholders. (a) disclosing the interest of directors in contracts in which they . creditors. have brought about too much of environmental degradation that has unleashed untold miseries to people in and around their locations. Ship breaking in Valinokkam. employees. customers. for example. the society at large and governments are dealt in a fair manner. 4) There is a lot of provisions in the Companies Act. can maximize the profit of shareholders. a chemical company. 3) Corporate governance is not something which regulators have impose on a management. distributors. Otherwise. 2) Good corporate governance should look at all stakeholders and not just shareholders alone. but completely violate all environment laws and make it impossible for the people around the area to lead a normal life. it should come from within. Arco and hosiery units in Tirupur.
For example.are interested. such wide-ranging processes are not available to courts in developing countries. a clever conman can try to sell a piece of the blue sky. 6) The Securities and Exchange Board of India (SEBI) has jurisdiction only in cases of limited and listed companies and are concerned only with their protection. What about the . In the US. there is the concept of the "blue sky" law. Members of the board and top management should ensure that these are followed both in letter and spirit. which may not be covered technically under any existing law and cannot be interpreted as violating any of the existing laws. which are manipulated by unscrupulous persons like Ketan Parikh and Harshad Mehta. for instance. but not in spirit. (b) abstaining from exercising voting rights in matters they are interested. In order to check such crooks. However. the courts recognise that new forms of fraud may arise. and (c) statutory protection to auditors who are supposed to go into the details of the financial management of the company and report the same to the shareholders of the company. 5) There are a number of grey areas where the law is silent or where regulatory framework is weak. But most of these may be observed in letter.
has been investigating several "Vanishing Companies". . 800 crores from the public and subsequently became untraceable. thousands of investors have lost their hard-earned' money and no agency has come to their rescue so far. However.shareholders and others of other unlisted Limited companies? 7) The Serious Fraud Investigation Office (SIFO) in the Department of Company Affairs (DCA). collected more than Rs. SEBI has identified 229 as "vanishing companies" which tapped the capital market. By 2003.
what becomes an ethical guideline today is often translated to a law. regulation or rule tomorrow.e." Seniors explain that ethics includes the fundamental ground rules by which we live our lives. responsibility. Many philosophers consider ethics to be the "science of conduct. Discussions around how these values are applied are sometimes called moral or ethical principles. Philosophers have been discussing ethics for at least 2500 years. Many ethicists consider emerging ethical beliefs to be "state of the art" legal matters. fairness. e.but "the right thing" is not nearly as straightforward as conveyed in a great deal of business ethics literature. Business Ethics is now a Management Discipline: Business ethics has come to be considered a management discipline. etc. i. environmental protection. especially since the birth of the social responsibility movement in the 1960s. values such as respect.. In that decade.g. Values which guide how we ought to behave are considered moral values.What is Ethics? Ethics involves learning what is right or wrong. crime. Many ethicists assert there's always a right thing to do based on moral principle. social awareness movements raised expectations of businesses to use their massive financial and social influence to address social problems such as poverty. equal .. honesty. and then doing the right thing -. and others believe the right thing to do depend on the situation -ultimately it's up to the individual.
policies and procedures. roles of ethicists and ethics committees. and in their planning and operations have replaced the word "stockholder" with "stakeholder. Note that 90% of business schools now provide some form of training in business ethics. Today.and so business ethics was born." meaning to include employees. An increasing number of people asserted that because businesses were making a profit from using our country's resources.rights. . organizations realized they needed more guidance to ensure their dealings supported the common good and did not harm others -. codes of conduct. procedures to resolve ethical dilemmas. etc. As commerce became more complicated and dynamic. public health and improving education. organizations realized that they needed to manage a more positive image to the public and so the recent discipline of public relations was born. ethics training. suppliers and the wider community. ethics in the workplace can be managed through use of codes of ethics. business schools and managers have recognized this broader constituency. The emergence of business ethics is similar to other management disciplines. Many researchers. For example. Organizations realized they needed to better manage their human resources and so the recent discipline of human resources was born. these businesses owed it to our country to work to improve society. customers.
promote & ensure orderly growth of the insurance industry. including: * Promoting and regulating professional organizations connected with insurance & reinsurance * Improving the efficiency while conducting the insurance business * Establishing a code of conduct for players in insurance * Determining the specification of accounts. and regulate. regulatory authority endeavoring to protect the interests of policy holders.The indication of reforms IRDA .INSURANCE .central to the insurance reform process . and the manner in which funds are invested * Laying down prudential norms for investment for both life and general insurance companies . The IRDA has been empowered to carry out several functions.is an autonomous.
The planner should mutually define the personal and financial goals. if relevant. understand the time frame for results and discuss. how one feel’s about risk. ♦ Establishing and defining the client – planner relationship: The Financial advisor should clearly explain or document the services to be provided and define the responsibilities. ♦ Gathering client data. The advisor should also disclose any restrictions on his ability to give unbiased advice and disclose any conflicts of interests.THE SIX STEP INSURANCE PLANNING PROCESS Insurance Planning is the process of providing advice and assistance to clients to determine whether and how clients can meet their financial needs and life’s goal through proper management of financial resources. . The advisor should explain fully how he will be paid and by whom. including goals: The Financial advisor should ask for information about the financial situation. The Financial Planner should gather all the necessary documents before giving the advice. The advisor should agree on how long the professional Relationship should last and how decisions will be made.
. depending on what services have been asked. coordinating the whole process along with professionals such as solicitors or stockbrokers. current insurance coverage. if needed. ♦ Developing and presenting Financial Planning recommendations and/or alternatives: The Financial Planner should offer Financial Planning recommendations that address the goals. investments or tax strategies. For this one could include analyzing the assets.♦ Analyzing and evaluating the financial status: The Financial advisor should analyze the information to assess the current situation and determine what one must do to meet the goals. The planner should also listen to the client’s concerns and revise the recommendations as appropriate. liabilities and cash flow. based on the information provided. ♦ Monitoring the Financial Planning recommendations: The planner should agree on who will monitor the progress towards the client’s goals. The planner may carry out the recommendations or serve as your ‘coach’. ♦ Implementing the Financial Planning recommendations: The planner and the client should agree on how the recommendations will be carried out. The planner should go over the recommendations with the client to help and understand them so that one makes informed decisions. If the planner is in charge of the process. he/she should report personally to review the situation and adjust the recommendations.
loss adjusters. brokers. One would agree that the level of capital companies have had to raise within the last few years is quite challenging. could only win the admiration and patronage of the buying public when there is a widely acknowledged effort by operators to operate by the rules laid down by trade bodies and the regulatory authorities. and agents to ensure that the . Insurance. the issue of compliance with ethics and best practices should govern market strategies and operations.Ethics in insurance today (present scenario): According to insurance stakeholders. being a business that is based on trust. That is why there must be a collective resolve by underwriters. Stakeholders have warned that the sector's efforts at achieving a more robust financial capacity would be rubbished if steps are not taken to address unethical practices and the prevalence of fake institutions in the industry. Insurance operators need to devote more of their energies and resources to ensuring the emergence of a new order in terms of players' attitude to the issue of ethics.
should be the key attributes of the sector. rate cutting and offer of illegal inducements has compromised insurance operators' compliance to the industry's ethics. Industry watchers say experience of non compliance with ethics in the insurance industry is a reflection of the situation in the larger society. honour.additional funds injected into the sector are safeguarded and used optimally through strict adherence to ethics of the profession. . adding that professionalism. Generally. the fear of losing business. service and social responsibility. Operators are usually expected to display more commitment to ethical standards in all the operations. There should not be any room for unprofessional and unethical practices in the dispensation.
limited. Man’s attempt to insure anything is. Because they do not control the world. Insurance might be viewed as man’s attempt to control and influence an environment that we all know is in God’s hands. insurance is only a partial or stopgap measure to deal with the uncertainties that the world presents. Many people look to insurance to provide them with a complete sense of security and assurance. everything will be taken care of. by definition raises ethical questions. the insurance industry has often nurtured this paternalistic and incorrect notion. now I don’t have to worry. When they buy insurance some people think. over the years.” Unfortunately. at best. “Oh.Insurance and Ethics Insurance. Insurance does not provide the kind of universal coverage and . Insurance is nothing more than a pooling of money to provide limited reassurance for a limited set of assets or circumstances.
insurance is a wonderful and much needed product. or “I didn’t understand what I bought. Because of this difference between what people expect and what insurance provides. usurious prices. Now my claim won’t be paid after paying premiums for many years”. there are times when the industry has not been a good corporate citizen. it is one of the few industries of its kind that is primarily regulated at the state level with 50 different sets of laws and regulations governing insurance. I thought everything was covered. people are often disappointed. is a pooling of community risks. Insurance. In some cases. angry or disillusioned to find that the insurance they have been paying for does not cover a particular situation.” Not meeting a customer’s expectations can feel frustrating and dissatisfying to them. my coverage was cancelled. In this business managers frequently hear statements like. the insurance industry has a history of discrimination.assurance that many people look for. This can leave consumers feeling that insurance is a poor economic value or a “rip-off”. and this small claim isn’t covered” or “Because I forgot two payments. Many ethical concerns with insurance exist because of this gap between consumer expectations and genuine insurable risk. For . Is insurance a good business after all? Does it raise so many ethical questions that we should just avoid or eliminate it? Once looked at carefully. “I’ve paid thousands of rupees of premiums. Although it is national in scope. insurance has played an important role in the development of world economies. Unfortunately. at its core. It is a formalized way for people to come together and help each other. For example. insurance is one of the most highly regulated industries in our country. Historically. and dishonest business practices.
we are putting our money together. the ethical concerns do not end. from the same pool. eat in a Restaurant. When someone dies. just like money. his family benefits because a payment can be made from this pool of premiums and the investment income that arises from it. not just to help ourselves but to help other families. if there was no insurance in place. get on an elevator. Even more compelling. and drive cars. those remaining help the family. Commercial insurance for industries and professions has underwriting standards that require certain practices. our claim is paid to our family. but insurance is much more powerful than just survivor benefits. In this way. in many cases. Insurance allows us to take risks and therefore fully live our lives. when we pay life insurance premiums. Once we accept the proposition that insurance actually is a good business. It is a channel that can be used in very good and helpful ways. When someone else dies.example. People. This gives us some assurance of the quality of goods and services that we use. is not an evil unto itself. . without insurance we would not enter into these businesses. have done this for centuries. in more informal ways. ride in an airplane. safeguards. This may appear very basic. Very few of us would have surgery. Without insurance one mistake could bankrupt the business and shatter customer confidence. in many ways. licensing. Insurance is required in most industries and professions. In fact. Insurance. they just begin. but also frees us to conduct business. insurance provides a form of safety net for consumers both in terms of the product or service delivered and remuneration if there is malfeasance. Every day in running an insurance business. When we die. Insurance not only provides protection to the consumer. and so on. ethical considerations arise.
or keep them no matter what? How can we best address these ethical dilemmas? . How should we contract with other companies? Should we get as much as possible. or something in-between? 2. the spirit of the law. What is the proper level of customer service? Just enough to get by. or both? When can and should we make exceptions to our policies and procedures? 5. give as much as possible. as much as possible. or Something in-between? 7. God’s laws. or both? 4. or something in-between? 3. What is a fair price to charge? Should we charge as much as we can. man’s laws. Which laws are we talking about. or something in-between? 6. What should be done when someone is not doing the job? Should we help them. What should our benefits and compensation be for the people working within the company? Should we pay them as little as possible. more than the customer has bargained for. get rid of them. What kinds of policies and procedures should govern the running of the company? Should we follow the letter of the law. as little as we can.A few of the questions insurance corporatists confront daily are: 1.
Trust. every day depending upon the individualistic views and ethical followings. insurance is based on mutual trust between insurance producers and insurance clients. A primary purpose of the Institute will be to consider the role of ethics as an alternative to additional regulation of the insurance and financial services industry. and the application of high ethical standards. . Based upon the situation. Unlike many other businesses. is based on the highest ethical standards. Institute for Insurance Ethics Mission and Purpose The mission of the Institute for Insurance Ethics is to develop programs that will educate members of the insurance and financial services industry. It is possible to face the changing questions. social responsibility. any of the answers may be right. as well as the consuming public about the nature of ethics. in turn.There are no hard and fast answers to any of these questions. and the changing answers.
It will be a strong. clear voice for ethical conduct and social responsibility within the insurance industry.Vision of the Future The Institute for Insurance Ethics will be a highly visible advocate for ethics and ethical behavior in the life insurance and financial services industry. To perform his / her duties in high esteem. So. 3. the marketing staff needs to observe a set of norms in his / her professional conduct. insurance professionals will gain more and more formal training in ethics and in dealing with ethical situations that they confront. Through its growing leadership and influence. Through that training and awareness. marketing staff 1. which make him / her worthy of trust and faith. The leadership shown by the institute will create ever-growing awareness of ethical issues among insurance and financial services professionals. Not to disclose client's confidential and personal information . To give utmost priority to the client's interest. The Code of Ethics for the life insurance. CODE OF ETHICS Selling Life Insurance is like selling intangible product. consumers will continue to gain trust and confidence in insurance professionals and in the insurance industry. 2.
Identification of marketing staff and the insurance agency . To strictly follow the concerned laws and regulations. The IRDA has formulated a Code of Conduct for the marketing staff which comprises two broad group heads viz. 7. They are listed herewith: Do's 1. To be loyal to the Organization. 5. . 8. To maintain fair relations with colleagues. To use appropriate methods in convincing clients to protect their insurable interest.certificate of License to be shown to the prospect on demand. To ensure prompt and sincere service to the client and his or her family. To set a plan and work accordingly. 2. "Do's" and "Don'ts". moral and financial standard defined by the Company.4. 9. To improve his / her knowledge of life insurance through constant study. 11. To make truthful and accurate presentations. 6. 10. 12. Match the needs of his / her client with various products available with his insurer. To obtain proposals only on the lives of persons who fits in the physical.
5. 7. Induce the prospect to submit wrong information in the proposal form or in the documents submitted to the insurer for acceptance of the proposal . Bring to the notice of his / her client the implication of various questions in the proposal form and other documents and advise the client to disclose all the material information. 8. Work out the premium to be charged so that his / her prospect is able to weigh the economic or financial implication of the proposal on his / her resources. change of address. • Exercise of various options.3. Don'ts . Inform the prospect about acceptance or rejection of the proposal by the insurer. Obtain all documents from the prospect for the completion of the case. Solicit or procure insurance business without holding a proper authorization 2. 6.No Marketer shall 1. • Revival. 4. Disclose to the insurer all relevant information. • Effecting nomination/assignment. Assist the policy holder in matters of: • Claim settlement. Induce the prospect to omit to disclose the material information in the proposal form 3.
4. Interfere with any proposal introduced by any other insurance marketers. Offer different terms and conditions other than offered by the insurer. 9. Apply for fresh license to act as an insurance marketer if his / her earlier license / authorization have been terminated with in five years from the date of termination. Ethics in insurance: Building relationships through trust The momentum of the private insurance sector leaves no doubt in one’s mind that it is amongst the foremost growth sectors of our country. Remain or become a director of any insurer carrying on insurance business in India. But even while one braces himself to avail of the numbers within his/her sight. Part with or share his incentive with Prospect or with any other person. Compel any person to terminate an insurance contract with any insurer in order to effect a new proposal within three years from date of such termination. A market share of 26. 8.18 per cent in five years is testimony to this. 5. 6. Behave in discourteous manner. they need to realize that the "long-term" will belong to that company which rigidly . Receive a share of the policy proceeds from the beneficiary. 10. 7. 11.
ethics has a direct relation to sales. On the flip side. the mandate for good ethics always stems from the top. the inclusion of the policy proposal form. the more the sales. It's a fact that good ethics makes good business sense. where the customer entrusts the company with his / her financial savings. they have introduced a system of checks and balances that guards . and increased scrutiny are not half as damaging as the loss to image and reputation.benchmarks ethics for itself and for the industry. building in riders and flexibility options that address these needs. they prove that they are an open and reliable organization. providing assistance and clarity in documentation and upgrades. The inspiration for ethics thus comes from the highest source — from a need to impact the industry. business losses. and settling claims on time. Ethics means being fully accountable. why at Birla Sun Life. Litigation and costs of settlement. the use of the sales illustration. a reduction in ratings. In a business. Ethics is an attitude that needs to touch every aspect of the customer relationship. By giving customers the option to track investments online and by publishing the performance of the funds against benchmark indices. It should offer complete clarity and transparency and the literature supporting the product should not overpromise the benefits or understate the risks. the most fundamental being the way the product is designed. There are many ways to build trust through ethics. It entails having great reverence for the customer's needs. and the free look period they offer have served to win their customers' trust. but to the industry they serve. a lack of ethics can have serious consequences. Which explains. being open to suggestions and insights that might enhance his / her comfort levels. not just to the company and to its customers. For eg: At Birla Sun Life. Of course. specifically prepared for Birla Sun Life by CRISIL. The greater the trust.
While top management can lay down a code of ethics and request adherence.against concealment and why they follow norms of compliance and adhere to IRDA regulations so scrupulously that their books and processes are open to audit at all times.”. its implementation depends on the individual. the strength by which they progress. "Ethics is an exclusive human concern without any superhuman authority to back it. that momentum that challenges a company to rise above themselves and raise the bar each time they interact. It is the way ahead . As Albert Einstein said. CASE STUDY: CODE OF ETHICS AND PROFESSIONAL CONDUCT ICICI LOMBARD-CHEATS .for each individual and for his industry. It is the means by which they measure themselves. Ethics is that discipline. and the light by which they shall be remembered.
Insurance company was notified and claim number received. . Police report was made. Member's Rating of this Product: Member's Recommendation of Product: Customer Service: Claims Settlement: Rates/Premium: Range of Plans: Staff Attitude: Pros: None Cons:Business ethics this No The Cheating by ICICI Now if things could not get any worse.Rahul Saxena is a policy holder who is an unsatisfied consumer of ICICI LOMBARD. and verifying the same with your customer service representatives as well as the garage of choice – Autograph Skoda. 12-11-05: Accident took place. 16-11-05: After checking the list of cashless garages on their company website. He shares his personal experience with us. The following is a timeline as to what happened and continues to happen. I am currently going through what can only be termed as the blatant cheating of a customer from one of India’s largest Companies – ICICI.
Suresh Shetty. “the ICICI legal department had advised them not to pay the claim”. Till date. I towed the car to the workshop. He instructed me that if I want my car I could pick it up after paying the full amount. All papers as desired by ICICI were handed over to the garage to produce to the Insurance agent at the time of the survey. I then spoke to Mr. I also spoke to my long time insurance agent from New India Assurance who confirmed that there is no such requirement and that ICICI is known to harass its customers on large claims. even after knowing the ridiculous prices they have. Nothing came. 19-12-05: At 7:30pm. Abhay stating that ICICI cannot process my cashless claim as a third party has been injured and a case has been filed. Abhay and Mr. I get a call from Mr. I was put on the line with Mr. Shetty were well mannered and helpful to the extent they could be. The only reason I picked an authorized Skoda garage. who stated. Kapil Madgar who stated that he was the Regional Manager. . I asked for a written copy of the clause in the policy where it is stated that the claim for vehicle repairs cannot be paid unless the case is solved in court. Mr. I have asked for a written statement by fax from the company showing me where this clause is mentioned. I was assured that it would be with me by 10am the next day.Official Skoda dealers. was because ICICI told me they had a cashless facility for that garage. However he rudely told me that he does not know and even though he was sitting in the office. but I must say that the manner of speaking of Mr. he did not take the bother to atleast try and assist me. I asked him to provide me with the clause as mentioned above. Kapil leaves a lot to be desired! As it was obvious that I was not going to get an accurate answer on the phone.
and a fax sent on the 20th to their MD – Mr. and my agent at New India told me that this is a motor sport activity and does not apply to my case at all. This battle will now move to the Insurance Regulatory Board. But. I am putting this topic up here now to WARN all other members that ICICI are COMPLETE CHEATS AND DO NOT GIVE A DAMN ABOUT THEIR CUSTOMERS. I am in very good standing legally and I should win my case plus penalties and other expenses paid to me. They will try anything in their power to wriggle out . No explanation was given as to what they mean by pace making. However this will now take time and I have no choice but to fund the entire repair costs myself. I get an unsigned fax from ICICI stating that they will NOT HONOUR my insurance at all stating the limitation in the policy of “PACEMAKING”. from all the legal opinions I have taken. This from a company who’s slogan is “Haam hai na!” I should take them to court for false advertising alone! I have now approached the WIAA who are supporting me completely. Sandeep Bakshi has not been replied too till date. all their written correspondence is unsigned. I receive the biggest shock of my life. All further attempts to get a proper reply from ICICI has fallen on deaf years.On 20/12/2005. There is no-one at ICICI who is willing to take responsibility. From there I can move the Consumer Court if I am not happy with the verdict. and there is no-one you can speak to who will give you a straight answer.
This tactic is probably their company policy. hoping that finally the customer will give up and forget about it. They will gladly take your money with a smile. My Final notes – DO NOT DEAL WITH ICICI. this is not happening here with me and rest assured this case will be followed till its rightful conclusion. they are the WORST I have ever had the displeasure of dealing with. insurance or loans. Conclusion: . whether it’s their banking. which they are rightfully entitled to pay. but when it comes to actual customer service.of paying a large claim. And hopefully it will serve as a lesson to ICICI and other insurance companies that the Customer is no longer just going to lie down and take the CRAP that is meshed out to them. Well.
is an individual one. Above all. and in life. ethics and the spiritual compass that underlies our individual ethical code. is not a destination. it is the journey. The ethical path may not be popular but it does stand the test of time. it is not even a journey. The ethical “stake in the ground” will always be scrutinized and criticized by someone. Ethics is not reached by consensus but by conviction. Ethics should guide our communities. What is good. right and true usually stands the test of time and may not always be immediately apparent.The ethical and spiritual path in insurance. yet they are deeply personal. At times. Ethics in insurance: Building relationships through trustnews . it can feel like a solitary path. Ethics is not a hard and fast set of rules but is based upon guiding principles.
specifically prepared for us by CRISIL. Mumbai: The momentum of the private insurance sector leaves no doubt in my mind that it is amongst the foremost growth sectors of our country.Nani Javeri* 11 January 2006 The 'long-term' will belong to the company which rigidly benchmarks ethics for itself and the industry. we need to realise that the 'long-term' will belong to that company which rigidly benchmarks ethics for itself and for the industry. the inclusion of the policy proposal form. At Birla Sun Life. A market share of 26. ethics has a direct relation to sales. the use of the sales illustration. the more the sales. It should offer complete clarity and transparency and the literature supporting the product should not over-promise the benefits or understate the risks. But even while we brace ourselves to avail of the numbers within our sight. There are many ways to build trust through ethics. The greater the trust. Ethics is an attitude that needs to touch every aspect of the customer . By giving customers the option to track investments online and by publishing the performance of the funds against benchmark indices. we prove that we are an open and reliable organisation. where the customer entrusts us with his / her financial savings.18 per cent in five years is testimony to this. In a business such as ours. and the free look period we offer have served to win our customers' trust. the most fundamental being the way the product is designed.
It entails having great reverence for the customer's needs. "Ethics is an exclusive human concern without any superhuman authority to back it. we have introduced a system of checks and balances that guards against concealment and why we follow norms of compliance and adhere to IRDA regulations so scrupulously that our books and processes are open to audit at all times. the strength by which we progress. that momentum that challenges us to rise above ourselves and raise the bar each time we interact. Which explains. Ethics means being fully accountable. and the light by which we shall be . the mandate for good ethics always stems from the top. why at Birla Sun Life. As Albert Einstein said. Litigation and costs of settlement. It is the means by which we measure ourselves. business losses. and increased scrutiny are not half as damaging as the loss to image and reputation. a reduction in ratings. not just to the company and to its customers. On the flip side. and settling claims on time. being open to suggestions and insights that might enhance his / her comfort levels. building in riders and flexibility options that address these needs. It's a fact that good ethics makes good business sense. but to the industry we serve.from a need to impact the industry. a lack of ethics can have serious consequences. While top management can lay down a code of ethics and request adherence. The inspiration for ethics thus comes from the highest source . providing assistance and clarity in documentation and upgrades." To this I add: Ethics is that discipline.relationship. Of course. its implementation depends on the individual.
and taking on the risk.remembered.for each of us and for our industry. What this means is that if there is a . In this sense. This view of insurance has led to a number of people and religious communities disapproving of insurance because of its similarities to gambling. The difference between your premium amount. they keep the premium. If they win the bet. Basically the insurance company is willing to bet that you and your property will not suffer the loss insured against. if they lose. and the amount the insurance company will have to pay out if the loss occurs. It's just like going to the horse races and betting on a horse that pays out 10 to 1. What these people do instead is create a system of what is known as social insurance. It is the way ahead . Birla Sun Life Insurance Company Limited Insurance contracts are often seen as a form of gambling. That is because they appear as a type of wager that takes place over the lifetime of the policy. *The author is CEO. they receive your premium. In exchange for making this bet. they are often compared to a type of long term financial casino. Among those groups that avoid insurance are the Amish and Muslim communities. is simply the odds the insurance company is getting for taking on the bet. they make the payout.
Social insurance systems therefore are not always effective. in extremely large disasters. This means that it is more successful in small closed and closely knit communities than in large modern societies. modern insurance systems can also run into difficulties.com/ where you will find information. While this system is very simple. for example by providing rehabilitation to accident victims.disaster and someone suffers a heavy loss. However. This is why larger modern insurance systems can be more robust. Also. in very large disasters the system can break down as a small community will not be able to rebuild itself completely without outside assistance. for instance by requiring the installation of fire alarms. or by reducing the loss if the insured against event does occur. Therefore insurance is like a gamble in the reward and risk elements. it requires that the community actually does step forward and help those who suffer from disasters. Often the community that is supposed to adopt it is not suitable. then the whole community will step forward and help them to deal with their loss and rebuild. This is because the damage would be simply on too large a scale for the insurance companies to cope with. There are other ways in which insurance doesn't follow the gambling model. However. but other elements are different. For instance insurance companies seek to reduce the risk of the loss occurring constantly. Joseph Kenny is the webmaster of the insurance site http://www. it has the potential to be just as effective a safety net as insurance. This is witnessed by the fact that it is impossible to insure against certain risks such as floods and earthquakes.insure121. news and .
Embezzlement.200 more per year just because of Fraud. Every person spends $250 more per year due to Auto Insurance Fraud. If an Agent or Insurer violates any of the Unfair Trade Practices. Since Agents and Adjusters are tied to state regulation. the Insurers often keep strict reins on any person who might mislead the public in any way. Commingling. Inside these laws are the Unfair Trade Practices. that allows for each state to regulate their states' business. There is a law called Public Law 15. Twisting. Some examples would be Misrepresentation.com/?expert=Joseph_Kenny Insurance Ethics isn't much different than the Ethics requirement for any other Fiduciary position.links to the leading providers of car insurance in the UK. Rebating. Giving away Free Insurance. the people and the Insurers could lose their license and Certificate of Authority to transact business in that state. the McCarran Ferguson Act. Because the Insurance industry is tied to Ethics. . Defamation. the state can assess fines and/or imprisonment. Fraud is the willfull intention to deceive and every family in America spends around $1. etc. Concealments. and the Federals will not intervene as long as the states handle it properly. Article Source: http://EzineArticles.
Our Nation spent $1. Trying to police Ethics is a full time job. I would say that we will always face that problem. No one is immune. Lawyers. If an Agent decides to lie to a client in order to promote his own commission. Pharmeceuticals.7 TRILLION dollars on health care in 2003. Insurers. It's everyone's fault. and the CLIENTS themselves for being frivolous. It is estimated that 20-35% of that was fraudulent. . and every day is a new battle. since 61% of taxpayers say it's okay to cheat on your taxes. then that Agent should have his license revoked and face justice. But. Doctors. the hospitals. but are also cursed by the shysters and crooks. Every Insurer has outstanding people. Agents.
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