The concepts of morality, ethics, and culture of behavior are usually attributed to the field of non-economic relations between people. To some extent, they are associated with official relations, usually tied to service in government organizations. Meanwhile, it is exactly the entrepreneur who needs the image of an honest, deeply decent person, guided by the principles of morality. The connection between business and morality stems from the very essence of entrepreneurship. The strategic management of any company is based on decision making. All business strategies must be consistent with the financial goals of the organization. Ethical issues arise when leaders attempt to achieve personal goals for the good of the company, but with negative consequences for people and environment. Osiel states that “the law cannot possibly encompass all that society ethically expects of businesspeople” (246). Usually, morality is viewed as a self-restraint of an individual that applies to one’s actions and pursuits. From there, the assumption arose: business, as it is never truly individual, is naturally amoral in its essence. However, business ethics remains a rather relevant issue for insurance business, as the latter participates in programs for the implementation of corporate social responsibility (CSR).
Insurance is an effective tool that largely determines the quality of doing business and provides an opportunity to increase CSR for organizations who are the consumers of insurance services. Issues of responsibility and ethics are important for participants in the insurance market and in their pure form, they are of fundamental nature for this type of business. There are many questions that arise when doing business in the insurance field. For example, is it ethical to require policyholders who are experiencing a difficult economic and, accordingly, psychological state to comply strictly with claims settlement requirements? Is it amoral to motivate front office employees to consciously and purposefully delay and minimize insurance payments, or create difficulties in obtaining policies? How do the issues of achieving the maximum financial result correlate with helping people? These determining issues of conducting and developing the insurance business are resolved by explaining the need for an even distribution of responsibility among all participants in the relationship. Insurance companies should strive, first and foremost, not to generate more and more profits, but to reduce social dependency and increase corporate responsibility to society, including through the rational use of insurance.
Insurance is both a subject of corporate social responsibility, when the basic principles of CSR are implemented in insurance companies, and a tool that allows non-insurance market participants to solve CSR problems. Still, insurance companies have been hesitant to introduce ethical approaches into their business lately. Key point lies in the fact that ethics related risks are systemic and correlate with public goods. In the future, lack of strict and specific ethical principles may become a serious issue for insurance businesses and organizations that are funded by them. Still, the insurance companies are largely doubtful of ethical approaches because of the lack of understanding how they can help generate immediate monetary profits.
Insurance companies are both risk takers and investors which means that there are advantages to using ethical principles in both insurance and investment activities. Theoretically, strict business ethic provides several advantages for insurance business: for example, better reputation among competitors and customers, as well as more motivated personnel. Bucatariu and Florescu add that “private businesses which have set ethic goals in business achieved a much higher profit growth rate than similar businesses that have not set business ethic codes” (161). Such companies are less affected by regulatory risks and are more sustainable in the long term.
Insurance companies should adhere to the corporate social responsibility first and foremost to maintain their reputation. Additionally, they can employ specific activities that offers indirect application of business ethics, such as reinsurance policies and standards of underwriting. In terms of direct application, an overall sustainability of the business should be concerned: provision of quality services, human rights support, and ethical management. Above all stands the continuous development and compliance with the Code of Corporate Ethics by all employees of a company. Insurance companies should also apply ethical principles when they design and develop new products that are relevant to modern trends, such as insuring of renewable energy, environmental sustainability, and others. Finally, environmental factors for insurance companies are considered mainly in terms of the responsible use of resources.
With the global trends turning towards servant leadership strategies and sustainable business development, it becomes imperative for the insurance companies to adopt ethical approaches. The costs of implementing business ethics in an insurance company are long-term, and there is no clear understanding of which of them will contribute to profit growth. Sustainable transformation is complicated by a shortage of specialized personnel. At the same time, it provides reputational advantages, lower operating costs, comprehensive risk management, contributes to the expansion of the product line, and for investors it means the rejection of long-term inefficient investments. Thus, it can be concluded that, while they require deep understanding and complex processes of implementation, ethical approaches pose a significant benefit for insurance business in the long run.
Works Cited
Bucatariu, Mihaela, and Ioana Cristina Florescu. “The Coin of Morality.” Proceedings of the International Conference on Business Excellence, vol. 12, no. 1, 2018, pp. 161–170.
Osiel, Mark. “11. Commercial Morality, Bourgeois Virtue, and the Law.” The Right to Do Wrong: Morality and the Limits of Law, Harvard University Press, Cambridge, MA, UK, 2019, pp. 246–260. Web.