Protection from Covert Ops

We can thank the movie industry for exposing the hidden world of covert activities — think James Bond and Jason Bourne. We are rapt by the entertainment provided and our attention is transfixed to the action before us. If it’s intrigue we want, with a generous amount of suspense and excitement thrown in for good measure, then without doubt we get our monies’ worth.

What has this world got to do with business in general and in particular, the insurance business? Well, for starters, covert activity is not what one would expect of the business world. And yet there have been startling examples of late, unabashedly laid out by the media, of how financial institutions can be made to go wrong. Ultimately the burden of consequences fell on those who entrusted probity to a management that should have known better and should have acted with propriety. Governors and regulators as the overall seers obviously let their guard down.

In Canada, the insurance industry has, by its enviable record, maintained a consistently elevated position of good corporate governance, with very little exception. Good corporate governance is the accepted and expected standard of operation. It is therefore obvious when there is even the slightest deviation from the norm, causing good governance to take a back seat to a pronounced permutation born of maladministration and imprudent management.

For the most part, despite comparatively minor situations that have arisen, little harm has hung around long enough to create an unforgiving memory.

But from the perspective of the insurance-buying public, what is expected in terms of what the industry has to offer? Foremost, some indication is sought that the insurer will literally place themselves in the shoes of the buyer, clearly defining what they would want were their positions to be reversed. Insurers will do this through the medium of brokerage representation (unless they are direct writers), explaining product availability, the extent of coverage limits and detailing risk types that they will accept as risk bearers — all with reliance upon a history that has proven itself viable.

Admittedly, this will not come as news to anyone familiar with the manner in which insurance normally operates. But regardless of whether a person is a novice or veteran of the insurance business, he or she will not view as “normal” any indication from an insurer that it is engaged in some kind of Jason Bourne-style of covert operation; that the insurer is holding back on information (i. e. reasons for non-renewal) crucial to the policyholder; and which, by remaining silent, leaves the policyholder left to trudge cheek-by-jowl with the broker through a maze of complicated procedures to re-establish the consumer’s former position. This, by the way, is not to say a policyholder may not have been instrumental in creating a situation in which an insurer opts to withhold reasons for underwriting actions.

Naturally, questions — if not concerns — arise when such information is not forthcoming. Is the information being withheld for fear of possible legal backlash? Has the insurer simply failed to walk in the shoes of the policyholder, leaving the policyholder to ponder their uncertain fate with another insurer (and the stigma of a questionable character that might result)? If an insurer withholds information for legal reasons, is that not doing harm to the insurance company’s status as a professional organization, on the theory that a professional body would observe the basic rules of duty of care and put them into practice?

Duty of care is a two-way street. For an insurer, it means self-recognition and demonstration of acceptable conduct, which in turn will encourage a policyholder to act with equanimity within the insurance purchasing process. For a policyholder, if that equanimity is not achieved, his or her fate has pretty much been sealed, since any attempt to reverse the situation would likely fail — worse than a case of crossing the Rubicon. In this situation, it becomes the onerous task of the insurance buyer to find his or her way out of the woods with the help of an understanding and thoughtful insurance broker.

Whether insurance or any other business, it is generally accepted that “getting the job done” — a manager’s credo if there ever was one — means reliance on good corporate governance. Good corporate governance, which eschews covert operations, carries with it the ability to seek out, identify and bring to an element of success the insurmountable. Any business that puts the customer ahead of its personal protection strategy earns the business it seeks and gains the respect of those to whom it hopes to capture.

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Duty of care is a two-way street. For an insurer it means self-recognition and demonstration of acceptable conduct.