Editor’s Corner: The Morality and Ethics Involved in Life Insurance
By Ronald Poon-Affat
Reinsurance News, December 2021
“You bought it all, didn’t you? That’s not a question. I’m not asking, I’m telling you. I look at a person like you and I know. You are a buyer. How do I know? Because I am a closer. I can sell anything, everything. Ask anyone. Except, uh, insurance. Can’t stomach it. Preying on people so weak, so frightened of the future that they entrust the protection of their family to a piece of paper. To some promise of a corporation. What kind of man does that? Puts his wife and children in the hands of strangers. People he’s never even met. Then one day … the man is gone. His family alone. The wolf comes to the door. And, well, no one’s covered for that.” —Victor Strand, “Fear the Walking Dead”
Wow! This is a rant worthy of a talk show radio program during the US presidential election season. Life Insurance is not usually disparaged publicly like this. “Fear the Walking Dead” is an American post-apocalyptic horror drama television series. In the show, even though everything has gone to hell, humanity is under near-constant threat of attacks from zombies, civilization as-we-know-it has come to its untimely end ... one of the main characters still has time to disparage the morality of insurance. I am defining morality as the principles concerning the distinction between right and wrong or good and bad behavior.
Two films come to mind that corroborate the general public’s negative view of insurers:
Netflix’s 2019 film, “The Laundromat,” starts with the reneging of a reinsurance company’s obligation to compensate an accidental death from a boating accident. Turns out that the Nevis-based reinsurer is a trust of a shell corporation that is under investigation by the Internal Revenue Service for fraud.
The second film is from 1993, “Groundhog Day,” which is the fictional tale of a weatherman (Phil) who becomes trapped in a continuous time loop. One of Phil’s daily interactions includes one of Hollywood’s unkindest depictions of an insurance agent. The salesman relentlessly badgers and presses Phil every single day about his insurance needs.
Pivoting away from Hollywood, the 1686 Lloyds of London institution recently made global headlines apologizing for its “shameful” role in the 18th and 19th Century Atlantic slave trade. Another not widely known historical fact relates to the 1967 race riots in the United States. This event brought to light insurers’ practice of explicitly demarking parts of a city deemed too risky to insure by drawing a red line on a map around these areas; thus giving rise to the term “redlining.” In an attempt to improve recovery from the riots, President Lyndon Johnson created the President’s National Advisory Panel on Insurance in Riot-Affected Areas in 1968, which attributed insurers’ redlining as being part of the problem. The panel’s report showed that the areas within the red lines established a feedback cycle that continued to drive inequity and deprive poor neighborhoods of financing and insurance coverage. Effectively, redlining had contributed to creating poor economic conditions, which already affected these areas in the first place.
Thankfully there is a new global awareness of Corporate Social Responsibility (CSR) for companies to provide resources and support activities focused on enhancing economic and social development. The insurance industry is paying attention to CSR and as an example, India’s insurance regulator has already formally solicited insurers’ commitment toward community and society and has mandated that insurers penetrate the rural sector market with products suitable for the rural poor.
While CSR now seeks to provide a formal roadmap to maximize companies’ overall impact on society, over the years the insurance sector may have serendipitously explored some progressive issues. Some examples that come to mind include:
- Anti-discriminatory practices. South African life insurers started covering HIV-infected clients as early as 2001,
- Gender equality. In 2012 EU auto insurers stopped charging different car insurance premiums to men and women because of their sex;
- Socially responsible investing. Some Universal Life policies already offer environmental, social and governance (ESG) investment options;
- Protection of low-income businesses. There are index insurance services that offer micro-insurance to smallholder farmers that cover crop or livestock losses.
Embracing CSR comprehensively can be daunting, since the insurance eco-system includes customers, employees, shareholders, intermediaries, suppliers, regulators and the broader community at large. Some broad topics for consideration include:
- Climate change leadership. Supporting climate risk management by mapping, analyzing, prioritizing, and pricing risk.
- Strategic philanthropy. Partnering with charities or organizations in the community for a mutually beneficial purpose.
- Socially responsible investment. The process of including non-financial criteria—ESG considerations—in decision making.
Some current dilemmas that specifically apply to life insurance include:
- Genetics. Should life insurers have access to genetic test results of prospective clients? Test results that reveal untreatable life-threatening diseases may create a class of uninsured risks.
- Physician-assisted death. When debating the legalization of facilitating a patient’s death by providing the necessary means and/or information to enable a life-ending act, should the life industry encourage greater flexibility in the payout of policy benefits in the event an insured is diagnosed with a terminal illness or is suffering from intractable pain?
- COVID-19 vaccination status. The use of COVID-19 vaccination proof before issuing a policy is a very controversial topic, but let’s consider one specific issue. Underwriters reviewing border-line declination for an impaired life with co-morbidities, might be swayed to accept the client with a rating upon the receipt of COVID-19 vaccination history.
This Editor’s Corner concludes that in order to raise awareness of these complex issues, perhaps insurance certification both for actuaries and non-actuaries should include a learning module on the ethical and moral quandaries for our industry. Insurance is fundamentally a force for social good. However as societal values keep evolving, insurers must continuously adapt to changing times and values in order to address our clients’ needs. To quote Winston Churchill “We make a living by what we get, but we make a life by what we give."
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Society of Actuaries and/or his employer.
Ronald Poon-Affat, FSA, FIA, MAAA, CFA, is life & health director at the IRB Re, based in Rio de Janeiro, Brazil. Ronald is co-editor of the SOA Reinsurance Section’s newsletter, Reinsurance News. A past SOA Board Director (2009–12), he was recognized as an SOA Outstanding Volunteer (2015) and is past recipient of the SOA Presidential award. Ronald can be contacted at ronald.affat@irbre.com.