The Ethics of Insurance

Kevin L. Eastman
Professionals: Comparison of Jacqueline K. Eastman
Personal Versus Professional Ethics Alan D. Eastman

ABSTRACT. This paper considers the level of ethics Loken, 1989). Although there has been consid
for insurance professionals for professional situations erable discussion of professional business ethics,
(measured with three insurance scenarios) compared there has been little attention paid to personal
to personal (consumer) situations (measured by or consumer ethics (Vitell and Muncy, 1992;
Muncy and Vitell's 1992 Consumer Ethics Scale). The Vitell et al., 1991) and even less empirical analysis
results of the study illustrate that there are significant
comparing the professional and personal ethics of
differences in the ethical behavior of insurance
business people and determining the factors that
professionals in professional versus personal situations.
The authors found that insurance professionals are impact each.
more likely to actively engage in unethical behavior T h e insurance industry in particular is
in order to benefit professionally than in a personal experiencing an image problem due to the
setting. In general, however, the average respondent potential for ethical lapses (Hoffman et al., 1991).
was "unlikely" or "extremely unlikely" to engage in Insurance policies are complex products that by
unethical conduct. The managerial implications and their very nature are confusing for customers.
need for future research in this area are discussed. Consumers of insurance products are therefore
more at the mercy of the insurance salesperson's
ethical behavior (Hoffman et al., 1991) than they
The ethical conduct of business has come under would be with other less complex products.
increased public scrutiny in the past twenty years Insurance ethical crises such as the Metropolitan
as the public is becoming both more aware of Life scandal (where agents misrepresented whole
and concerned with business abuses (Dubinsky life insurance policies as retirement savings plans
and Loken, 1989, Vitell et al., 1993). Americans for nurses) have been discussed recently in the
generally distrust business people; furthermore, news (Kerr, 1993; Wooley and DeGeorge, 1994),
most business people do face ethical dilemmas but they have not been addressed much in the
in their careers (Lacznaik and Murphy, 1991). In academic literature. A recent exception is an
response to these concerns, both business prac- article by Tansey et aL (1994) that uses Forsyth's
titioners and academicians have devoted more Ethical Position Questionnaire to classify the
attention to the study and implications of idealism and relativism o f life insurance agents.
business ethics (Vitell et al., 1993; Dubinsky and The majority o f insurance articles that address
ethics are in practitioner related journals such as
National Underwriter (Cox, 1991), the C P C U
K. L. Eastman is an Assistant Professor of Risk Journal (Cooper and Frank, 1990), and Best's
Management and Insurance at Florida State University.
Review (Skipper, 1990) and stress the need for the
He received his doctorate from the University of
insurance industry to become more ethical to
Pennsylvania.
J. K. Eastman is an Assistant Professor of Marketing at regain consumer confidence. Areas of concern
Valdosta State University. She earned her doctoratefrom include marketing tactics, such as distorting
Florida State University. information for clients (National Underwriter,
A. D. Eastman is a doctoral candidate in Risk Management 1992) and product integrity (Skipper, 1990).
and Insurance at Florida State University. The importance of positive business ethics

Journal of Business Ethics 15: 951-962, 1996.

© 1996 Kluwer Academic Publishers. Printed in the Netherlands.
952 K. L. Eastman et al.

cannot be stressed enough. Ethical business is Finally, the results of the study and their impli-
good business because it attracts a better quality cations for both insurance managers and acade-
of employee, improves customer and public micians are discussed.
relations (Tsalikis and Fritzsche, 1989), and may
be an absolute requirement for success (Brennan,
1991, p. 255). Lagace et al. (1991) suggest that Literature review
ethical sales behavior can lead to higher levels of
quality in a business relationship in terms of trust Bartels (1967, p. 21) defines ethics as "a standard
and satisfaction with the business exchange. by which business action may be judged right
While business ethics is becoming a more impor- or wrong." Bartels (1967) further offers that
tant concern for both consumers and business ethics represents a concern not only for acts or
people, it is still misunderstood (Ferrell and material things, but also for people and the
Fraedrich, 1991). One of the areas of confusion actions of one person to another. This agrees
is that people tend to have two ethical standards with Ferrell and Fraedrich (1991, p. 4) who
(personal and professional) that may differ sub- describe ethics as the study and philosophy of
stantially (Tsalikis and Fritzsche, 1989). human conduct focusing on the determination
Given that the marketing of insurance products of right and wrong. Finally, Tsalikis and Fritzsche
is a prime area of ethical concern for insurance (1989) use the term ethics interchangeably with
agents and their clients, it makes sense to morals.
consider how the marketing literature addresses
ethics. In the marketing literature, several key
areas of ethical concern that have been pointed Business ethics
out are: bribery, fairness, honesty (such as
misrepresenting services to customers), pricing Business ethics can be defined as the "moral
(such as charging higher prices than firms with principles and standards that guide behavior in
similar products while claiming superiority), the world of business" (Ferrell and Fraedrich,
product (such as selling products that do not truly 1991, p. 5). Chonko and Hunt (1985, p. 340)
benefit the customer), and confidentiality suggest that ethical conflict occurs "when people
(Chonko and Hunt, 1985). These areas of perceive that their duties toward one group are
concern also apply to the field of insurance. inconsistent with their duties and responsibility
Thus, the purpose of this paper is to extend the toward some other group." Business ethics may
marketing literature into the area of insurance in be one of the most important but misunderstood
order to expand the knowledge of insurance concerns in the business world as business people
ethics in the academic literature. need to address ethical issues on a daily basis
This paper addresses the differences between (Farrell and Fraedrich, 1991; Tsalikis and
the personal and professional ethics of insurance Fritzsche, 1989). Most business managers do face
agents. It tests the hypotheses that insurance sales- an ethical dilemma at some point in their career
people apply a higher level of ethics to their (Lacznaik and Murphy, 1991).
personal lives than to their professional lives
(Dubinsky et al., 1980; Dubinsky and Ingram,
1984). The paper also considers what variables Marketing ethics
(demographic, top management, peers, and
corporate code of ethics) impact professional and Singhapakdi and Vitell (1990, p. 4) define
personal ethics. It accomplishes this objective by marketing ethics as the "inquiry into the nature
first addressing the business ethics literature, and grounds of moral judgments, standards, and
looking in detail at how the marketing and insur- rules of conduct relating to marketing decisions."
ance literature have addressed both professional Ferrell and Gresham (1985) note the lack of
and personal (consumer) ethics. Next, the consensus regarding what constitutes ethical
authors present the methodology for the study. conduct for marketing managers. Furthermore,
 Ethics and Insurance Professionals 953

they offer that marketing managers may face the long-run best interest of the customers
more ethical dilemmas than other business people (Dubinksy et al., 1980). Additionally, salespeople
given their increased frequency of boundary often work for long periods of time unsupervised
spanning contacts. Finally, Vitell et aI. (1993) have and sales negotiations may lend themselves to
created a scale to measure the marketing-related dishonesty (Lagace et al., 1991). Singhapakdi and
norms of marketers. Vitell (1992) suggest that salespeople do not
Ethical decision making for marketing differ significantly from others in marketing in
managers is affected by both external aspects (the terms of their Machiavellianism, deontological
environment, peers, and situation) and internal norms (the inherent rightness or wrongness of an
aspects (moral values) (Ferrell et al., 1988). In action), or their perceptions of ethical problems.
considering the firm's effect on ethics, Chonko Where they do differ, however, is that salespeople
and Hunt (1985) offer that upper management tend to see themselves as more self important
is less likely to see ethical problems than lower than others in marketing. Dubinsky and Gwin
management and that larger firms are more prone (1981) suggest that salespeople may be ethically
to ethical problems than smaller firms. Top less sensitive than those who are in purchasing
management is seen as setting the overall tone for areas of a business. Finally, Dubinsky et al. (1992)
ethical behavior in the firm (Chonko and Hunt, offer that salespeople want additional ethical
1985; Ferrell and Gresham, 1985; Sturdivant and guidance from their firms.
Ginter, 1977; Tsalikis and Fritzsche, 1989) in
addition to significant others and the social
interaction they present (Ferrell and Gresham, Ethics in insurance
1985; Ferrell and Weaver, 1978; Tsalikis and
Fritzsche, 1989). The literature regarding the Chonko and Hunt (1985) suggest that service
effect of a corporate or industry-wide code of industries have ethical problems in that managers
ethics is mixed with Chonko and Hunt (1985) may misrepresent services, capabilities, and data
suggesting that the codes do not have a signifi- to make their product look better than com-
cant effect, while Singhapakdi and Vitell (1990) petitors. Many consumers do not trust the
and Lacznaik and Murphy (1985) suggest that insurance industry (Feldblum, 1990) and conse-
enforced codes do provide ethical benefits. Hunt quently it needs to rebuild the public trust
and Vitell (1986) see both the industry and (Cooper and Frank, 1990). Vinten 0990) ranked
organizational environment as directly influ- various occupations for their ethical practices and
encing a manager's ethical decision making. reported the following ranking: auditors, profes-
Furthermore, most people see themselves as sors, bankers, doctors, corporate executives,
being more ethical than their peers and/or top business editors, lawyers, stockbrokers, insurance
management (Chonko and Hunt, 1985; Ferrell agents, TV newscasters, and U.S. Congress
and Weaver, 1978). Dubinsky et al. (1980), people. This suggests that there should be an
however, suggest that in a professional setting, emphasis on improving insurance ethics (Cooper
personal codes of ethics are probably compro- and Frank, 1990) and increasing ethics education
mised for the sake of job security and being part in the insurance field (Feldblum, 1990). Similarly,
of the group. Cox (1991) stresses that the insurance industry
In considering sales more explicitly, Tansey et is indeed facing an image problem that may be
at. (1994) suggest that there is increasing interest improved through straight talk by insurance sales-
in salespeoples' ethical decisions. Dubinsky and people to their clients backed by sound and
Ingrain (1984, p. 344) offer that the nature of simple investment strategies.
sales jobs (as salespeople are the link between a Cooper and Frank (1990) suggest that a key
customer and the company) can create an ethical problem is the failure of insurance agents
environment conducive for creating ethical con- to identify the customer's needs and recommend
flicts. These ethical conflicts may be created by the proper products to meet those needs.
the short-run interests of management versus Hoffman et al. (1991, pp. 24-25) identify nine
954 K. L. Eastman et al.

major ethical issues that confront insurance Professional versus personal ethics
agents: (1) assisting a customer in misrepresenting
a claim to the company (Misrepresent); (2) mis- Fraedrich (1988) offers that the moral philoso-
representing/downselling a competitor's product phies that are employed in ethical decision
to gain a competitive edge (Downselling); (3) making differ between the work and nonwork
obtaining an agent-of-record letter without fully environments for the same person. Tsalikis and
informing the consumer of the consequences Fritzsche (1989) state that there are two ethical
(Letter): (4) twisting/replacement of policies standards: personal and professional, with the
without offering full disclosure of consequences personal level of ethics being more strict than the
to the consumer (Twisting), (5) rebating part of professional level (since the professional level may
the commission as an incentive to the potential be compromised because of the need to succeed
policyholder (Rebating); (6) the selling of and to meet corporate goals). Tansey et al. (1994,
insurance by non-licensed agents (Non-licensed); p. 73) found, however, that the moral judgments
(7) an agent claiming that his/her policy and of life insurance agents are connected to their
competitive policies are equivalent when in fact personal moral philosophies. Ferrell and Gresham
they are not (Equivalent); (8) offering a lower (1985) suggest that the social learning that occurs
price policy without disclosing higher in the work place may influence an individual's
deductibles or other changes in classification professional ethics, while Ferrel et al. (1989)
(Lowball); and (9) providing false information to suggest that perhaps situational constraints such
the company and/or underwriters (False info). as work versus nonwork environments may affect
These issues of market conduct and misleading an individual's cognitive processes in selecting
sales tactics will continue to plague the integrity moral philosophies in ethical decision making.
of the insurance field (Wooley and DeGeorge, Consumer ethics is defined by Muncy and
1994) as consumers are unwilling to negotiate vitell (1992, p. 298) "as the moral principles and
prices with their insurance agent (Crosby et al., standards that guide behavior of individuals or
1991). groups as they obtain, use, and dispose of goods
Skipper (1990) in his discussion of the ethics and services." Muncy and Vitell (1992) note that
and integrity of the life insurance industry offers there is very little in the business academic
that there are four interrelated elements associ- literature addressing personal (consumer) ethics.
ated with the moral and ethical elements of the Most studies that have addressed consumer ethics
life insurance industry: (1) agents (as they repre- look at it in terms of very specific ethical behav-
sent the company to most insurance buyers), (2) iors, such as shoplifting, or normative guidelines
insurers (in terms of underwriting and investment for dealing with consumer abuse. Wilkes (1978)
management), (3) regulators (who must have offers that there is no absolute reaction to
integrity), and (4) the insurance product itself consumer ethics, but rather it varies greatly from
(which must be sound and offer good value). individual to individual and with the particular
Wooley and DeGeorge (1994) suggest that ethical ethical situation. Muncy and Vitell (1992) found
problems, such as the MetliFe scandal, could that consumers are more tolerant of certain kinds
increase due to several problems: (1) a compen- of potentially unethical behaviors than others.
sation system that favors the sale of whole life Those actions they found to be most unaccept-
insurance versus investment plans (Skipper, able were those in which the consumer actively
1990), (2) fragmented regulation which results in benefits from actions against a business, while
differences in regulation and state investigations more passive or less harmful unethical behaviors
by state, (3) inadequate controls due to a lack of were seen as more acceptable to consumers
internal safeguards to catch unethical agents early (Muncy and Vitell, 1992). Finally, while most
on, and (4) increased competition in the insur- consumers recognize that fraudulent consumer
ance industry which has led to more aggressive behavior can occur often, they tend to be more
sales tactics. tolerant of unethical behavior by consumers than
unethical business behavior (DePaulo, 1987;
 Ethics and Insurance Professionals 955

Wilkes, 1978; Vitell et al., 1991). This paper passively benefiting at the expense of the seller
intends to shed new light on the issue o f pro- (the consumer benefits from a seller's mistake);
fessional versus personal (consumer) ethics for (3) deceptive practices (where the consumer tries
insurance agents. to deceive the seller); and (4) no h a r m / n o foul
(consumers perceive an action as not resulting
in any direct harm to seller). It should be noted
Methodology that the authors did not use one of the twenty
items in Muncy and Vitell's (1992) scale because
The primary purpose of this study is to compare it related to unethical behavior o f consumers
the levels o f personal (consumer) and professional toward their insurance agent. The authors' pretest
ethics for a sample o f insurance agents. A with several insurance professors illustrated that
secondary goal is to examine the impact o f it may upset the respondents and taint the rest
selected variables (previously tested in other of the survey.
studies) on the levels of both personal and pro- Professional ethics are measured using the
fessional ethics for the insurance agents. T h e scenario technique (Chonko and Hunt, 1985;
hypotheses along with the literature that influ- Singhapakdi and Vitell, 1992) with three
ences them are addressed next. pretested insurance scenarios: (1) convincing a
client to drop a competitor's superior product to
buy your firm's inferior product (what Hoffman
Hypotheses et al., 1991 refer to as downselling); (2) selling a
product which satisfies a consumer's needs, but
Personal versus p@ssional ethics. The two main also offers other u n n e e d e d coverage which
hypotheses of this paper deal with the relation- increases the price o f insurance and the com-
ship between the personal and professional ethics mission to the agent; and (3) using inside infor-
of insurance professionals. The hypotheses and mation on an insurance bid situation with a local
the literature on which they are based are: government entity.
The use of such scenarios to determine
H1 There is a statistically significant differ- professional ethics allows for the inclusion of
ence between the level of personal ethics background information and detail in an ethical
and the level of professional ethics for the situation (Tsalikis and Fritzsche, 1989). The first
insurance agents (Tsalikis and Fritzsche, two scenarios tap into Cooper and Frank's (1990,
1989). p. 237) key ethical concern (i.e., the "failure to
There is a statistically significant differ- identify the customer's needs and r e c o m m e n d
H2
ence between the level of ethics (both products and services that meet that need") and
personal and professional) of m e n and also illustrate one of their other nine major
w o m e n , with higher levels for w o m e n ethical issues ("false or misleading representation
than for m e n (Vitell et al., 1991). of products or services in marketing, advertising,
or sales efforts"). The third scenario is related
This comparison requires measurement o f the to another of C o o p e r and Frank's nine major
levels of both personal and professional ethics for ethical issues (1990, p. 237), "relations with local
a selected sample of insurance agents. Personal communities."
ethics are measured using M u n c y and Vitell's To measure professional ethics, the respondents
1992 Consumer Ethics scale (a likert scale that were asked three questions for each scenario:
measures one's belief regarding twenty consumer (1) "The insurance situation described above
situations potentially having ethical implications). involves an ethical issue or problem"
M u n c y and Vitell (1992) operationalize (Singhapakdi and Vitell, 1992); (2) " H o w likely
consumer ethics as being made up of four factors: is it that" . . . the respondent would engage in
(1) actively benefiting from an illegal activity the described (unethical) behavior in the scenario
(consumers benefit from actions they initiate); (2) (Ferrell and Weaver, 1978); and (3) "Have you
956 K. L. Eastman et al.

faced the above situation in real life?," which was included in the analysis. Additionally, only 100
included as a manipulation check to ensure that of the respondents had absolutely no missing data
the chosen scenarios were realistic for the sample of any type. Thus, in some instances (particularly
(Hunt and Vitell, 1986). The first two scenarios in the case of the demographics of the sample
(downselling and selling additional unneeded outlined below) only the data from those surveys
coverage to a consumer) had been encountered are used.
by 90 percent and 76 percent of the respondents,
respectively. The "public bid" scenario had been Age, sex, marital status, and ethnic group of the
faced by only 17 percent of the agents. sample. The group of respondents was predom-
inantly Caucasian (96%), male (64%), and
Variables affecting p@ssional ethics. In addition to married (84%). The non-married segment of the
consideration of personal versus professional sample was composed of 10% divorced and 6%
ethics, the authors considered six variables dis- single individuals; all 4% of the respondents who
cussed in the literature which potentially impact were non-Caucasian were of Hispanic descent.
professional ethics: (1) the attitude of top man- Most of the agents (74%) were between the ages
agement (Chonko and Hunt, 1985; Ferrell and of 30 and 50 (with 35% in their thirties and 39%
Weaver, 1978; Hunt and Vitell, 1986) as between ages 40 and 49). Only 3 percent were
measured by Chonko and Hunt (1985), (2) peer under age 30, while the remaining 23 percent
influence as suggested by Ferrell and Weaver were in their fifties (17%) or above age 60 (6%).
(1978); (3) the existence of a corporate code of
ethics as suggested by Ferrell and Weaver (1978); Educational level and income of the sample. The
(4) the opportunity for unethical behavior as majority of the respondents (54%) had earned a
measured by Chonko and Hunt (1985); (5) job bachelor's degree, while another 33% indicated
tenure (Dubinsky and Ingram, 1984; Dubinsky some college education. Additionally, 3 percent
et al., 1992); and (6) income level (Vitell et al., had earned graduate degrees and another 3
1993). percent indicated some graduate school experi-
ence. Only 7 percent of the agents had no
Variables affecting personal ethics. The authors also education beyond high school. The income of
consider three variables that have been shown in the agents varied widely, but the single income
previous research to have an effect on personal category with the largest number of respondents
(consumer) ethics: age (Vitell et al., 1991; Muncy was the "$90,000 and over" category, with 23
and Vitell, 1992); educational level (Vitell et al., percent of the 100 respondents who had com-
1991); and income (Muncy and Vitell, 1992). pleted the entire survey. The overall results with
regard to the distribution of income are given
in Table I.
Sample
Professional information (position and work experi-
The data for this study was obtained by surveying ence). The majority of the respondents (57%)
123 insurance agents. Given that the questions indicated their position as a "sales agent" (34%)
related to ethical dilemmas and the agents' or as the "CEO, President, or O w n e r " of an
responses to those situations, it was stressed to insurance agency (23%). Other positions cited
the respondents that this research was for in the survey were vice president of sales (6%),
academic purposes only, and that no individual sales manager (5%), office manager (8%), and
scores would be identified. The need for truthful customer service representative (3%). The
responses was also stressed (per Ferrell and remaining 21 percent indicated "other" positions,
Weaver, 1978). O f the 123 surveys, only 115 had without elaboration. Sixty-three (63) percent of
answers to all of the survey questions dealing the respondents had more than 14 years of
with both personal and professional ethics, and insurance work experience, and only 6 percent
hence where appropriate only those surveys were had less than 5 years. O f the remaining individ-
 Ethics and Insurance Professionals 957

TABLE I of personal ethics identified by Muncy and Vitell

Distribution of income (i.e., actively benefiting, passively benefiting,
deceptive practices and no h a r m / n o foul). The
Income class Number of respondents coefficient alphas for the individual four
dimension were 0.57, 0.81, 0.77, and 0.69. The
Under $30,000 10
insurance scenarios presented to the respondents
$30000 to $39,999 15
are most closely related to factor one (actively
$40000 to $49,999 15
$50000 to $59,999 9 benefiting), and hence this comparison may be
$60,000 to $69,999 12 the most meaningful. The results of the analysis
$70000 to $79,999 8 are presented in Table II (where the level of
$80 000 to $89,999 8 personal ethics is measured as the average of the
$90 000 and over 23 responses to each set of corresponding items from
the Consumer Ethics Scale).
100
The overall result (of less ethical personal
behavior) is not consistent across the four factors.
The respondents are significantly less ethical in
uals, 12% indicated 5 to 9 years o f insurance their professional activities (at a 0.10 level of
work experience, while 19% have been in the significance) w h e n considering personal ethics
business for 10 to 14 years. Sixty (60%) percent factors one (where a consumer initiates an uneth-
of the respondents had been in their current ical action in order to benefit at the expense of
position for more than 5 years. The job tenure the seller) and two (where the consumer benefits
for the others ranged from 19 percent for less from the seller's mistake and does nothing to
than 2 years, 10 percent for 2 to 3 years, and 11 correct it). However, the respondents are signif-
percent for 4 to 5 years of work experience. icantly more ethical in their professional behavior
(at a 0.01 level of significance) w h e n considering
personal ethics factors three (consumer deceives
Results seller) and four (consumers perceive action as not
resulting in any direct harm). That is, the respon-
The first of the two primary hypotheses (H1) is dents are less ethical in their professional
concerned with the differences in the level o f activities than in their personal activities when
personal and professional ethics. This hypothesis they are initiating the unethical activities (as in
is tested using a t-test of the differences in the the specified insurance scenarios). Questions
mean responses for the personal versus profes- relating to factors three and four are ethically less
sional ethics items. The level of personal serious, and are less comparable to the insurance
(consumer) ethics is measured as the average of scenarios.
the nineteen items from the Consumer Ethics The finding of significant differences in
Scale, and the level of professional ethics is personal and professional ethics has support in
measured as the average of the six items (two the literature. Tsalikis and Fritzsche (1989) offer
each) from the (three) insurance scenarios. The that there are two ethical standards for one's
coefficient alpha for the entire nineteen item personal and professional life. The results of this
consumer ethics scale was acceptable at 0.86. The study indicate, however, that there are degrees
results of the t-test indicate that the respondents of ethical standards in one's actions as a
are more unethical in their personal (consumer) consumer. This conclusion is supported by
activities than in their professional insurance Muncy and Vitell (1992) who suggest that con-
activities (p = 0.0001). sumers may be more tolerant o f certain kinds of
The relationship between the professional and potentially unethical behavior (such as those in
personal ethics o f the respondents can be dimensions three and four).
examined more closely by comparing the level It should be noted that the analysis so far has
of professional ethics to each of the four levels only focused on the relative levels of personal and
958 K. L. Eastman et al.

TABLE II
Difference between personal (consumer) and professional ethics

Measure of Sample size Mean difference Std. error T stat.

personal ethics (P value)

Consumer ethics 115 0.3137 0.0767 4.0907

Scale (all) (0.0001)
Factor 1:
Actively 115 -0.7919 0.0740 -10.7030
Benefitting (0.0001)
Factor 2:
Passively 115 -0.1688 0.0923 -1.8288
Benefitting (0.0700)
Factor 3:
Deceptive 115 0.2672 0.0922 2.8998
Practices (0.0045)
Factor 4:
No harm/ 115 1.8512 0.0897 20.6450
No foul (0.0001)

professional ethics, and not the absolute levels. N o n e o f the six i n d e p e n d e n t variables have a
That is, the finding o f less ethical behavior in the significant effect on the level o f professional
agents' professional activities than in their ethics. The overall model o f predicting profes-
personal activities does not preclude the possi- sional ethics is not significant and has an adjusted
bility that they are nonetheless behaving in an R-squared o f only 0.0081. This suggests that the
ethical m a n n e r in both cases. In fact, the level o f an agent's professional ethics is affected
responses to the professional ethics questions by variables other than the attitude o f top
generally indicated that the agents are unlikely to management, peer influence, the existence o f a
engage in the unethical behavior. (This point is corporate code o f ethics, the opportunity for
discussed further in the later section on m a n - unethical behavior, job tenure, and income level.
agerial implications). A second regression model is used to test the
Hypothesis H 2 is also evaluated by a t-test variables affecting personal ethics. The dependent
procedure. N o significant differences are found variable is consumer ethics and the independent
between the level o f ethics o f m e n and the level variables are age, level o f education, and level o f
o f ethics o f w o m e n for either personal (p-value income. T h e authors found that a respondent's
= 0.1565) or professional ethics (p-value = age has a significant impact on his or her level
0.8384). Thus, there is no support for hypoth- o f consumer ethics (p-value = 0.0413), with the
esis two. level o f consumer ethics increasing with age as
Regression analysis is used to test the six suggested by Vitell et al. (1991) and M u n c y and
variables expected to impact the level o f the Vitell (1992). Education level and income level,
respondents' professional ethics. The dependent however, did not exhibit a statistically significant
variable, the level o f professional ethics, is again impact on the level o f consumer ethics.
measured as the average o f the responses to the Finally, the authors wanted to ensure that the
six insurance scenario questions. The indepen- results o f the survey were not due to socially
dent variables are measured as the average o f the desirable responses. The authors correlated the
responses to each variable's target questions. personal and professional ethical items with
 Ethics and Insurance P@ssionals 959

Strahan and Carrese Gerbasi's (1972) version of w o m e n has support in the literature. Sayre et al.
the Marlow-Crowne Social Desirability scale. (1991) found that female real estate agents with
There were no significant correlations between ethical infractions were not treated differently
social desirability and any o f the ethics items. than male violators. Thus, as w o m e n are
Thus, the results of this study are not tainted by becoming more accepted in the business world,
socially desirable responses from the respondents. they are acting more like men and being treated
the same in terms of ethical behavior.

Discussion and managerial implications

Variables affecting p@ssional ethics
In this study, the authors found several interesting
results that hold strong managerial implications, In considering the six variables thought to affect
both for those in the insurance industry and an individual's level of professional ethics (the
other business professionals. attitude of top management, peer influence, the
existence of a corporate code o f ethics, the
opportunity for unethical behavior, job tenure,
Personal versus professional ethics and income level) there is support in the litera-
ture for the lack of significant results regarding
The overall comparison of personal and profes- the impact o f the six variables on professional
sional ethics indicated that the sampled insurance ethics. Ferrell and Weaver (1978) suggest that
professionals were more unethical in the overall people believe that they have higher ethical
personal consumer behavior than in their pro- standards than peers and top management and
fessional lives. For those situations, however, that a corporate code of ethics does not have a
involving unethical behavior that benefited the significant effect. Tsalikis and Fritzsche (1989)
individual at the expense of the seller (factors one likewise do not feel that codes of conduct
and two of M u n c h and Vitell's, 1992 scale), the provide adequate guidance. The literature also
respondents were less ethical in their professional has precedents for the lack of support of job
lives than as consumers. This suggests that tenure impacting ethical behavior (Dubinsky and
insurance professionals are more likely to try to Ingram, 1984; Hoffman et al., 1991). Thus, the
benefit from unethical behavior in their business factors that impact one's level of professional
practices than in their personal actions as con- ethics have still not been identified.
sumers. In terms of relatively lesser ethical
consumer digressions (factors three and four), the
respondents were more likely to engage in those Variables affecting personal ethics
activities in their personal lives than in their
professional lives. Thus, this study suggests that In terms of personal ethics, only age had an
insurance professionals are more likely to try to impact on one's level of consumer ethics (with
unethically benefit at the expense of others in the level of ethics increasing with age). This
their professional lives than as consumers, but result is supported in the literature (Vitell et al.,
are more likely to cut small ethical corners as 1991; Muncy and Vitell, 1992).
consumers than professionals. Future research is
needed to measure professional ethics in terms of
both overt unethical acts (which has been done Managerial implications
in this study with the three scenarios) and smaller
"white lies" bending of ethical rules. This would The results of this study have strong managerial
allow for easier comparison with M u n c y and implications. The majority of the professionals in
Vitell's (1992) consumer ethics scale. this study had faced the issues presented in the
The finding that the level o f personal and scenarios and were more likely to attempt to
professional ethics is no different for m e n versus benefit from unethical behavior at the expense of
960 K. L. Eastman et al.

others in a professional rather than a consumer sample w h o felt, at best, neutral about this
relationship. However, the average score on tl~e situation. T h e implication is that training in
three ethical scenarios was 1.9 out o f a possible ethical customer relations may be needed.
five, suggesting that the insurance professionals Further research measuring the level o f ethics
surveyed in this sample were "unlikely" or o f insurance professionals is needed for compar-
"extremely unlikely" to engage in the unethical ison with this sample. Insurance professionals
behavior presented in the scenario. The average must, however, deal with the poor ethical image
response to each o f the six professional ethics they have in the media. O n e way to address
items and the average response for each o f the this problem is formalized ethics education for
four consumer ethics dimensions are given in insurance professionals as there is a positive rela-
Table III, with a higher score indicating a less tionship between ethics education and increased
ethical response. As Table III shows, the sensitized perceptions o f ethical misconduct
managers saw the downselling issue (the first (Hoffman et al., 1991). T h e respondents to this
scenario) as the biggest ethical dilemma o f the survey, while not giving significantly socially
three and the one in which they would be least desirable answers, may be more ethical than those
likely to behave in an unethical manner. O n the insurance professionals that the media focuses on
other hand, they saw the least ethical problem in cases o f insurance scandals. Additional research
with scenario two (selling additional u n n e e d e d is n e e d e d to fully decipher h o w m u c h o f an
coverage) and were m o r e likely to engage in ethical problem exists in the insurance field.
this behavior than was the case with the other
scenarios. This situation dealt very specifically
with customer relations (overselling) and was Future research a n d l i m i t a t i o n s
faced by approximately three-fourths o f the
The intent o f this study is to initiate a research
discussion o f the level o f personal and profes-
TABLE III sional ethics o f insurance agents. While this study
Average ethical responses offered interesting results regarding the compar-
ison o f personal versus professional ethics, there
Scenario Average response are many other areas in this field that also need
to be explored. First, while the authors strived
Professional ethics
to get a representation o f the various issues facing
1. (Downselling)
insurance agents, they did not capture all the
involves an ethical issue 1.30
how likely would do 1.13 possible ethical dilemmas facing insurance agents.
2. (Selling additional unneeded Second, while the majority o f the agents had
coverage) faced the first two scenarios, only a sizable
involves an ethical issue 2.61 minority had faced the third (governmental
how likely would do 2.85 bidding) scenario. This scenario was included in
3. (Governmental Bid) the study as an example o f dealing with the
involves an ethical issue 1.77 g o v e r n m e n t as a customer. Given that the
how likely would do 2.18 responses to this scenario (as shown in Table Ill)
were b e t w e e n the range o f the first two, the
Dimension Average response authors felt justified in including it in the
analysis. Future research is needed to include
Personal (consumer ethics)
additional governmental issues that face insurance
1. Active benefit 1.16
2. Passive benefit 1.81 agents.
3. Deceptive 2.22 T h e literature and this study do not offer
4. No harm/no foul 3.82 supported explanations that can predict the
factors that affect personal a n d / o r professional
Note: A higher score indicates a less ethical response. ethics. Future research needs to focus on this
 Ethics and Insurance Professionals 961

issue as it can assist managers in selecting ethical Kotabe and C. Un Lim: 1992, 'Ethical Perceptions
insurance agents as well as other business profes- of Field Sales Personal', Journal of Personal Selling
sionals. In addition, personal ethics measures and Sales Management 12(4), 9-21.
other than M u n c y and Vitell's (1992) consumer Feldblum, S.: 1990, 'Ethics and Insurance: Dilemmas
ethics scale need to be developed. Finally, addi- for the Thoughtful Underwriter', CPCUJournal
(June), 72-75.
tional samples o f those in the insurance industry
Ferrell, O. C. and J. Fraedrich: 1991, Business Ethics,
as well as other industries need to be considered.
Ethical Decision Making and Ethics (Houghton
Mifflin Company, Boston).
Ferrell, O. C. and L. G. Gresham: 1985, 'A
Conclusion Contingency Framework for Understanding
Ethical Decision Making in Marketing', Journal of
This study addresses the differences that exist for Marketing 49 (Summer), 87-96.
one sample o f insurance professionals regarding Ferrell, O. C. and K. M. Weaver: 1978, 'Ethical
their personal versus professional (consumer) Beliefs of Marketing Managers', Journal of Marketing
levels o f ethics. Support was found for statisti- (July), 69-73.
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professional situations. In terms o f ethical 'Ethical Dilemmas Faced in the Selling of Complex
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Kerr, P.: 1993, 'Insurer to Pay for Investigation of It's
to behave unethically in their professional versus
Sales Tactics', New York Times (October 7), D4.
personal lives. In general, however, the average
Lacznaik, G. R. and P. E. Murphy: 1991, 'Fostering
respondent was "extremely unlikely" or Ethical Marketing Decisions', Journal of Business
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