TRUST DAMAGED IS TRUST LOST – you don’t hear this every day: a New York court recently dismissed criminal charges against insurance executives.

What’s unusual here is that the executives had already pled guilty.

Context: many of the charges date back to 2004-05.  At that time, New York Attorney General Eliot Spitzer led a high-profile investigation into insurance bid-rigging and inappropriate commissions.  The charges involved employees of Marsh, Zurich American, ACE USA and American Home Assurance resulting in 21 guilty pleas.

However, the legacy of Mr. Spitzer’s moral crusade against brokers and insurers began to unravel when he was forced to resign as Governor of New York in March 2008 because of his involvement in a prostitution scandal.

So what did his moral failings have to do with the revoked criminal charges against brokers and underwriters??

The Wall Street Journal put it this way:  “The attorney general has become famous for assailing a business practice that is either controversial or legally ambiguous and then using leaks via the media and the threat of indictment or the destruction of an entire company to force his targets to surrender”.

I suspect that more than a few in the insurance industry enjoyed a smug, slightly twisted sense of delight in Spitzer’s very public humiliation.

But the whole sorry affair has the repugnant odor of misplaced faith.  If only the judge could reverse the damaged trust suffered by the entire insurance industry, where contractual policy relationships are built on the principle of “utmost good faith”.

Trust is generally built on 3 foundational concepts:

• competence – the ability to complete a task.
• reliability – the capacity to repeatedly meet expectations.
• good faith – although both parties need to benefit from the relationship, the broker must first and always, guard the client’s interests.

Those of us in the insurance industry would do well to remember that trust is gained every day – and lost by a single action.

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This entry was posted on Friday, February 12th, 2010 at 1:16 pm and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.