Canadian Underwriter

Traveling Back in Time

October 7, 2011   by CIP Society

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After purchasing her first car, a client immediately contacted her father’s insurance broker to obtain the necessary coverage. Her father was a very important client for the broker since he was a prominent local businessman and his commercial and personal insurance policies were both held at this brokerage. The broker strived to do his utmost to meet the client’s needs and therefore advised his staff to do the same.

Indicating that she may have exceeded her budget when purchasing this used car, she requested the broker find her decent coverage at a low price. Due to the fact that the car was a few years old, the client and broker discussed the merits of liability coverage alone, and set aside coverage for collision. Ultimately, the client decided that this would be the best option available to her, particularly from an affordability standpoint. Thus, the documents were prepared and the client looked forward to enjoying her new vehicle on the weekend.

During the weekend, the client was unfortunately involved in a single car accident causing several thousand dollars in damage to her car. At her first opportunity on Monday the client contacted the broker’s office to advise them of the car accident. When discussing the situation with the client, a brokerage staff member recalled the words of the brokerage owner that this was an important customer and therefore considered any and all available options. The staff member discovered that the client’s paperwork was not yet complete, and pondered the implications of changing the original documents to include collision coverage. This would certainly help this important client, but was it the correct thing to do?

Backdating coverage and misrepresentation contravenes the ethical standards of insurance professionals across the county. All brokers are governed by the Code of Conduct of the licensing body in their province. For example, in Ontario, RIBO’s Disciplinary Committee considers backdating coverage to be a violation of the Code of Conduct and contravenes section 14 (1) “a member shall discharge the member’s duties to clients, members of the public, fellow members and insurers with integrity.” Such misconduct can result in the broker being disciplined with one or more penalties as set out in the R.I.B. Act.

For those insurance professionals who are graduates of the Insurance Institute’s Chartered Insurance Professional (CIP) and Fellow Chartered Insurance Professional (FCIP) designations, he/she is governed by the Institute’s Code of Conduct which includes the following clauses:

Institute graduates shall not willfully misrepresent or conceal material fact in insurance and risk management business dealings in violation of any duty or obligation.

Institute graduates shall not sign or associate themselves with any letter, report, statement or representation, which they know is false or misleading, or which is prepared in a manner, which might tend to be misleading or to misrepresent the actual situation.

Contravening the Institute’s Code of Conduct puts his/her designation at risk.

Addressing the ethics rather than the sanctions, the balance between meeting and even exceeding a client’s expectations must be balanced against the overall benefit to the client and industry at large.

In this scenario, the insured had contracted for a particular policy and the deal was done. Altering the application form to effectively backdate coverage is no different than having someone walk in off the street and request coverage for an accident that has already occurred. Underwriters do not normally agree to insure a burning house!

It would be a fraud on the underwriter to provide coverage in such an event and it would be equally fraudulent to backdate an application. Members of the insurance industry have an obligation to deal fairly and ethically with all clients. Backdating coverage on an application in favour of one client breaches this obligation.

The insurer/broker relationship is one built on mutual respect and trust. When the insurer becomes aware that the broker had backdated an application to cover a loss, it would severely damage or even sever that relationship.

Acting ethically may cause a problem with the father, possibly leading to a loss of the father’s business. However, a good client would not expect his/her broker to compromise his/her ethics and commit fraud on their behalf in any other context and they should not expect it in the insurance context.

What if word got out to the insurance industry at large or the media and general public? Apart from regulatory sanctions, all the industry’s hard work to earn the public’s trust has been put at risk.

Remember, one of the things you can ask yourself in assessing what is the best ethical decision when faced with a dilemma is whether you would be pleased if your decision or action made front page news in tomorrow’s newspaper.

Acting ethically ought to be your foremost concern, no matter how well intentioned you may be and regardless of how enticing the economic incentive. In short, fraud is fraud, even when dealing with a good client and even if no one but the client knows about it. An ethical client will want nothing to do with this kind of behaviour.

The reputational harm to the individual broker and the broker’s staff is not a risk worth taking.  As is true in most if not all personal and commercial service industries, a reputation in the insurance and risk management community takes many years of hard work to build and yet can be lost in minutes by conduct that goes down the wrong ethical path. The “win for the client at all costs” approach does not serve the best interests of anyone and can lead to an assumption that such conduct is a substitute for proper ethical service to clients, a slippery slope to be avoided.


The CIP Society represents more that 16,000 graduates of the Insurance Institute of Canada’s Fellow Chartered Insurance Professional (FCIP) and Chartered Insurance Professional (CIP) Programs. As the professionals’ division of the Institute, the Society offers continuous professional development, information services, networking opportunities, and recognition and promotion of the designations. This article is developed from commentary solicited from senior members of key brokerage firms, law firms and the CIP Society, and is intended to generate a dialogue about ethics among insurance professionals. We welcome comments and scenarios to the discussion at This series of articles is archived on The CIP Society’s Web site at:


Copyright 2011 Rogers Publishing Ltd. This article first appeared in the July/August 2011 edition of Canadian Insurance Top Broker magazine.

This story was originally published by Canadian Insurance Top Broker.