Understand the staff
For the sake of early detection of potential problems, management staff should pay constant attention to staff members’ conduct, e.g. their relationship with their subordinates, customers or anyone with whom they have business dealings, their attitude towards offers of entertainment or gifts by anyone with whom they have business dealings, the way they handle their own financial matters, and whether they have acquired bad habits or are living unhealthy lifestyles such as gambling and being extravagant resulting in their inability to make ends meet.
Know your subordinates and assign appropriate tasks
A perfect staff administration system will ensure staff’s quality, boost their moral and raise the companies’ productivity. Therefore, recruitment, selection, promotion and training of staff members who have potential are the primary steps to improving corporate governance. Companies may include “loyalty and honesty” as core attributes that their staff must possess, and include them as criteria for selection and performance appraisal.
Contact customers
Management staff should fully understand and keep close contact with customers. In particular, in the case of corporate customers, management staff should frequently keep contact with them or pay visits to them, in order to confirm their operations and the nature of their businesses. They should also get to understand the customers’ background regularly, and get a better understanding of the business sectors they are in. For customers’ complaints, they should be followed up seriously, after which a report to the company on the problems identified and on any violations against the laws or regulations together with suggested methods of improvement should be prepared.
Surprise examinations
It is necessary for management staff to delegate authority to subordinates and have trust in them. However, excessive trust which is based on personal relationship, the background or good performance of staff should not be allowed. Management staff should follow objective, established procedures and carry out independent, sudden examinations. For instance, they should check carefully when examining policies, treat customers’ information and declarations in accordance with established procedures and criteria, and examine and verify the contents. Occasional, surprise examinations of information submitted by customers are advisable, in order to prevent bogus or falsified information.
Checks and balances
Corruption usually involves other types of misconduct as well. Any mismanagement or deficient organisational structures may give rise to corruption. But these temptations may not be easily detectable. Therefore, management staff should constantly review internal monitoring mechanisms to ensure their overall effectiveness. For instance:
formulate clear procedures for business discussions and for customers’ payments of commissions;
regularly spot check records of policies, and verify information declared by customers;
check cases of mid-term cancellations of policies, find out their reasons and record the findings;
meet subordinates regularly, so as to reinforce the communications with them for an understanding of their problems so that assistance can be offered as appropriate;
should there be subordinates who are new to the profession, join their meetings with customers, so as to offer guidance on selling techniques and to understand customers’ views of the insurance products concerned; and
when a staff member is about to leave his job, arrange exit interview with him to find out and understand the likely problems with the systems or among the staff. The more serious cases of corruption or fraud happening in the insurance industry in recent years mostly occur at the claims stage. In view of this, the Corruption Prevention Department of the ICAC has produced a Best Practice Module on Verification of Insurance Claims to address the insurance claims problems. The publication offers corruption prevention suggestions on system improvement and control, which will help control risks of corruption and other types of malpractice in the industry. It can be downloaded from the ICAC’s website (http://www.icac.org.hk).
Transparency of management
The management of companies should, through various channels such as internal circulars, the companies’ websites, newsletters for employees or customers and publicity publications, make known to the public, the staff and the customers the companies’ policies and information that relate to their staff or customers, and reinforce the communications with them for a better understanding. The contents may include scopes of insurance cover, claims procedure, and the time and information needed for claims processing, etc. It is advisable to include the companies’ requirements and criteria for their staff’s integrity, and channels for making enquiries or complaints, which will help the staff and the customers better understand the companies’ policies and measures so that the customers will not get cheated on the basis of their misunderstanding or make unnecessary complaints.
Be fair in meting out rewards and punishments
The causes of subordinates’ mistakes vary. Management staff should be good at identifying their causes – whether they are incompetence or inexperience of the subordinates, or problems with their integrity. In the case of incompetence or inexperience, management staff may correct the mistakes through training and guidance. But if it is the latter case, they should never show tolerance or connivance and should instead handle the cases prudently in accordance with the laws, so as to build up an ethical culture within the companies and to deepen their staff’s understanding of the companies’ stand and policies. Never tolerate or abet misconduct, or let things drift; otherwise, others might despise the laws as well.
Report corruption
Both frontline staff and management staff should, if they come across matters which very likely involve corruption in the course of business, handle them carefully and make enquiries with the ICAC about the statutory requirements. Where the circumstances of a particular case are complicated, they should seek legal advice. Companies should step up the publicity of their internal mechanisms for complaints handling to their staff, and promise their staff that they will keep the contents of the complaints confidential. Management staff should encourage the staff to make use of the internal mechanisms to make complaints and to report malpractices to the auditors or the senior management. All reports should be handled speedily. If violations of the regulations are proved, disciplinary actions should be taken. Once corruption, fraud or another type of crime is suspected, the management should immediately report to the relevant law enforcement bodies, to show that they themselves and the companies will never tolerate such misconduct.
Ethical culture The management of staff’s personal integrity should be people-oriented. Its success will depend on the management staff setting examples of ethics, actively paying attention to the performance and conduct of their subordinates, and providing suitable guidance and training. If companies manage to build up an ethical culture throughout the whole organisation, encourage the colleagues to stand up and report violations of the laws or regulations, and solve the problems as soon as possible, then their likely exposure to risks will be reduced, their reputation and the insurance intermediaries’ image of ethics safeguarded. Lawless people will also be severely hit, which will help send a warning signal to others.