Introduction
Though insurance is all about covering and managing risks, the contribution of the collective and obligatory social insurance systems towards developing social responsibility on every individual of a society is not only built up to cover the costs of illness and disability, to assure the household’s income levels in case of breadwinning premature death, and to provide for a pension during old age. The role is to provide awareness and consciousness individually so as to manage the individual risks.
There was a time when entire collective insurance was provided with premiums and benefits regular differentiation on the basis of income only; today, risk management is provided as well. Circumstances are changing as the public systems are restructured and partially dismantled. Developments during the 1990s have comprised some privatisation of social insurance, while those parts that remain in the public domain have been individualised and exposed to competition in considerable measure. Throughout the development and growth phase, insurance has never been subjected to forget managing their risks through the provision of innovative services and advice.
Thus insurance systems have been motivated by solidarity, they have been characterised by strong collective and mandatory elements in which public involvement has been all-inclusive in many cases and predominant in others, and the profit motive has been entirely absent in most cases, or at least strongly subdued. Insurance systems have treated social responsibility in the same manner as what in the past was commonly referred to simply as the ‘business economic function’.
That means today’s insurance companies concern about weighing the legal, ethical, moral, and social impact and repercussions of each of their decisions in context with our society. Dyer & Whetten (2006) suggests that “In the field of social responsibility, evidence suggests that family-controlled insurance firms serve as irresponsible social actors as compared with other social concerned firms” (Dyer & Whetten, 2006).
When Morck and Yeung (2004) examined family-controlled firms in the 27 largest industrialized countries in the world, they found that such family firms were related to various dimensions of societal progress. According to them, “these dimensions were none other than the economic development, physical infrastructure, health care, education, quality of government, and social development measured in the context of income inequality” (Morck & Young, 2004).
Though in the UK, risk management focuses on public arrangements to provide for the costs of the treatment of illness and to protect against income shortfalls in the event of poor health or premature death, and during old age, but the primary focus is on those families or individuals who are subjected to many challenges in protecting their property. Of course, with social exclusion comes the area of ‘neighbourhood safety’ and ‘financial crime’. Social issues that occur in insurance responsibility are in three areas: Total compliance with international, federal, state, and local legislative laws and acts, moral and ethical standards and procedures under which the firm will operate. The most important one is philanthropic giving.
Philanthropic Activities
According to Anderson (1989), “In the area of philanthropy, where there is considerably more latitude of operations in how, when, where, and even if the insurance division wants to contribute money or other resources to ‘worthy causes’, the firm must deliberate about and resolve any questions prior to establishing fair and workable guidelines” (Anderson, 1989, p. 16). Some of the common charitable and social activities that come under philanthropy include health, education, safety standards and providing equal opportunity regardless of age, gender, sex, caste or creed.
One of the basic problems that Insurance systems face in philanthropic giving is to first determine whether the company wants to give any money at all to social causes and, if so, how much. After a decision to give has been made, questions remain. Which internal and external agencies should receive money and how much? Should the money be distributed equally between all contributing subsidiaries, or should it be spent primarily in a few selected high payoff areas? Should other companies be pushed to give the maximum allowable amount? What strings, if any, should be attached to the funds? Who should be managing risks in such philanthropic activities?
Risks concerns in philanthropy
For an insurance firm, managing risk while contributing to society is a major concern in philanthropy. That means the insurance system is dealing with social responsibility in a parallel manner. On the one hand, it has limited choices of avenues in which to participate in the legal arena, while on the other end, it has to maintain its credibility in the moral and ethical area, and when it comes to philanthropy, there are boundaries.
Alternatives should be chosen in light of the personal values and support of the manager and retention of the inner coherence and health of the organization. Participation and involvement in any area depend on the company’s available resources. Once involvement is determined, it must have the complete backing and support of all levels of management if it is to be satisfactorily complemented and enforced. This need for continuous top management and other levels of management participation and support in such programs is reinforced by four separate studies on establishing and implementing social responsibility programs.
Moral and Ethical Standards
The onus is on the firm’s shoulders to assess its objective in the light of ethical and moral standards and to draw significant boundaries around it. These boundaries make it clear for the company what it is going to tolerate and what not. Here the risk management for the company is to evaluate the level of integrity with continuity so that the areas of vulnerability must be examined with appropriate limits established in each of these areas. For example, an insurance company must consider important points to consider when doing charity. According to Anderson (1989), “One way of examining how well the charitable institutions are doing is to look at what percentage of their total budget is spent on fundraising and other expenses and what percentage is spent for actual services” (Anderson, 1989, p. 247).
Since not detecting or overlooking violations weakens the fear of punishment, a system of inspection must be implemented and strict levels of punishment enforced for violation of the code. Expenses for implementation and control cannot get out of hand and policing, and enforcement cannot be done in a way that adversely affects the attitudes or the creativity of the employees. The objectives of the company in the area of philanthropic giving should be as clearly defined and explicit as are those in economic policy and strategy. The company should be as firm about what it intends to be and do in this area as it is about the business in which it wants to be involved and the type of people it wants to attract to its organization.
Health Safety Insurance
Health safety standard care is determined by the availability of high-quality medical care to all citizens on a test of professionally judged medical needs and without financial barriers to access. According to Sorell (1998), “There are various Insurance forms through which health safety principle is implemented, including that of a tax-based public service as in the UK, tax-financed insurance as in Canada, or legally required compulsory social insurance as in Germany” (Sorell 1998, p. 138). That clearly indicates that the same principle can be implemented in different ways in context with the compatibility with the principle of comprehensive, high-quality care that is available to all on a test of professionally judged medical need.
Since the rising cost of health care challenge to the ethical basis of public provision has claimed that health care resources need to be rationed. Therefore insurance firms need to be clear about rationing. Rationing, as Weale (1995) explains, is all about that a health care system must be subjected to an implicit or explicit policy decision to withhold specific measures of treatment or care on the grounds that their economic costs are prohibitive, even though the measures in question are thought to yield some medical benefit (Weale, 1995, p. 831).
Public Service
Insurance aims at least some responsibility for assuring medical care for those citizens who are socially excluded on the basis of caste, colour or creed. In this case, insurance firms are socially responsible for providing resources to those members of the society that are unable to consume sufficient resources to insure themselves or, if they have sufficient money, they are characterised by any disability, which means they allocate inadequate resources to cover their health care needs.
According to White (1995), “One solution here is to cope up with such situations through socialising insurance either through the tax system, as in Canada, or through a system of non-profit sickness funds based on compulsory membership, as in Germany” (White, 1995, p. 61). White suggests that “these are the common ways which contribute towards socialising insurance for the correction of the distributional deficiencies of the health care market” (White, 1995, p. 61).
In the case of public ownership of medical care resources in hospitals and health centres, the insurance market must socialise its goal base upon a judgement about the benefits of being able to plan the allocation of resources, including personnel, in a more integrated way than is allowed for otherwise. Private health insurance must consider those facts upon which poor citizens are excluded from coverage on the grounds of poverty or on some pre-existing conditions that make private insurance unaffordable. This does not indicate that user charges do not matter, either to raise revenue or to signal to health care consumers the costs that are being borne, but any such measures ought to be constrained by the principle that no charges ought to make access to health care unaffordable for even the poorest citizen.
Access and Equality to Health Care
It is true that the denial of medical care on the grounds of religion, race, caste, political belief or social position constitutes a lack of equal access. But this is also true that in the Western democracies it is money rather than these factors that is more usually the topic of concern in discussions of access. Therefore it is clear to us that access is not equal if some people are denied care because they cannot afford it. Age factor debate on the distribution of health care engenders more controversy as elderly are denied a treatment because their prospects of benefiting from it are very rare.
This notion would not hold the same significance if younger patients are regarded as a denial of equal access for the treatment. For it is not always the age factor but the likelihood of benefit, that is the ground of the decision. Like if the treatment instead of the elderly patient is applied to the younger patient, it might be a success in yielding fewer life years to younger patients as younger ones may be expected to live longer, then that should be deemed a denial of equal access to the elderly. There is no doubt that denying medical care on the basis of age constitutes unequal access to the citizens, but such unequal access arrangement is not always inequitable or unjust.
Role of Insurance in Finance
Most people believe that though pension balances are properly defined and managed, there is still a need to make the balances as handy as possible, allowing employees to be able to contribute on a tax-deferred basis up to reasonably high limits on top of employers’ contributions. This would not only help the insurance companies to evoke sense of responsibility among the individuals to encourage them leading to a higher national savings rate, but would also make it easier to provide better pensions. Self-management of pensions ought to be allowed, by providing, for example, a menu of unit trusts from which an individual’s pension balances can be drawn.
According to Culp (2001) “Financial Insurance sector also plays a significant role in applying consumer protection and product liability laws to financial services by raising standards of disclosure associated with the concepts of what consumers require in order to make informed decisions” (Culp, 2001, p. 65). This way the insurance policies are clearly transparent as they represent the company’s responsibilities in affecting the relationship with the consumer.
References
Anderson W, Jerry, (1989) Corporate Social Responsibility: Guidelines for Top Management: Quorum Books: London.
Culp L, Christopher, (2001) The Risk Management Process: Business Strategy and Tactics: Wiley: New York.
Dyer W, Gibb & Whetten A, david, (2006) “Family Firms and Social Responsibility: Preliminary Evidence from the S&P 500” In: Entrepreneurship: Theory and Practice. Volume: 30: 6: p: 785+.
Morck, R. & Yeung, B. (2004). “Family control and the rent-seeking society” In: Entrepreneurship Theory and Practice, 28(4), 391-409.
Sorell Tom, (1998) Health Care, Ethics and Insurance: Routledge: London.
Weale, A. (1995) ‘The Ethics of Rationing’, British Medical Bulletin 51:4, pp. 831-41.
White, J. (1995) Competing Solutions (Washington, D.C.: Brookings Institution).