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[OPINION] The ethical vulgarity of the insurance industry

Death has always been a site for competing moral ideologues, and contesting discourses of what is ethically right and wrong, and the religious dogma: who has the power over life? But the commodification of life and human value used to be something totally unheard of, and turning the "sacred event of death into a vulgar commodity" raised a much bigger ethical crisis.

Enter the insurance industry in the 1700s and things became a little more interesting. The contentious issue was no longer who had the power over life, but could a monetary value be placed on human life. According to Viviana A. Zelizer, who did a comprehensive study on the rise of life insurance in the United States: “Life insurance, by definition, implies a value put on human life”, something in direct conflict to life being immeasurable and sacred. But death redefined as an event ending the human life earning capacity (Heubner, 1959) would signal the birth of the insurance industry.

While life insurance seemed the perfect solution to the increasing economic destitution of widows and orphans, in the early part of the 19th century it was seen as dehumanising and unethical to place a value on human life. The value system condemned the materialistic assessment of death, even worse, the idea that a commercial pact or money transaction depended on death for its fulfilment. Life insurance benefits, however profitable, became dirty money. Treating life and death as commercial items would be the ethical question of the moral economy of the time.

While the insurance industry got off to a slow start in the 18th century, its rise in the 19th century was backed by non-economic factors that mobilised moralism and ethical concerns for its success. It relied upon the conjuring up of the moral justification: everyone dies, and protecting loved ones after death would be the right thing to do, and the shift moved from resistance to acceptance.

Life insurance was thus marketed as an “altruistic, self-denying gift rather than a profitable investment”. Today, however, the industry still faces scepticism in the face of expanding growth. After all, the business of the industry is to make people plan and discuss death in monetary terms. And the superstitious view that thinking or even planning for death would bring death itself still holds in some communities and families. But providing insurance is the ethical right thing to do, and so the debate continues.

The question of morality and ethics have always been the Achilles heels of an industry that works on the principle of good faith, caught up in the dichotomies of good vs bad, evil vs good, depending on your political viewpoint. Insurance is an inherently moral act, insurers say. Is it a moral act to end one’s life so your insurance pays out, with the intention to protect one’s family financially after death? Is it morally right to right to reject a claim based on a breach of contract although the cause of death is unrelated to breach?

Momentum has been the subject of huge moral outrage for repudiating a R2.4 million claim of the deceased Nathan Ganas. This case brings to the fore normative business issues of the insurance industry, the polarisation of what constitutes right and wrong, the disconnection of what constitutes morality and what is ethical, and the incompatibility of fairness and justice and the subjectivity of the principle of good faith and integrity.

Nothing brings home this point than MMI Holdings group CEO Hillie Meyer stating on the Eusebius McKaiser show on Monday that it would not be “right” for group company Momentum to pay out the claim. For Momentum, this is to protect the integrity of the industry, its business and the interest of all its clients who complete their applications with full disclosure if it is to avoid the moral hazard which as every insurer’s nightmare. Did the client act in good faith by not disclosing material facts of his health? Did Momentum act in bad faith by repudiating the claim based on the non-disclosure of material facts? Can we ever apply degrees of good faith?

At the centre of the furore is non-disclosure and misrepresentation and the materiality of the non-disclosure, especially if the non-disclosure has an immaterial bearing or link to the cause of death. According to Momentum and the Long-Term Insurance Ombudsman, legally, Momentum did nothing wrong. But after the moral outrage that we have seen in the past few days on social media, radio platforms, the question remains, did Momentum do the ethically right thing?

The deceased, Mr Ganas, died in a hail of gunshots while protecting his family. By rejecting the claim, Momentum is denying Mr Ganas his moral obligation to protect his family even after death, contrasting the insurance’s ethical argument. Hiding behind contractual law and industry principles, Momentum argues that Mr Ganas did not act in good faith when he concealed certain information about his diabetes when applying for insurance.

Momentum’s spin that attempts to appeal to the moral code of conduct wants us to ask the thorny questions before we unleash moral outrage: As clients in the insurance industry, would you pay money towards somebody who lied, omitted certain facts, did not abide with the rules that we are all subjected to? Is it fair that some of us stick to the rules of insurance, while some get away with it? Because, according to Momentum, the insurance industry has an obligation to existing clients to act on a consistent basis to manage the shared pool of risk.

But the spin and logical reasoning summoned by Momentum cannot stick based on the materiality of the non-disclosure. It is not the first time that we’ve heard of a similar case. Old Mutual last year tried to repudiate a claim for a deceased man, who had also died from a shooting, based on non-disclosure. But the matter was settled even before it landed in the courts.

Long-Term Insurance Ombudsman Judge Ron McLaren argued on Cape Talk during that particular case that:

“If the applicant does not disclose the previous diagnosis and the policy gets issued, and six months down the line the insurer discovers that there had been a non-disclosure ... The insurer would in law unquestionably be entitled to cancel the policy.”

But he went further and argued that:

“It is not a requirement that the non-disclosed information must relate to the insured event.”

It is therefore concerning that Judge McLaren said last year that:

“Where a death occurs unrelated to the non-disclosed medical condition, the medical condition should not be a factor in denying the claim.”

And yet in the Momentum case, could not reach a similar conclusion in the case of Mr Ganas. Will non-disclosure pass the materiality test?

PR GONE WRONG?

Unfortunately for Momentum Life CEO Johann Le Roux, they can take emotions out of their decisions with pride, but death is an emotive issue and so is money, especially when it relates to the upkeep of the family of the deceased. Fairness is an emotive issue.

PR crises often arise from an emotional reaction, therefore a logical explanation isn’t enough - for Momentum to say that death is tragic is distasteful. Momentum missed out on an opportunity to address people’s feelings and concerns as well, instead of hiding behind unsound legal reasoning.

Public outrage undeniably from a crowd that is forever seeking “moral” and “ethical” financial and insurance products is justifiable, especially where there is a disconnect between fairness and justices.

The principle of good faith is the backbone of the insurance industry, relying on the insured to provide an accurate and honest picture of the nature of the risk. But the matter also exposes the weaknesses and vulnerability point of the industry.

Therefore, it is the vulgarity of the unscrupulous business nature of the insurance industry that we need to question if the industry that has suffered a credibility crisis since inception is ever to restore our trust and faith. And we wait to see how the Ombudsman will rule on the appeal brought by the widow of Mr Ganas.

Andiswa Makanda is an award-winning producer at 702. She writes in her personal capacity.

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