CONFLICT OF INTEREST

Not too many people seem to understand why someone in authority should be free of any conflict of interest, at least in the performance of his official duties.

In the first place, what is conflict of interest?  The Bible says one cannot serve two masters at the same time.  One who does is in the middle of a conflict of interest.  In the Pirma case at the Supreme Court, Justice Padilla found himself in a conflict of interest when a relative was on the other side of the bench.  True to his calling, Justice Padilla did not take part in the proceedings.

In the insurance industry, the rules against conflict of interest are quite clear in law and common usage.

For example, the Insurance Code says that “no person shall concurrently be a Director and/or Officer of an insurance company and an adjustment company”.  Also, “no insurance company shall have any equity in an adjustment company and neither shall an adjustment company have any equity in an insurance company”.

The Insurance Commission does not license a person to act both as an agent (representing the insurance company, the seller) and as a broker (representing the insured, the buyer).  He has to choose one or the other.

Once, a friend of mine took the job of general manager of an insurance company.  The Commission required him to turn in his broker’s license.

Insurance companies are quite strict about their rules against conflict of interest.  In one case, the president of a company found out that the car claims manager was part-owner of a repair shop.  The manager was asked either to resign from the company or sell out his holding in the repair shop.

Why all this fuss about conflict of interest?  Because, as in the case of the car claims manager, it is hard for him to decided whose side he should be on.  As claims manger, it is his duty to see to it that if an insured car is damaged, the repair must be done as cheaply as be without sacrificing quality.  As part owner of the repair shop, his job is to find business for the shop at the most profitable level.

The interests of the company and the shop clash.  Whatever the manager does is wrong, or at least suspect.

When a conflict of interest exists, there is no need to find out if any wrongdoing has been committed.  The conflict, in itself, is the wrong to be corrected, the sin to be avoided.  In the case of the car claims manger, he was asked to resign or sell out even though he never awarded a single repair job to his shop.

It’s as simple as that.

Where there is no specific law against conflict of interest, simple rules of ethics apply with equal force.

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