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A friend of mine is CSR at the retail insurance company where he is working full time. Now, he is getting a lot of referrals from his contacts, family and friends and he doesn't want to place that business with his current company. He asked me if there will be a conflict of interest if he opens his own company and will work there after hours out of his hours. I am not an attorney but I thought there is no problem there unless he will be dumb enough to solicit to clients from his 8-5 full time job. What do you think?

Most insurance agencies (and direct companies) have stated policies with regards to such activities....and such would be considered a conflict of interest. At the very least, he would most likely be fired. And...if he signed any sort of agreement upon being hired by his full time job that forbids such activities, he could be subject to civil action by his (soon to be ex-) employer.

Why not put the business in their current agency as the writing agent? It would get them some experience in handling the sales side without the conflict. They obviously have asperations to have their own shop someday, but not the guts at this time, so this would be a good middle road.

alx730 wrote:Why not put the business in their current agency as the writing agent? It would get them some experience in handling the sales side without the conflict. They obviously have asperations to have their own shop someday, but not the guts at this time, so this would be a good middle road.

I clearly think that there is a strong conflict of interest. He/she might approach the principal to get a referal fee for those customers, from the agency principal. This is assuming that the CSR is not already on a commission. If he/she is on a commission, might ask for a bonus for soliciting and/or cross-selling an account.

Even in today's market place getting appointments to open his/her own shop would range from difficult to impossible in this situation. It could be beneficial if this CSR approached the principal with a proposal of 'owning' their own book of business with the 'ownership' being applied to buying into the agency as a principal.

Your friend should also check with His/Her Dept. of Insurance about a potential DOI ethics violation that may cause a loss of license.

we need an ethics thread of no-no's.

Conflict of interest aside, I dont see how this can work, unless it's life insurance. Which carrier will give him a direct appointment when he can only work at night. If he uses other brokers and GAs, he might as well place them with his current employer. And how is he going to service his accounts? Is he going to take calls on his cell phone at work when his friends/family/contact clients call him?

This would definitely be a conflict of interest if not a violation of a potential contract that you may have with your employer.

Many agencies have embedded within their employment agreements a provision that does not allow outside employment, especially with another competing agency is being started by the employee!!

Jack Thomas
http://www.pathwayinsurance.net

Edmundich: here is your question expressed as a story:
Joe works for Travelers in their direct writing department. He gets paid by Travelers to write business for them.
Joe decides that there is more business that he can write and does not want to do this new business with Travelers so he goes and works for CNA in the evenings.

Do you think either company would permit Joe to do this? No insurance company would allow it & I remember a disclosure form I had to do annually with Hartford that asked this type of question very directly.

I also doubt an agency would allow this type of situation. Not done & not wise to try and participate in this.

Massive conflict of interest here.

I agree with the comments here, and I have advised my friend NOT to do it from day one. His logic was that: He is CSR for company A and he writes business with company B. He is not obligated to place business with company A and free to be a producer wherever company he likes. I see how this can get him in toruble and will advise him to talkt o DOI and an attorney. I appreciate the feedback!

If your friend wants to get paid for this referral business tell him to Man up and become a producer for his agency, then there's no conflict and he can get the business placed wherever he wants and get paid for it.
If he tries to steal this business from where it belongs, which is with the agency he works for, then shame on him and I pray and have no doubt he will eventually be caught and have to pay the price, and it will not go cheap! This is not just a conflict of interest but unethical and amoral in my opinion.
So my advice to your friend is get out of my business, we need MORE morality not less. Guys like you give the rest of us a bad name!

I agree with all the posts on this question - this is a very, very slippery slope and would recommend avoiding it altogether. The larger issue appears to be that there seems to be an issue/dissatisfaction/something that is motivating the contemplation of this potential course of action - which in my view needs to be worked out with existing relationships or severing and creating a new one.

Good luck!

It is a bit risky offer. His employer would fire him if he gets caught. It will lead to chain of agents coming into the picture and eventually spoil the customer relation.

patstanley wrote:It is a bit risky offer. His employer would fire him if he gets caught.

His employer would fire him, and if there is an employment contract with a conflict of interest or non-compete, he should quickly hire an attorney to defend against the lawsuit.