LLQP Ethics & Professional Practice · Component 1.1 · 60% of the exam
A client asks why a federally incorporated insurer's policy is still governed by his province's Insurance Act. The agent should explain that:
- Athe client may choose whichever province's law he would prefer to apply to his contract
- Bfederal incorporation makes an insurer exempt from every provincial law touching the contract
- the federal regulator oversees the insurer's solvency while contract terms fall under provincial law
- Dthe province regulates the solvency of the insurer while the federal government sets policy terms
Correct answer: C) the federal regulator oversees the insurer's solvency while contract terms fall under provincial law
Insurance is divided: the federal superintendent supervises the financial soundness of federally incorporated insurers, while the contract itself and the licensing of agents are matters of provincial jurisdiction.
Why the other options are wrong
- AA policyholder cannot select which province's insurance law will apply.
- BFederal incorporation does not exempt an insurer from provincial contract law.
- DThe division runs the other way, with solvency federal and contract terms provincial.
Exam tip
Solvency is federal, the contract and the agent's licence are provincial.
Common mistake
Believing a federally incorporated insurer escapes provincial insurance law.
What this tests
CISRO competency component 1.1 — Integrate into practice the legal aspects of insurance and annuity contracts — which is weighted at 60% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 1
- An 'assignee' of a life insurance policy is:
- A corporation as policyowner and beneficiary of a policy on a key employee:
- A 'trustee' named to receive proceeds on behalf of a beneficiary:
- The 'automatic premium loan' (APL) provision:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.