LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
A client cannot afford a premium and the agent offers to lend her the money personally. The agent should recognize this as:
- Aacceptable because the money is the agent's own rather than the insurer's funds
- an inducement and a conflict, so affordability should be addressed instead
- Cgood service that protects the client's coverage from lapsing unnecessarily
- Dacceptable provided the loan is repaid before the next policy anniversary arrives
Correct answer: B) an inducement and a conflict, so affordability should be addressed instead
Paying or lending premiums creates a financial entanglement and can amount to an inducement. The real issue is affordability, which is addressed by reviewing the coverage rather than by financing it.
Why the other options are wrong
- AThe source of the money is not what makes the arrangement improper.
- CThe kindness creates a conflict and conceals an affordability problem.
- DRepayment timing does not remove the conflict of interest.
Exam tip
An unaffordable premium is a suitability problem, not a financing problem.
Common mistake
Propping up a policy the client cannot actually afford.
What this tests
CISRO competency component 2.2 — Integrate into practice the rules governing the activities of life insurance agents — which is weighted at 40% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 2
- A prospective client wants to confirm that an agent is properly licensed before meeting him. She should:
- A dual-licensed agent's mutual fund business is reviewed following a client complaint. The review will be conducted by:
- Assuris coverage applies to:
- OLHI's services are available to:
- Complaints about an agent's conduct (as opposed to an insurer's claim decision) should be directed to:
- The best summary of an agent's ethical obligations is to:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.