LLQP Ethics & Professional Practice · Component 1.1 · 60% of the exam
A client questions whether the agent can act in the client's interest when the insurer pays the commission. The most accurate answer is that the agent:
- owes duties to the client including suitability and disclosure, whoever pays the commission
- Bmay choose each year which party's interests to place ahead of the other's
- Cacts for the insurer alone, since the insurer is the party that provides the compensation
- Dowes no duty to either party, since the agent is merely an intermediary passing forms between them
Correct answer: A) owes duties to the client including suitability and disclosure, whoever pays the commission
An agent has contractual duties to the insurer and professional duties to the client, including care, suitability, honest disclosure and management of conflicts. Compensation does not displace the obligations owed to the client.
Why the other options are wrong
- BDuties cannot be switched on and off at the agent's convenience.
- CDuties to the client exist independently of who pays the agent.
- DAn intermediary who advises owes a duty of care to the person advised.
Exam tip
Who pays does not determine to whom the agent owes professional duties.
Common mistake
Explaining compensation in a way that suggests loyalty follows the money.
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.