LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
An agent offers to pay a prospective client's first premium to secure the sale. This is:
- Aacceptable provided the client is told the payment will not be repeated next year
- an inducement prohibited by legislation on unfair or deceptive practices
- Cacceptable marketing, since the agent is using personal money rather than the insurer's
- Dacceptable where the amount is small relative to the total premium over the term
Correct answer: B) an inducement prohibited by legislation on unfair or deceptive practices
Offering anything of value not specified in the contract to induce a purchase is prohibited, along with rebating part of the commission. The client's decision must rest on the product's suitability.
Why the other options are wrong
- ADisclosure does not make a prohibited inducement acceptable.
- CThe source of the money does not make the inducement permissible.
- DThe size of the inducement does not change its character.
Exam tip
Inducements and rebating are prohibited, whatever their size or source.
Common mistake
Treating a small payment toward a premium as a marketing gesture.
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.