LLQP Ethics & Professional Practice · Component 1.2 · 60% of the exam
An elderly client with no close relatives asks the agent to be named as beneficiary of her policy. The agent should:
- Aaccept, since the client is entitled to choose anyone she wishes as beneficiary
- Baccept on condition that the proceeds are used for the client's funeral expenses
- decline, because being named creates a serious conflict and is generally prohibited
- Daccept but disclose the designation to the insurer at the time of the change
Correct answer: C) decline, because being named creates a serious conflict and is generally prohibited
Being named beneficiary by a client puts the agent's personal interest against professional duty and invites allegations of undue influence. The agent should decline, explain why and suggest the client take independent advice.
Why the other options are wrong
- AClient choice does not relieve the agent of the conflict created.
- BAn earmarked purpose does not remove the agent's personal interest.
- DDisclosure does not cure a conflict of this seriousness.
Exam tip
An agent named as a client's beneficiary is a conflict to decline, not manage.
Common mistake
Accepting a designation because the client offered it without prompting.
What this tests
CISRO competency component 1.2 — 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.