LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
An insurer asks an agent to explain why so many of his clients have replaced existing policies. The agent must:
- cooperate and produce the replacement disclosures and suitability records for each case
- Bprovide a general statement of philosophy rather than details of individual transactions
- Cdecline to answer, since the reasons for each recommendation are confidential to the client
- Dexplain that replacement decisions were made by the clients themselves without advice
Correct answer: A) cooperate and produce the replacement disclosures and suitability records for each case
Agents must cooperate with insurers and regulators reviewing their business. A pattern of replacement attracts scrutiny because of the cost to clients, so the disclosures and suitability reasoning must be on file.
Why the other options are wrong
- BA general statement does not answer a file-level review.
- CConfidentiality does not shield business records from a compliance review.
- DDenying that advice was given is unlikely to be true and does not help.
Exam tip
Replacement patterns attract review; the reasoning must be documented case by case.
Common mistake
Recommending replacements without recording the comparison and the reasons.
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.