LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
An insurer runs a sales contest with a trip for agents who reach a target with one product. The agent's obligation is to:
- ARecommend the contest product wherever it is defensible, since the insurer designed the contest to promote a product it believes in
- Ensure the incentive does not influence recommendations, disclose non-cash compensation, and recommend only where suitable
- CKeep the contest confidential, since disclosing it would make clients suspicious of a recommendation that is genuinely suitable
- DRefuse all incentives from insurers, since accepting any of them is incompatible with giving unbiased advice
Correct answer: B) Ensure the incentive does not influence recommendations, disclose non-cash compensation, and recommend only where suitable
Incentives are conflicts to be managed and disclosed; regulators have scrutinized sales contests.
Why the other options are wrong
- ASuitability governs, not the contest.
- CNon-cash incentives must be disclosed.
- DRefusing is not required, but the conflict must be managed.
Exam tip
Incentives: disclose; never let them drive advice.
Common mistake
Steering clients to the contest product in the last week of the quarter.
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.