LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
'Churning' refers to:
- AInvesting client funds in agricultural commodities, which is beyond the scope of a life insurance licence
- Repeatedly replacing policies or switching funds mainly to generate commissions, an unfair practice
- CLegitimate rebalancing of a client's segregated fund portfolio to restore the target asset mix after a market move
- DConducting annual reviews with every client, which some insurers discourage because it generates unnecessary changes
Correct answer: B) Repeatedly replacing policies or switching funds mainly to generate commissions, an unfair practice
Churning harms clients through new charges and restarted periods; regulators and insurers monitor replacement ratios.
Why the other options are wrong
- AChurning has nothing to do with agriculture.
- CRebalancing is client-driven and legitimate.
- DReviews are good practice.
Exam tip
Churning = commission-driven replacement/switching.
Common mistake
Switching a client's seg funds each year to earn new sales charges.
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.