LLQP Ethics & Professional Practice · Component 1.6 · 60% of the exam
'Good faith claims handling' obligates the insurer to:
- APay every claim that is presented, since questioning a claim is inconsistent with the duty of good faith
- Investigate fairly and promptly, give reasons, not deny without grounds, avoid delay; breach can bring extra damages
- CDeal only with the claimant's lawyer, since direct communication with a claimant could be seen as pressure
- DTake as long as it considers necessary, since a thorough investigation is the best protection for other policyholders and the insurer's reserves
Correct answer: B) Investigate fairly and promptly, give reasons, not deny without grounds, avoid delay; breach can bring extra damages
Canadian courts have awarded punitive damages against insurers for bad-faith claims handling.
Why the other options are wrong
- AGood faith requires paying valid claims, not every claim.
- CCommunication with the claimant is required.
- DDeliberate delay is itself bad-faith conduct.
Exam tip
Bad-faith claims handling → damages beyond the policy.
Common mistake
Assuming an insurer's only exposure is the policy amount.
What this tests
CISRO competency component 1.6 — 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.