LLQP Ethics & Professional Practice · Component 1.6 · 60% of the exam
If the insurer pays a claim and later discovers fraud:
- It may seek to recover the payment through legal action, since fraud has no time limit, and report the fraud
- BIt must pay the claim again to the rightful beneficiary, since its own failure to detect the fraud caused the loss
- CNothing happens, since payment of a claim closes the file and the insurer cannot reopen it for any reason
- DIt cannot recover the payment, since the two-year contestability period bars any action after the claim is paid
Correct answer: A) It may seek to recover the payment through legal action, since fraud has no time limit, and report the fraud
Fraud vitiates the contract at any time; recovery actions are possible.
Why the other options are wrong
- BThe insurer does not pay a fraudulent claim twice.
- CDiscovered fraud has consequences even after payment.
- DRecovery is possible; fraud is not time-barred.
Exam tip
Fraud: recoverable even after payment.
Common mistake
Believing payment closes all inquiry.
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.