LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
'Know your client' (KYC) obligations require the agent to:
- AEstimate the client's situation from appearances and occupation, since detailed questioning puts clients off
- Gather and document the client's situation, objectives, coverage, tolerance and needs before recommending, and update it
- CAsk only about income, since the amount of coverage a client can afford is the only fact that determines the recommendation
- DSkip the process for small sales, since the cost of a full fact-find exceeds the commission on a small policy
Correct answer: B) Gather and document the client's situation, objectives, coverage, tolerance and needs before recommending, and update it
KYC is the foundation of suitability; it is expected for every sale and reviewed periodically.
Why the other options are wrong
- ADocumentation of actual facts is required.
- CKYC covers much more than income.
- DKYC applies to all sales.
Exam tip
KYC before every recommendation; document; update.
Common mistake
Selling on a referral's 'she just wants a term policy' without fact-finding.
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.