LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
'Referral arrangements' where an agent pays or receives fees for referrals:
- AAre unlimited, since a referral is a private commercial arrangement between the agent and the referring party
- Are permitted only within regulatory limits, not as pay for licensed activity, and must be disclosed
- CNeed no disclosure to the client, since the client is not a party to the arrangement and pays nothing extra
- DAre always prohibited, since any payment connected with an insurance sale must flow through the insurer's commission
Correct answer: B) Are permitted only within regulatory limits, not as pay for licensed activity, and must be disclosed
Paying unlicensed referrers for sales is treated as sharing commissions with unlicensed persons; rules vary and disclosure is required.
Why the other options are wrong
- AReferral fees are limited, not unlimited.
- CReferral arrangements must be disclosed.
- DSome arrangements are permitted.
Exam tip
Referral fees: no commission-sharing with unlicensed persons; disclose.
Common mistake
Paying a mortgage broker a percentage of commission for referrals.
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.