LLQP Ethics & Professional Practice · Component 2.1 · 40% of the exam
The insurer's obligation under FTC guidance to 'design products with target markets in mind' protects clients because:
- AIt is irrelevant to agents, since product design is an internal matter for the insurer's actuaries and marketing staff
- BIt limits client choice, since a client outside the target market cannot buy the product even if it suits them
- CIt raises prices, since designing products for narrow markets removes the economies of scale of mass distribution
- Products are built and distributed to suit identified client groups, and agents should sell them to those clients
Correct answer: D) Products are built and distributed to suit identified client groups, and agents should sell them to those clients
Product governance is an FTC element that flows down to agents' suitability practices.
Why the other options are wrong
- AAgents apply target-market thinking in their recommendations.
- BProduct governance improves fit; it does not limit choice unfairly.
- CRaising prices is not the purpose of product governance.
Exam tip
Product governance: target market → suitable distribution.
Common mistake
Selling a complex product to a client outside its intended market.
What this tests
CISRO competency component 2.1 — 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.