LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
Two products suit a client equally well, and one pays the agent substantially more. The agent should:
- disclose the compensation difference and recommend on the client's interests alone
- Blet the client choose without mentioning that the compensation differs between them
- Crecommend the higher paying product, since both are suitable for this particular client
- Drecommend the lower paying product automatically to avoid any appearance of conflict
Correct answer: A) disclose the compensation difference and recommend on the client's interests alone
Where compensation could influence a recommendation, the conflict must be disclosed and managed in the client's favour. Suitability is decided on features, cost and fit, with the reasoning recorded.
Why the other options are wrong
- BWithholding the conflict prevents the client from judging the advice.
- CLetting compensation decide between equally suitable products is the conflict itself.
- DThe cheaper option for the agent is not automatically better for the client.
Exam tip
Disclose compensation conflicts and decide on the client's interests.
Common mistake
Choosing between suitable products on the basis of the commission.
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.