LLQP Ethics and Regulatory Compliance 4

Question 1

A client asks their insurance agent to backdate a policy to avoid a premium increase that took effect last month. What should the agent do?

Accepted Answer

Refuse, as backdating to gain a financial advantage is fraudulent

Answer

Backdating a policy to gain a financial advantage for the client constitutes fraud and violates insurance regulations.

Question 2

Under the duty of utmost good faith (uberrimae fidei), which party bears the PRIMARY obligation to disclose all material facts?

Accepted Answer

Both the insurer and the applicant equally

Answer

Utmost good faith applies to both parties — the applicant must disclose material facts and the insurer must disclose all policy terms and conditions.

Question 3

An agent discovers a clerical error in a client's policy that actually benefits the client with lower premiums. The agent should:

Accepted Answer

Report it to the insurer and inform the client of the correction

Answer

Agents must report errors regardless of who benefits, as concealing errors breaches the duty of honesty owed to the insurer.

Question 4

Which scenario BEST illustrates a conflict of interest that an agent must disclose to a client?

Accepted Answer

The agent recommends a product that pays a higher commission than competing products

Answer

Recommending a product primarily because it pays a higher commission, without disclosing this, creates a conflict of interest that must be revealed to the client.

Question 5

A state insurance department investigation finds that an agent consistently replaced existing policies without documenting the client's reasons. This practice is known as:

Accepted Answer

Churning

Answer

Churning refers to an agent repeatedly replacing a client's own policies to generate new commissions without benefit to the client.

LLQP - Life License Qualification Program Practice Test

LLQP - Life License Qualification Program Practice Test

LLQP Ethics and Regulatory Compliance 4