Insurance Ethical Issues Exam

INSURANCE ETHICAL ISSUES EXAM

Candidate Information

Applicant Name:

Date of Birth:    License/Agent ID:

Policy/Practice Information

Primary Lines of Business (check all that apply):

Life   Health   Property   Casualty

Auto   Professional Liability   Other:

Exam Instructions

Complete all sections of the exam. Responses must reflect your independent professional judgment. Use black or blue ink for printed copies. Answers will be reviewed for compliance with professional ethical standards; misrepresentation or plagiarism constitutes grounds for disciplinary action.

Multiple Choice / Scenario Questions

1. An applicant with limited disclosure capacity requests advice on selecting coverage. The ethical obligation of the insurer/agent is to:

A. Prioritize selling the most comprehensive policy available regardless of cost.
B. Determine the applicant's needs, explain limitations, and seek appropriate consent or involve a legally authorized representative.
C. Refer the applicant to a competitor to avoid liability.
D. Delay any communication until written confirmation is received.

2. A producer discovers that a client intentionally omitted material information on a new application. The producer should:

A. Ignore the omission if the sale is beneficial to the agency.
B. Document the discovery, disclose to the insurer promptly, and advise the client regarding consequences of nondisclosure.
C. Backdate documents to correct the record.
D. Terminate the relationship immediately without explanation.

3. When handling client funds, a fiduciary duty requires:

A. Commingling client funds with business operating accounts as long as records are kept.
B. Segregation of client funds, accurate accounting, prompt remittance, and transparent reporting to the client and insurer.
C. Immediate personal use with later reconciliation.
D. Holding funds indefinitely to ensure commission is collected.

4. An agent is offered an undisclosed referral fee by a third party to place business with a particular insurer. The proper response is:

A. Accept without disclosure to maximize revenue.
B. Disclose the arrangement to the client and obtain informed consent; decline if it conflicts with the client's best interests.
C. Transfer the fee to the insurer.
D. Redirect the referral fee to a charity without informing the client.

5. A claims examiner receives a credible tip that a policyholder committed fraud. The examiner must:

A. Close the claim to avoid controversy.
B. Conduct a thorough, documented investigation, preserve evidence, and coordinate with legal counsel and fraud units where appropriate.
B. Immediately pay the claim and seek reimbursement later.
D. Publicly disclose the suspicion without confirmation.

Short Answer / Analytical Responses

Exclusions — Acknowledgement

The following practices are expressly prohibited under the professional code of conduct for this exam and for employment/licensing:

• Deliberate falsification or material omission of insurance applications, claims, or underwriting documentation.
• Commingling of client funds with personal or business operating accounts without documented fiduciary oversight.
• Undisclosed kickbacks, referral fees, or contingent arrangements that bias recommendation of coverage.
• Retaliation against a client or colleague for reporting suspected fraud or unethical conduct.

I acknowledge that I have read and understand the exclusions above and that violation may result in disciplinary measures including revocation of license, civil liability, and other sanctions.

Acknowledgement: I certify that I understand and will comply with the exclusions described.

Beneficiary / Contact for Record

Relationship:    Allocation Percentage:

Declaration and Certification

By signing below I certify under penalty of professional discipline and applicable law that:

1. All information provided on this exam and in supporting materials is true, accurate, and complete to the best of my knowledge.
2. I have neither given nor received unauthorized assistance in completing this exam.
3. I will maintain records and documentation necessary to support any representations made in my answers.
4. I understand that deliberate misrepresentation may result in licensing sanctions, civil liability, and criminal penalties where applicable.

Candidate Attestation: I attest that I am the person named above and that the responses and statements contained herein are my own work and reflect my professional judgment.

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