Ethics Chapter 4 Flashcards
(17 cards)
What should an agent do if there has been a change in insurability before delivering the policy?
The agent should not deliver the policy. Instead, they should return it to the insurer, which will then decide whether to alter its underwriting decision.
What is another name for extended E&O coverage for retired agents?
Run-off insurance.
What is CISRO and its purpose?
CISRO is a group of regulators from various provinces aiming to create consistent standards for insurance intermediaries (agents and companies).
What is tied selling in insurance?
The unethical practice of making one product’s purchase or approval dependent on the purchase of another product.
What is trafficking in insurance?
When an agent acts as an intermediary between a policyholder selling a policy and a third-party buyer, typically through absolute assignment.
What is a Politically Exposed Foreign Person (PEFP)?
A PEFP is someone in a government or judicial position in a foreign country, often more susceptible to bribery or corruption.
What must be done when replacing an existing life insurance policy?
A Life Insurance Replacement Declaration (LIRD) must be reviewed with and signed by both the agent and the client, outlining pros and cons of replacement.
What are the money laundering threshold amounts that must be reported?
Single cash deposits over $10,000 or multiple deposits within 24 hours totaling over $10,000.
What are the conditions for referral fees in insurance?
Referral fees are paid per lead, must not be a percentage of commission unless licensed, and must be disclosed to the client.
According to CAILBA, what must an agent do to hold out properly?
- Post license visibly
- Use name on license (e.g. ‘Bob’ for ‘Robert’, not ‘Tiger’)
- Don’t mislead qualifications
- Avoid false specialization claims
- Don’t imply ‘associates’ unless verifiable
- Don’t claim to be a financial planner unless CFP® certified
Why can’t an insurance agent refer to themselves as a financial planner?
Because financial planning involves more than just insurance. Only those with the CFP® designation recognized by the Financial Planning Standards Council may use that title.
What is required of an agent when a client is acting under a POA?
- Complete a third-party determination form
- Verify third party’s details (name, DOB, occupation, etc.)
- Record nature of the relationship (e.g. business or family)
What is ‘commingling of funds’ and why is it prohibited?
It’s using client funds for any purpose other than intended (e.g., premiums), even temporarily. This is deceptive and illegal. Must:
- Use funds only for stated purpose
- Pay all funds to insurer
- Not encumber funds without insurer consent
What is the key difference between principles and rules in a regulatory context?
Principles encourage behavior (e.g., incentives for not drinking and driving), while rules prohibit it (e.g., penalties for exceeding alcohol limits). Principles = ‘you may’, Rules = ‘you shall not’
Explain the member-method of verifying someone’s identity
You rely on another organization (like a bank, credit union, or life insurance company) that has already verified this person’s identity,
and is also a member of a recognized financial industry group or system (like a securities dealer or insurer).
What is misrepresentation?
To make, issue, or circulate any illustration or sales material, or to make any statement that is false,
misleading or deceptive.
