Ethics and Professional Practice
This module tests the conduct expected of a licensed life insurance agent: integrity, suitability, disclosure, confidentiality, conflict management, replacement, premium handling, and complaint handling. Questions often present a realistic dilemma and ask for the next compliant action, not the most profitable one.
Core duties
Agents must act with integrity, honesty, and good faith, placing the client's interests ahead of compensation. Know your client (KYC) and know your product (KYP) are ongoing duties: collect financial situation, needs, objectives, risk tolerance, and time horizon, then recommend only suitable products. Disclose material information, including costs, guarantees, restrictions, and remuneration, in plain language.
Conflicts, confidentiality, and competence
Identify and disclose conflicts of interest, including outside business activities and referral fees; avoid them if the client cannot be fairly served. Protect personal information under privacy law: collect only what is needed, obtain consent, safeguard records, and do not disclose to family members without authority. Maintain competence through continuing education and know the limits of your licence.
Replacement, premiums, and marketing
On a replacement, complete the required disclosure and comparison, notify the existing insurer where required, and never twist or churn. Handle premiums as trust property: issue a receipt, remit promptly, and never commingle client funds with personal funds. Advertising must be fair, clear, and not misleading; do not exaggerate returns or imply guarantees that do not exist.
Worked example
A client wants to surrender a seg fund with a $6,000 deferred sales charge to buy a new contract that pays the agent a higher commission. The agent compares guarantees, fees, surrender charges, and the client's five-year horizon. The new contract's 75% guarantee and higher fees make it unsuitable. The compliant action is to explain the costs, recommend staying or choosing a lower-cost option, document the discussion, and decline the replacement if it is not in the client's interest, even though the agent loses commission.
Traps that cost marks
Verbal disclosure is not enough; document it. The duty is not only to the insurer. A client's request does not excuse an unsuitable sale. Gifts and referral payments can create conflicts. Confidentiality survives the end of the relationship. Replacement forms are not optional, and signing for a client or backdating a document is misconduct.