Ethics and Professional Conduct
Ethics and Professional Conduct tests how an insurance professional resolves conflicts between client interest, employer interest and personal gain. Expect scenarios on suitability, disclosure, confidentiality, fair treatment, inducements and market conduct.
Core rules
- Fiduciary duty requires acting in the client's best interest, not merely avoiding outright fraud.
- Suitability means recommending a product that matches the client's needs, affordability, horizon and risk tolerance.
- Conflict of interest must be identified, disclosed and managed; disclosure alone does not cure an unsuitable recommendation.
- Confidentiality protects client data, but yields to legal requirements, AML/KYC reporting and client-authorised disclosure.
- Fair treatment covers clear communication, timely claims, complaint handling and no misleading advertising.
- Inducements must not encourage inappropriate sales; commission should not drive advice.
- Whistleblowing protects those who report misconduct through proper channels.
Worked example
An agent can earn 35% commission on a ULIP and 10% on a term plan. A 25-year-old with no dependants and no investment surplus is sold the ULIP as protection plus savings. The recommendation fails suitability: the client needs little life cover now, has no emergency fund, and the product's charges and market risk are not explained. The agent also fails conflict management by letting commission determine advice. Reasoning: the test is the client's need, not the product's payout to the agent.
Traps
- Believing disclosure of commission makes any recommendation ethical.
- Treating confidentiality as absolute when AML or court orders apply.
- Confusing client agreement with suitable advice.
- Using gifts or hospitality to influence a corporate buyer.
- Assuming ethics only concerns illegal acts, not poor advice.