Ethics and Customer Protection
What the domain tests
This domain tests ethical selling, suitability, disclosure, confidentiality, conflict-of-interest management, fair treatment of customers, grievance redressal, and prevention of mis-selling and rebating.
Core rules and concepts
- An adviser must understand the customer’s needs and recommend a suitable product, not merely the highest-commission product.
- Disclosure includes material policy terms, exclusions, charges, waiting periods, and the difference between guaranteed and non-guaranteed benefits.
- Confidentiality protects customer data. Conflict of interest must be disclosed and managed.
- Mis-selling includes false promises of returns, hiding exclusions, and unsuitable replacement of existing cover. Churning is unnecessary replacement to generate commission.
- Rebating is prohibited. Complaints should follow the insurer’s grievance process and then eligible escalation routes such as the Ombudsman.
- The free-look period gives the policyholder a chance to review and return a policy under stated conditions.
Worked example
A customer nearing retirement needs capital protection. An adviser recommends a market-linked product with a long lock-in and high charges because it pays a higher commission. This is unsuitable advice. The ethical approach is to document needs, explain risk and charges, compare suitable alternatives, and let the customer make an informed choice. If the customer buys, the free-look right and grievance route must be explained.
Traps that cost marks
Do not equate high returns with suitability. Do not hide exclusions or charges. Do not say rebating is a legitimate sales incentive. Do not ignore the free-look period. Do not disclose customer data without authority. Do not treat commission as the customer’s interest.