Ethics Exam

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School

University of Toronto *

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Course

HLLQP

Subject

Finance

Date

Jan 9, 2024

Type

pdf

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Uploaded by SuperHumanField12968

Question 1 Correct Mark 1.00 out of 1.00 Flag question Question text If your client has an individual critical illness policy that covers the four basic major health conditions and he dies of condition not listed in this policy, what will the insurance company do? Select one: a. Nothing as there is no benefit payable b. Refund the premiums to his beneficiaries c. Refund the premiums to his estate d. Pay the lump-sum benefit to her estate Feedback Your answer is correct. The answer is "Nothing as there is no benefit payable" Rationale Critical illness is not life insurance and pays out after a waiting period, not after death. As per section 2.6.3.4 Critical illness (CI), which states, Critical illness (CI) insurance started out as cancer insurance, and rapidly expanded to cover heart attack and stroke. It insures against the risk of a person suffering a life threatening illness. Relevant sections of exam preparation manual: 2.6.3.4 Critical illness (CI) The correct answer is: Nothing as there is no benefit payable Question 2 Correct Mark 1.00 out of 1.00 Flag question Question text

Claire wants to become a life insurance agent while also having another occupation. Out of the following list which occupation would be considered restricted for the purposes of selling life insurance? Select one: a. Mortgage broker b. Real estate broker c. Securities broker d. Clergyman Feedback Your answer is correct. Correct answer: Clergyman Rationale Regulatory authorities can restrict certain types of additional employment for life insurance agents. For example, restrictions exist on the licensing of clergymen, liquor store employees, and police officers. The correct answer is: Clergyman Question 3 Correct Mark 1.00 out of 1.00 Flag question Question text Sonjay is the sole proprietor of a bakery. Unfortunately two months ago one of his employees slipped in the bakery and broke his arm. Sonjay is being sued for negligence for $1.5 million dollars by this employee. Sonjay's lawyer has told him that if Sonjay loses this lawsuit, he will have to sell all of his personal belongings to pay this debt. Sonjay owns a seg fund that lists himself as the beneficiary. Based on what his lawyer told him Sonjay is changing the beneficiary from himself to his father. Given this scenario would changing his beneficiary achieve creditor protection for this investment? Select one: a. Yes, because his father is a preferred beneficiary and the policy is protected against creditor claims b. Yes, because his father is a preferred beneficiary and she is protected from creditor claims c. Possibly, but naming his father as beneficiary may have been done to defeat creditor claims d. No, since Sonjay cannot change the beneficiary of a segregated fund contract after it has been issued Feedback Your answer is correct. The correct answer is "Possibly, but naming his father as beneficiary may have been done to defeat creditor claims"

Rationale As per section 2.1.4.3 Loss of protection, The designation of a beneficiary, including a protected class beneficiary, is subject to being set aside and ignored if it is made in an attempt to defeat, delay, or hinder creditors. This is an aspect of bankruptcy and insolvency law and fraudulent conveyances, and beyond the scope of this Chapter. The important principle is that designations that are made in an attempt to defeat creditors may be subject to challenge, despite the insurance provisions. The same would apply to the purchase of a life annuity or segregated fund, which qualify as life insurance and could otherwise normally be protected. Relevant sections of exam preparation manual: 2.1.4.3 Loss of protection The correct answer is: Possibly, but naming his father as beneficiary may have been done to defeat creditor claims Question 4 Correct Mark 1.00 out of 1.00 Flag question Question text Jack's children, Sue and Phil, are concerned about his long-term care in case he needs ongoing care if he was to become ill. Sue and Phil are going to obtain and pay for a policy so that they can approve any changes to the beneficiary, who they've currently designated as Jack, and control the policy. Given this scenario which of the following statements is most correct? Select one: a. Sue and Phil pay for the policy while their father is the beneficiary b. Sue and Phil pay for and are the policyholders of the policy c. The children have control of the policy but no legal ownership d. Jack is the life insured and the long-term care facility is the beneficiary Feedback Your answer is correct. The answer is "Sue and Phil pay for and are the policyholders of the policy" Rationale As per section 2.1.2 Policyholder, which states that “The policyholder is the individual or legal person (e.g., corporation) who has legal ownership of the policy and exercises the contractual and statutory rights that go with being the owner. The first policyholder is the one that forms the original contract with the insurer. In summary, “the person who makes the contr act with the insurer is the insured (or policyholder, or owner) and is a party to the policy with contractual rights.””

Relevant sections of exam preparation manual: 2.1.2 Policyholder The correct answer is: Sue and Phil pay for and are the policyholders of the policy Question 5 Correct Mark 1.00 out of 1.00 Flag question Question text Dave was the life insured in a policy owned by his employer. Dave died on May 5th. The claim form was submitted to the insurer on May 19th, and the notice of death was received by the insurer on June 1. The company pays the annual premium April 1 and it is the beneficiary of the policy. By what date must the death benefit be paid to the company? Select one: a. Within 90 days b. June 19 c. May 30 d. July 1 Feedback Your answer is correct. The correct answer was "July 1" Rationale The insurer is obligated by provincial and territorial insurance law to pay a claim within 30 days of receiving evidence that satisfies that the claim is payable. Relevant sections of exam preparation manual: 3.5 Time to pay claim, which states, “The insurer is obligated by provincial and territorial insurance law to pay a claim within 30 days of receiving evidence that satisfies that the claim is payable.” The correct answer is: July 1 Question 6 Correct Mark 1.00 out of 1.00

Flag question Question text Kira, a new life insurance agent, is asking you about Assuris protection available for health expenses in the event of an insolvency of the insurer. Out of the following choices what is correct? Select one: a. The expenses up to $60,000 or 80%, whichever is higher b. The expenses up to $200,000 total c. The expenses up to $100,000 or 85%, whichever is higher d. The expenses up to $60,000 or 85%, whichever is higher Feedback Your answer is correct. Correct answer: The expenses up to $60,000 or 85%, whichever is higher Rationale For health expenses, Assuris protects 100% of the promised benefit, up to $60,000. For values greater than $60,000, Assuris protects the greater of $60,000 or 85% of the promised benefit, whichever is higher. The correct answer is: The expenses up to $60,000 or 85%, whichever is higher Question 7 Correct Mark 1.00 out of 1.00 Flag question Question text Alice was introduced to her mother's life insurance agent. This agent is a strong supporter of universal life insurance, and after meeting with him a few times Alice decided to take his advice and apply for a universal life insurance policy. The insurance company approved Alice and when the agent delivered the policy he once again went over the benefits of the policy. However, the agent never compared the policy to other options that may have been as or more appropriate for Alice, nor did he discuss any other types of insurance that might have been beneficial for her. Seven months later Alice was involved in a bicycle accident that resulted in her losing her job. She did not have any individual or group disability benefits, and was unable to make her universal life insurance policy premium payments. This directly resulted in the policy lapsing. Given this scenario which of the following statements is most correct? Select one:

a. The agent is guilty of misrepresentation since he did not assess her need for disability insurance b. The agent may be liable for her financial loss since he failed to assess her need for disability insurance c. The agent can pay the premiums of Alice's universal life policy until her income resumes d. If the agent had discussed disability insurance he would have been guilty of tied selling Feedback Your answer is correct. The correct answer is "The agent may be liable for her financial loss since he failed to assess her need for disability insurance" Rationale "The agent is guilty of misrepresentation since he did not assess her need for disability insurance" is incorrect because this is not misrepresentation, which means a misstatement of facts. "The agent may be liable for her financial loss since he failed to assess her need for disability insurance" is correct as per section 4.2.2.3, Product suitability, which states, Agents are expected to follow appropriate client needs-based sales practices to make the most suitable recommendations for prospective policyholders. The recommended product must both be suitable to the needs of the client and show that the agent has understood the client’s needs and put their interests first. "The agent can pay the premiums of Alice's universal life policy until her income resumes" is incorrect because the agent can’t pay the premium (this is referred to premium rebating), as per section 4.2.3.3, Premium rebating involves an agent giving back or rebating a portion of the premiums. The Insurance Act of Ontario describes premium rebating as an “unfair or deceptive act or practice” when: A person pays, allows or gives, directly or indirectly, a rebate of all or part of the premium stipulated by a policy to a person insured or applying for insurance (…). "If the agent had discussed disability insurance he would have been guilty of tied selling" is incorrect because this is not an example of tied selling Relevant sections of exam preparation manual: 4.2.2.3 Product suitability The correct answer is: The agent may be liable for her financial loss since he failed to assess her need for disability insurance Question 8 Correct Mark 1.00 out of 1.00 Flag question Question text Jane has decided to try to use a new technique to sell life insurance policies. She has looked at the numbers and believes that if she offers to pay all of her new clients’ first premiums most will continue to pay their own premiums and she will not only not lose any money, but will make a substantial amount of commission. Given this scenario which deceptive sales practice is Jane guilty of committing?

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