WFG – ETHICS QUESTIONS AND ANSWERS
All insurance contracts are unilateral contracts. What does this mean? - Answers -This
means that the insurance company is the only party bound by the contract and is
obliged to fulfill the contract, as long as premiums are paid, whereas the insured can
cancel it at any time.
Andreas went into a financial institution to take out a loan to purchase a car. The
financial institution insisted that he purchase a life policy to insure the loan.
Identify the professional standard that the financial institution has violated. - Answers -
Tied selling.
Assuris is an industry-sponsored, non-profit, federally incorporated consumer-protection
plan for policy owners and purchasers of related products. How does Assuris provide
protection for insurance policyholders? - Answers -If a member insurance company
becomes insolvent, Assuris facilitates the transfer of its policies to a solvent company
and ensures benefits are continued under the original terms of the policy.
Clark is healthy, exercises regularly, and maintains a healthy diet. He works in an office
as a graphic designer. However, Clark also likes to skydive a few times a year for fun.
While meeting with his insurance agent, Clark decides not to mention the fact that he
skydives. He has heard that he might have to pay a higher premium for having a "risky
lifestyle" if he tells the insurance company about his hobby. Since he only does this a
few times a year, he prefers they don't know about it.
What type of misrepresentation is this, and how might it affect the policy? - Answers -
Clark's failure to disclose his skydiving hobby is considered material misrepresentation.
Material misrepresentation is a misrepresentation of a fact, which, if the truth had been
known, might have resulted in the insurer refusing to issue the policy, or charging a
higher premium for it.
Dallas and Brendan both work for ABC Financial; Dallas works on the investment side
and Brendan works in insurance.
Dallas and Brendan have a mutual client, Damien. Damien recently met with Brendan to
purchase term insurance. He requested term insurance because he said that he was
not able to afford high premiums. Brendan perceived Damien as someone who made a
lot of money. He decided to double-check with Dallas on what Damien's income was,
and what kinds of assets he had.
Would Dallas be in violation of a professional standard if he provided Brendan with this
information? If so, which one? - Answers -Dallas would be violating privacy and
confidentiality standards if he provided this information to Brendan.
Denise has not been in the office very much this year, and her sales numbers are lower
than usual. She has been in the business for several years and has several clients with
in-force policies. In order to generate some revenue, Denise decides to replace some of
her clients' existing policies with new policies. To ensure that insurers do not realize
, this, Denise will make sure that her clients get new policies with a different company,
even if they are a little more expensive.
What is the name for this prohibited practice? - Answers -Twisting.
Twisting occurs when an agent induces policyholders to surrender a policy with one
insurer and replace it with another insurer, to the detriment of the policyholder.
Devin purchased life insurance in 2009, naming his daughter Julie as the sole
beneficiary on the policy. In 2010, he married Melissa and moved in with her and her
daughter, Mandy. In 2012, Devin updated his will. In his will, Devin designates the
proceeds of his life insurance policy to be split 50/50 between his daughter, Julie, and
his new stepdaughter, Mandy. If Devin dies today, who would be considered the
beneficiary of the policy? - Answers -If a beneficiary for insurance proceeds is named in
a will, and a later declaration names a different beneficiary for insurance proceeds, the
beneficiary named closest to the death of the insured will prevail.
Earl and Emily were married and lived together in a beautiful home in Toronto before
they divorced. Earl and Emily were so busy moving into their new homes and splitting
their bank accounts that they forgot to update their insurance policies. If Earl and Emily
do not change the beneficiaries on their policies, and one of them dies, how will the fact
that they are now divorced impact the death benefit? - Answers -The surviving ex-
spouse would still receive the death benefit. Except in Québec, if the spouse of the
policyholder has been named as the beneficiary, and the parties subsequently divorce,
the divorce does not alter the rights of the former spouse as beneficiary.
Emma was filling out her insurance application and accidentally filled in the year of her
birth as 1988 instead of 1989. Is this considered a mistake or a misrepresentation, and
what is the difference? - Answers -This would be a mistake. Emma did not do this
intentionally. Furthermore, there would be no benefit to the client to inform the insurance
company that she is older than she really is, as this would result in a higher premium,
and have no benefit to her. A mistake is not a conscious act, whereas a
misrepresentation may not be a conscious act.
Errors and omissions (E&O) insurance is mandatory for insurance agents. Most
provinces also mandate the amount of coverage each agent must have. E&O insurance
protects both the agent and the customer.
How does E&O insurance provide protection for the client? - Answers -Clients can be
confident that, in the event that they have to make a claim against an agent, that there
is sufficient financial backing to pay the claim.
Gina is a life insurance agent. Her brother Matthew is a marketing professional.
Matthew has been helping Gina with many aspects of her business, including her
website, contact management database and her business card design. Matthew asks
Gina for 25% of her commissions for the next year to compensate him for his
contribution to her business.
Can Gina agree to this proposal? - Answers -Life insurance agents cannot share
commissions with anybody who is not also life insurance licensed.
All insurance contracts are unilateral contracts. What does this mean? - Answers -This
means that the insurance company is the only party bound by the contract and is
obliged to fulfill the contract, as long as premiums are paid, whereas the insured can
cancel it at any time.
Andreas went into a financial institution to take out a loan to purchase a car. The
financial institution insisted that he purchase a life policy to insure the loan.
Identify the professional standard that the financial institution has violated. - Answers -
Tied selling.
Assuris is an industry-sponsored, non-profit, federally incorporated consumer-protection
plan for policy owners and purchasers of related products. How does Assuris provide
protection for insurance policyholders? - Answers -If a member insurance company
becomes insolvent, Assuris facilitates the transfer of its policies to a solvent company
and ensures benefits are continued under the original terms of the policy.
Clark is healthy, exercises regularly, and maintains a healthy diet. He works in an office
as a graphic designer. However, Clark also likes to skydive a few times a year for fun.
While meeting with his insurance agent, Clark decides not to mention the fact that he
skydives. He has heard that he might have to pay a higher premium for having a "risky
lifestyle" if he tells the insurance company about his hobby. Since he only does this a
few times a year, he prefers they don't know about it.
What type of misrepresentation is this, and how might it affect the policy? - Answers -
Clark's failure to disclose his skydiving hobby is considered material misrepresentation.
Material misrepresentation is a misrepresentation of a fact, which, if the truth had been
known, might have resulted in the insurer refusing to issue the policy, or charging a
higher premium for it.
Dallas and Brendan both work for ABC Financial; Dallas works on the investment side
and Brendan works in insurance.
Dallas and Brendan have a mutual client, Damien. Damien recently met with Brendan to
purchase term insurance. He requested term insurance because he said that he was
not able to afford high premiums. Brendan perceived Damien as someone who made a
lot of money. He decided to double-check with Dallas on what Damien's income was,
and what kinds of assets he had.
Would Dallas be in violation of a professional standard if he provided Brendan with this
information? If so, which one? - Answers -Dallas would be violating privacy and
confidentiality standards if he provided this information to Brendan.
Denise has not been in the office very much this year, and her sales numbers are lower
than usual. She has been in the business for several years and has several clients with
in-force policies. In order to generate some revenue, Denise decides to replace some of
her clients' existing policies with new policies. To ensure that insurers do not realize
, this, Denise will make sure that her clients get new policies with a different company,
even if they are a little more expensive.
What is the name for this prohibited practice? - Answers -Twisting.
Twisting occurs when an agent induces policyholders to surrender a policy with one
insurer and replace it with another insurer, to the detriment of the policyholder.
Devin purchased life insurance in 2009, naming his daughter Julie as the sole
beneficiary on the policy. In 2010, he married Melissa and moved in with her and her
daughter, Mandy. In 2012, Devin updated his will. In his will, Devin designates the
proceeds of his life insurance policy to be split 50/50 between his daughter, Julie, and
his new stepdaughter, Mandy. If Devin dies today, who would be considered the
beneficiary of the policy? - Answers -If a beneficiary for insurance proceeds is named in
a will, and a later declaration names a different beneficiary for insurance proceeds, the
beneficiary named closest to the death of the insured will prevail.
Earl and Emily were married and lived together in a beautiful home in Toronto before
they divorced. Earl and Emily were so busy moving into their new homes and splitting
their bank accounts that they forgot to update their insurance policies. If Earl and Emily
do not change the beneficiaries on their policies, and one of them dies, how will the fact
that they are now divorced impact the death benefit? - Answers -The surviving ex-
spouse would still receive the death benefit. Except in Québec, if the spouse of the
policyholder has been named as the beneficiary, and the parties subsequently divorce,
the divorce does not alter the rights of the former spouse as beneficiary.
Emma was filling out her insurance application and accidentally filled in the year of her
birth as 1988 instead of 1989. Is this considered a mistake or a misrepresentation, and
what is the difference? - Answers -This would be a mistake. Emma did not do this
intentionally. Furthermore, there would be no benefit to the client to inform the insurance
company that she is older than she really is, as this would result in a higher premium,
and have no benefit to her. A mistake is not a conscious act, whereas a
misrepresentation may not be a conscious act.
Errors and omissions (E&O) insurance is mandatory for insurance agents. Most
provinces also mandate the amount of coverage each agent must have. E&O insurance
protects both the agent and the customer.
How does E&O insurance provide protection for the client? - Answers -Clients can be
confident that, in the event that they have to make a claim against an agent, that there
is sufficient financial backing to pay the claim.
Gina is a life insurance agent. Her brother Matthew is a marketing professional.
Matthew has been helping Gina with many aspects of her business, including her
website, contact management database and her business card design. Matthew asks
Gina for 25% of her commissions for the next year to compensate him for his
contribution to her business.
Can Gina agree to this proposal? - Answers -Life insurance agents cannot share
commissions with anybody who is not also life insurance licensed.
