Chapter 16: Ethics

Which of the following is not an ethic found in America's business world? - Business is war - Business is a business - Business is a war with high ethical boundaries - Business is noncompetitive

Business is noncompetitive

When Sun Tzu developed the principles in The Art of War, what type of government ruled in China?

Feudal monarchy

Moral philosophies that guide ethics include all of the following, EXCEPT: - Judeo-Christian philosophy - Hindu thought - Rationalism and scientific analysis - Marketing analysis

Marketing analysis

________________ is a fundamental reason that insurance is purchased.

Planning

Activities that are legal

adhere to a minimums of required standards

With regard to misrepresentation by an insurance producer, which of the following statements is true? - to be illegal and subject to sanction, misrepresentation must be intentional - unintentional misrepresentations is not legal - an errors and omissions policy may cover unintentional misrepresentation - an errors and omissions policy may cover intentional misrepresentation

an errors and omissions policy may cover unintentional misrepresentation

All of the following statements are true EXCEPT: - an ethical producer's conduct may be lower than legal and regulatory standards - compliance and law are a filter through which all of our ethics options should flow - compliance and regulation standards that form a foundation for the industry's ethic - an ethical producer's conduct may be broader and higher than compliance demands

an ethical producer's conduct may be lower than legal and regulatory standards

Conforming to a minimum set of required standards can be equated to:

being "in compliance"

With regard to the fiduciary duty involved with an insurance agency relationship, which of the following statements is true? - only the agent holds a fiduciary duty - the agent holds a fiduciary duty only when acting outside of his or her authority - only the principal holds a fiduciary duty - both the agent and the principal hold a fiduciary duty

both the agent and the principal hold a fiduciary duty

With regard to ethics and compliance, which of the following statements is true? - ethics and compliance standards are often conflicting forces - compliance forms the foundation for the insurance industry's ethics - ethics does not extend further than the letter of the law - ethics ignores the law

compliance forms the foundation for the insurance industry's ethics

Insurance licensees may be found to be brokers by a court of law if the licensee advises customers in complex insurance placements and:

customers rely on the licensee's recommendations as being made in the customer's best interest

Adopting a code of ethics requires a producer to:

embrace the tenets of professionalism

Describing the provisions of insurance policies to prospects and taking applications for insurance are examples of:

express authority

Earl holds a position that requires a high degree of loyalty, care and skill to another party. Earl holds a/an:

fiduciary position

The best way to avoid problems caused by negligence is to:

follow thorough and consistent sales and service procedures

Producer Joe can assure that he complies with suitability standards by:

following a practice of needs-based selling

Which of the following is an ethical primary duty an agent owes his or her clients? - providing insurance coverage - conducting a thorough fact-find - putting the client's interest above the producer's in the insurance transaction - honestly explaining all aspects of a given product

honestly explaining all aspects of a given product

Which of the following can a producer feel free to openly disclose? - information that was provided to the producer on any application of insurance - all information about the producer's principal - information that is generally available to the public - any information about the producer's competitors in the course of a sales call

information that is generally available to the public

The focus of the IAIS' "Insurance Core Principles - Conduct of Business" is directed to:

insurance companies

Which of the following statements is accurate? - insurance producers as a whole provide appropriate information and advice about insurance products and services - consumers typically rely on sources that are completely independent from the insurance industry for information about its products and services - the insurance industry has a sterling reputation with all consumers - the average consumer is fully knowledgeable about insurance industry products and services

insurance producers as a whole provide appropriate information and advice about insurance products and services

Agent Gerald writes a $250,000 insurance policy. He gives the insured a binding receipt and tells the insured that the receipt provides coverage through the underwriting period. He fails to inform the insured that the receipt, because of insurer underwriting rules for coverage over certain limits, limits the insurer's liability for certain coverage during this period to $100,000. Agent Gerald:

is negligent in his duty to his new client

When a business ethic is communicated in the workplace:

it should be evaluated by the employee in terms of the regulation and law that governs the licensee's conduct

An insurance producer cannot maintain high ethical standards without:

knowing and following insurance regulation

The terms and responsibilities of a "special relationship" between a producer and his or her clients:

may arise due to passivity on the client's part

Ignoring our human imperfections by trying to cite a sequence of events by memory instead of using a written checklist during an insurance transaction:

may have a minor repercussion or they may have serious legal consequences

Insurance producers who act with a lack of concern are likely to create liability issues commonly associated with:

negligence

Producer Neal vows to adopt a code of ethics to guide his business practices and relationships. If he does so, he can count on all of the following EXCEPT: - appropriately fulfilling his responsibilities - never making an error - having a measure of guidance when a difficult choice must be made - fewer chances that conflict of interest will arise

never making an error

In ethical terms, the distinction between responsibilities of the agent and broker to clients:

overlaps in that both have a duty of care to clients

The best way for a licensed producer to meet high ethical practices while following the executives at an insurance company or insurance agency is to:

practice due diligence concerning the insurer and agency before accepting employment with them

A producer is required to provide his or her clients all of the following, EXCEPT: - providing legal advice to the client concerning the insured risk - reasonable diligence in obtaining insurance requested by the client - informing the client of specific excluded risks in the coverage if specifically mentioned by the client - informing the client of possible conditions of an insured's property

providing legal advice to the client concerning the insured risk

The source that defines most specifically the unfair business practices that an agent must avoid is:

state laws

A professional fact-finding interview should be designed to do all of the following EXCEPT: - support the producer's objective to promote a given product - develop a client profile - define client objectives - identify the financial capabilities the client has

support the producer's objective to promote a given product

Technically and in legal terms, a broker is an agent for:

the client

The "enemy" insurance agents are battling is:

the consumer's financial loss and those circumstances that create loss

In agency law, the term "special relationship" refers to:

the extension of service beyond the basic duties one owes to one's clients

To determine the appropriate product for his client, Agent George should rely primarily on:

the information gathered during the fact-finding process

In war, a battle will most likely be won when:

the people and the military follow and are in complete accord with their ruler

To obtain the most accurate understanding of an insurance product's features and how the product will meet his or her needs, the client should be able to rely primarily on:

the producer

For insurance producers, all of the following elements are associated with a "special relationship" EXCEPT: - client expectations - the producer's knowledge and capabilities - the duration of the producer/client relationship - whether the producer is a licensed agent or a licensed broker

whether the producer is a licensed agent or a licensed broker

A licensee may have the responsibility to ____________ and ____________ illegal activities of those in the insurance business, even when the illegal activities are conducted by managers or executives.

whistle blow; report