CPCU Ethics Practice Quiz Questions

Anil is a commercial insurance producer who specializes in large, complex accounts. Anil is approached by the risk manager from Altor Systems, a company that specializes in developing special-purpose computer operating systems for use in such things as communications satellites, space vehicles, and military applications. Because of the nature of its business, Altor often finds it difficult to obtain insurance coverage, much less to obtain it at a cost the company sees as reasonable. Based on his experience, Anil is aware of two companies that might provide coverage for Altor. One, licensed in the client's home state, has very stringent underwriting guidelines and relatively high premiums. The second is a nonadmitted insurer, not licensed in the client's home state. This second insurer has much more flexible underwriting guidelines, and Anil is certain that the premiums charged would be much lower, as would be the com

. To examine any laws, regulations, and guidelines governing the situation

Which one of the following situations represents a potential obstacle to thinking and acting independently for an insurance professional? Select one: A. A claims rep is compensated in part based on the number of claims he processes weekly. B. A producer pursues continuing education provided by an industry association she serves in a volunteer leadership role. C. A claims rep refuses to join industry associations, citing a lack of time. D. A producer receives a referral and proposes the exact same coverage for the new customer as the one who referred her.

A. A claims rep is compensated in part based on the number of claims he processes weekly.

Tasha, a claims processor, reports to a manager who pressures her to process as many claims as possible rather than devoting time to thoroughly investigate each claim as stated in her company's code of ethics. Tasha's manager represents which one of the following types of barriers to ethical decision making? Select one: A. Administrative B. Environmental C. Physical D. Procedural

A. Administrative

Yusuf was an insurance professional but changed to an unrelated career ten years ago. Yusuf just moved to another state and is now a producer for a local agency. As an insurance professional, Yusuf's best approach now should be to Select one: A. Begin a continuing education program to become competent for the markets he serves. B. Quickly become knowledgeable about his insurer's eligibility requirements. C. Become competent in the application of the laws of his new state. D. Learn the skills necessary to use modern computer systems.

A. Begin a continuing education program to become competent for the markets he serves.

Sadie, a new claims adjuster, was on the job just two months when she recognized an ethical issue. She knew from her training that ethics concern making often difficult decisions Select one: A. Between two or more right answers. B. Based on legal obligations. C. Between right and wrong. D. Based on professional standards.

A. Between two or more right answers.

Sugartown Insurance Company strives to act ethically across all departments of operations. Which one of the following explains how its claims handling benefits society as a whole? Select one: A. By indemnifying claimants and reducing their dependence on charitable organizations B. By using word of mouth to acquire more customers C. By ignoring instances of moral hazard D. By waiving premium increases following a loss

A. By indemnifying claimants and reducing their dependence on charitable organizations

Christine, an underwriter working for Insurance Company, placed a telephone call to Olivia, an agent, to complain that many of the applications submitted by Olivia and accepted by Christine lately represent poor quality risks. Christine told Olivia that she will be enforcing underwriting guidelines more strictly in the future. Olivia said she will do better, and then mentioned that no one is using her ski chalet next weekend and Christine and her family are free to use it. Christine would love to accept, but wonders whether that would create an ethical conflict. If Christine uses an ethical dilemma decision-making flowchart, she will

A. Determine whether application of a professional standard/code will resolve any conflict.

Oliver is an underwriting manager. During a recent staff meeting, two of his underwriters expressed concerns about what they considered unethical behavior by one of the producers. After gathering more facts, and reviewing company practices and professional codes, Oliver determines that there is an ethical concern. Which one of the following is Oliver's next step in resolving this dilemma? Select one: A. Determine who is responsible for resolving the conflict B. Analyze the positive and negative impact on the stakeholders C. Evaluate the dilemma from a people-based prospective D. Decide on a course of action

A. Determine who is responsible for resolving the conflict

Risk professionals at Northern Divide Insurance Company are constantly encouraged to adhere to high ethical standards. These standards fall into three general areas: regulatory requirements, social responsibility, and Select one: A. Economic outcomes. B. Nondiscrimination. C. Inclusion. D. Legislative practices.

A. Economic outcomes.

Sandi is the compliance officer for a medium-sized insurer and is thus very interested in the practice of professional ethics within her company. She knows that Select one: A. Ethical organizations avoid legal issues because their activities comply with applicable laws and regulations. B. The result of maintaining high ethical standards from an economical standpoint is an increase in operational expenses. C. Organizations that demonstrate high ethical standards can find it difficult to recruit and retain employees. D. Organizations that concern themselves with ethics generally have less time to focus their attention on their core business goals.

A. Ethical organizations avoid legal issues because their activities comply with applicable laws and regulations.

In his role as a claims representative, Andy wants to practice in a professional manner. Which one of the following statements in that regard is correct? Select one: A. Honest, open communication fosters an authentic relationship between insurer and insured. B. A commitment to high ethical standards is easy to achieve and maintain. C. A claim adjuster must always consider settlement options only from the perspective of the insurer. D. The phrase "the buck stops here" encapsulates the concept of integrity.

A. Honest, open communication fosters an authentic relationship between insurer and insured.

Underwriting supervisor Tom has been receiving reports from his employees that Pam, who works in his unit, has an evening job as a waitress in a nearby town. While this is not a direct conflict of interest, his employees are upset because Pam calls in sick on most Fridays and then works her second job. This is a potential ethical dilemma for Tom and he must be aware of unethical situations that may arise. The first step in addressing this problem is for Tom to Select one: A. Identify the conflict or ethical problem, if he is using a flow chart or checklist approach. B. Consider the personal impact of the decision such as alienation, isolation, or other negative effects. C. Complete the background work and then identify the appropriate decision maker. D. Search for any applicable code, standard, or regulation that may apply to Pam's situation.

A. Identify the conflict or ethical problem, if he is using a flow chart or checklist approach.

Joseph is struggling with an ethical dilemma. He does not have a firm handle on what he should do. During a recent continuing education class, Joseph was introduced to the concepts of a systematic approach to resolving ethical dilemmas. Following the process, he has identified the stakeholders and the motivations of those involved. To complete the systematic approach and come to a conclusion Joseph should now Select one: A. Identify the relevant ethical issues. B. Consider only objective information. C. Separate facts from feelings. D. Identify the rights of the stakeholders.

A. Identify the relevant ethical issues

Sammy is an underwriter who has to make several key decisions a day on her accounts. She has to realize that Select one: A. Insurance practitioners should strive to make informed, independent decisions based on careful review and consideration. B. Participation in a group activity relieves insurance practitioners of their duty to consider issues independently. C. Professionalism requires that a decision-maker personally know everything required to make a judicious decision. D. When faced with a difficult situation or choice, the insurance practitioner should avoid consulting with peers.

A. Insurance practitioners should strive to make informed, independent decisions based on careful review and consideration.

Greater North American Insurance Company operates according to the laws and regulations of the various states in which it conducts business. Which one of the following statements regarding laws is most accurate? Select one: A. Laws cannot describe the ethical response to every conflict. B. Laws do not factor into ethical decision making. C. Laws are not concerned with insurer solvency. D. Laws will clearly define the ethical response to any conflict.

A. Laws cannot describe the ethical response to every conflict.

Oliver is a reinsurance intermediary placing reinsurance for a variety of insurers with a variety of reinsurers. He has no contact with the public or policyholders of the insurers for which he places reinsurance. In this position, Oliver's duties are best characterized by which one of the following? Select one: A. Oliver still has significant duties to the public and primary insurer policyholders. B. Oliver owes his primary duties to the insurance regulators overseeing reinsurance. C. Oliver only owes his duties to the insurers for which he places business and the reinsurers. D. Oliver only owes his duties to the insurers for which he places business.

A. Oliver still has significant duties to the public and primary insurer policyholders.

Tag and his team work together to resolve ethical issues, sometimes using a flowchart and sometimes using a checklist. In either case, the issue at hand should be analyzed from different perspectives including rules-based, situation-based, and Select one: A. People-based. B. Regulation-based. C. Organization-based. D. Market-based.

A. People-based.

Don has acquired a significant body of knowledge relating to coverage for additional insureds. This knowledge, and his skill in applying it, has resulted in significant new business for him and his firm. To best comply with the ethical canon titled Maintaining and Raising Professional Standards, Don should Select one: A. Share his knowledge with other appropriate insurance professionals. B. Maintain his advantage in the marketplace. C. Ask regulators to establish a license with minimum standards of understanding the exposure. D. Seek clients with additional insured challenges.

A. Share his knowledge with other appropriate insurance professionals.

Mariam is new to the insurance industry and her supervisor is urging her to join a professional association. She has looked into it and has learned that Select one: A. The professional code of an association or society addresses the ethical standards and ideals that the group requires of its members. B. Most of the professional associations or societies in the United States are relatively small and operate only at the local level. C. Professional associations or societies typically do not monitor legislative activities or changes that might affect their members. D. The principal purpose for professional associations and societies is to provide a social environment in which members can network.

A. The professional code of an association or society addresses the ethical standards and ideals that the group requires of its members.

Which one of the following situations primarily represents a moral, as opposed to legal or ethical, failure? Select one: A. An agent continues to sell insurance coverage despite having her license suspended. B. An applicant misrepresents previous work experience to land a position. C. An insurer inflates the pricing for a certain product line for which they have little competition. D. An insurer unfairly discriminates against applicants who live in certain ZIP codes.

B. An applicant misrepresents previous work experience to land a position.

One of the seven traits of a professional is having professional competence. This specific trait includes not only being knowledgeable about insurance products but also Select one: A. Making others aware of the extent of the knowledge possessed. B. Being able to apply that knowledge to risk and insurance circumstances. C. Using that knowledge to ensure success in the business. D. Placing the insured's interest above the interests of the insurer.

B. Being able to apply that knowledge to risk and insurance circumstances.

Which one of the following best describes business ethics? Select one: A. Business ethics primarily concern decisions of right versus wrong. B. Business ethics are, in reality, applied ethics. C. Business ethics are rooted in the profit motive. D. Business ethics are applied legal obligations.

B. Business ethics are, in reality, applied ethics.

Anil is a new customer service representative in a busy insurance company sales department. In training, he is finding that his employer greatly values acting professionally at all times. Anil should learn that Select one: A. Ethical insurance professionals need not concern themselves with laws and regulations. B. Business ethics entail doing what is right in the context of products and services and relationships with stakeholders. C. Governmental entities cannot encourage moral behavior or discourage immoral actions. D. Ethical behavior requires sacrificing one's own values for the good of the consuming public and society as a whole.

B. Business ethics entail doing what is right in the context of products and services and relationships with stakeholders.

Clarence is a claims representative for a commercial liability insurer that has a code of conduct governing all employees. Its first rule is that employees shall "do the right thing" at all times. Clarence is handling several claims that have been reported to the reinsurer. The reinsurer informed him that its auditor planned to visit to review those claim files and asked that the entire file for each be made available. Clarence knows he did a poor job writing the summaries in the files. He is embarrassed to have the representative see them, so he is contemplating hiding them during the audit. He does not think that they are relevant to the ultimate outcome of the claims anyway. Which one of the following statements is true? Select one: B. Clarence should look to the code of conduct for guidance and decide to provide the summaries even if they are not done well.

B. Clarence should look to the code of conduct for guidance and decide to provide the summaries even if they are not done well.

There are many professional groups to which an insurance professional can belong, on both the local and national level. Professional associations and societies are Select one: A. Most helpful when the groups include many different job types. B. Effective in setting ethical standards within their specialties. C. Relatively expensive at the local level. D. Most effective when organized at the national level.

B. Effective in setting ethical standards within their specialties.

Greater North American Insurance Company encounters a recurring claims situation in which it can choose to pay out either of two different amounts for any given situation, depending on the interpretation of the claim. There are no regulations that directly address the issue. The policy they choose to formulate will be primarily based on which one of the following? Select one: A. Principles B. Ethics C. Laws D. Morals

B. Ethics

As an underwriter Marge knows that, whether for the purpose of personal advancement or competition, practitioners who are perceived as professionals will gain an advantage over other practitioners. Public recognition as an insurance professional is most likely a result of Select one: A. Earning a very high income. B. Exhibiting the traits of a professional. C. Hard work and active public relations. D. Acknowledgement by employers and competitors.

B. Exhibiting the traits of a professional.

Insurance Company (IC) provides company cars to claim managers who have metropolitan territories. The company's written policy is to use these vehicles only for business and there is a strict prohibition against having passengers for any reason whatsoever. Claim manager Barb recently gave birth to a son. She would like to stop by her son's daycare center to pick him up daily. This would take her only five miles a day out of her way and this helps Barb save time and use of her own car. Barb rationalizes that the side trip actually benefits IC because it allows her to spend less time switching vehicles and more time at work and it allows Barb to be more focused on her claim files. Which one of the following statements is correct? B. From a rules-based decision analysis, it would be unethical for Barb to use her company car to pick up her son from daycare.

B. From a rules-based decision analysis, it would be unethical for Barb to use her company car to pick up her son from daycare.

Milo is creating a chart for his fellow business analysts at the insurer where he works. The chart will show the major groups to which insurance professionals owe ethical responsibilities, which are Select one: A. Policyholders, additional insureds, and the public. B. Insurers, policyholders, and the public. C. Insurers, policyholders, and additional insureds. D. Policyholders, insurers, and the federal government.

B. Insurers, policyholders, and the public.

Maintaining high ethical standards is best associated with which one of the following? Select one: A. Concern for beliefs of others B. Knowledge of law and regulations C. Adherence to National Association of Insurance Commissioners (NAIC) model acts D. Active involvement in insurance associations

B. Knowledge of law and regulations

The sales team at Local Insurance Company receives periodic training on insurance laws and regulations. Which one of the following statements is correct regarding what the sales team needs to realize? Select one: A. Regulatory control over the business of insurance is primarily intended to protect shareholders. B. Laws specify right and wrong behavior and are important to orderly behavior. C. Laws on their own are enough to dictate moral behavior. D. Laws exist outside the scope of ethical decision making.

B. Laws specify right and wrong behavior and are important to orderly behavior.

Kathryn is chosen to lead a team in creating a flowchart to resolve an ethical issue for her company. She and her team establish that the issue cannot be solved by applying a rule or code. Which one of the following is most likely to be the final step in the process outlined in the flowchart? Select one: A. Implement the course of action B. Monitor and assess the outcome C. Select a course of action D. Refer to responsible party

B. Monitor and assess the outcome

Emily is a producer on a difficult risk. She has gathered extensive information regarding an insurance applicant. In order for Emily to meet her professional responsibilities to the insurer, Emily should Select one: A. Recommend coverage that is the most profitable for the insurer. B. Review the applicant's risk exposure carefully to place appropriate coverage. C. Submit to the insurer only the information that favors lower premiums. D. Recognize a mutual interest and do what is best for the insurer and herself.

B. Review the applicant's risk exposure carefully to place appropriate coverage.

An underwriter has realized that most of the potential insureds in the poor section of town will not qualify for homeowners insurance because of below-standards roofing. This disturbs her and she is using an ethical dilemma decision making flow chart to decide whether there is an ethical obligation to underwrite their properties anyway. If she is concerned with the perspective of the potential insureds, then she is at which one of the following steps of the flow chart? Select one: A. Analyzing whether the issue is hers to resolve B. Reviewing the dilemma from the three decision (rules-, situation-, and people-based) perspectives C. Considering whether an application of a professional standard will resolve the issue D. Determining which values and principles are at stake

B. Reviewing the dilemma from the three decision (rules-, situation-, and people-based) perspectives

Sally works for Insurance Company in the underwriting department where she implements policy changes. In reviewing a policyholder's address change, Sally realizes that the policyholder deserves a refund because her policy was being improperly rated at the old address. To make the correction according to company procedures and legal requirements, Sally would have to refund the difference in premium for the last ten renewals and would have to calculate interest on each period. She decides to simply make the address change and save the insurer some time and money instead. Sally's decision is clearly unethical under an analysis that is Select one: A. Function-based. B. Rules-based. C. People-based. D. Situation-based.

B. Rules-based.

Laura is an internal auditor for an insurance company. She has uncovered proof of an agency receiving commissions and other benefits in excess of those normally allowed. Laura recognizes that she is presented with an ethical dilemma and decides that she must first identify stakeholders. Which one of the following statements regarding her situation is true? Select one: A. The agency is not a stakeholder because its actions are the root of the problem. B. She must not only identify stakeholders but also their rights. C. The insurer will not be a stakeholder unless there is proof that the insurer had an unearned benefit. D. Only those who participated in unethical activities can be stakeholders.

B. She must not only identify stakeholders but also their rights.

Bethany works in a research department of a large property insurer. Her staff has created technology that would allow the insurer to predict adverse weather better than anyone else. She knows that the technology will give her company a competitive edge, but it also would be valuable to other insurers, governmental agencies and relief organizations. She is wondering whether it would be ethical to not share it with others. Which one of the following would be true if she used an ethical dilemma decision-making flow chart to address this issue? Select one: A. She would implement a course of action. B. She would decide that it was not her issue to resolve. C. She would select a course of action. D. She would consider duties owed to involved parties.

B. She would decide that it was not her issue to resolve.

Life insurance producer Mack is aware that his company has replaced an inferior life insurance product with a superior policy. The sales commission on the new product is lower than the commission on the policy it is replacing. He is therefore eager to sell more of the inferior products while they are available due to the higher commission. He is aware the new product is better for the insured and is faced with an ethical dilemma. Mack convinces himself that he should market the old product as being unique and one that is the customer's last chance to have the opportunity to purchase the product. Although his resolution may be wrong, Mack's decision, from an ethical decision-making standpoint, is Select one: A. People-based. B. Situation-based. C. Function-based. D. Rules-based.

B. Situation-based.

Which one of the following statements is correct? Select one: A. The way in which a task is performed is not an indication of an insurance professional's level of competence. B. The ability to apply knowledge to risk and insurance circumstances is essential for insurance professionals. C. Professional competence entails not acknowledging limitations in one's knowledge or ability to perform. D. Professional competence simply requires having extensive knowledge about the details of insurance policies.

B. The ability to apply knowledge to risk and insurance circumstances is essential for insurance professionals.

Northern Continental Insurance Company interacts with its policyholders in a way that supports the doctrine of utmost good faith. Which one of the following statements is correct? Select one: A. The doctrine of utmost good faith does not require the sharing of information. B. The doctrine of utmost good faith obligates all parties in a contractual agreement. C. The doctrine of utmost good faith applies only in insurance transactions. D. Only the insurer is bound by the doctrine of utmost good faith.

B. The doctrine of utmost good faith obligates all parties in a contractual agreement.

Managers at Greater North American Insurance Company must deal with ethical conflicts on a regular basis. Ethical conflicts frequently arise because of Select one: A. Overly rigorous state insurance regulations. B. The inherent needs of different parties. C. A misunderstanding of laws or regulations. D. A lack of concern regarding an organization's reputation.

B. The inherent needs of different parties.

Sanjay is a claims representative for Dutiful Insurance Company. A policyholder is sued by a third party for an at-fault accident. If he acts according to high ethical standards, which one of the following should be Sanjay's primary goal? Select one: A. To attempt to discredit the third party B. To protect the policyholder from out-of-pocket loss C. To protect Dutiful from reputational damage D. To minimize the claim amount to be paid by Dutiful

B. To protect the policyholder from out-of-pocket loss

Under which one of the following circumstances can physical barriers to ethical decision making prevent an insurance professional from reaching an ethical decision? Select one: A. When the processes are complicated and procedures are cumbersome B. When key documentation is missing or destroyed C. When tools or processes for making ethical decisions are not known D. When internal and external pressures prevent insurance professionals from following codes of conduct

B. When key documentation is missing or destroyed

Westfork Mutual has suffered from a publication regarding allegations of unethical claims settlement practices. An internal review indicated that there was no unlawful or illegal behavior involved, but there was a lack of consistency in claims practices among the cases. Westfork Mutual also found that employee morale was low and turnover was higher than other companies in the industry. The executives are looking for a tool to improve the company's reputation, provide employees with guidelines for clarity and consistency, and offer some protection against lawsuits. Which one of the following tools would help the organization meet these goals? A. A publication disputing the original allegations B. An employees survey of all employees throughout the organization C. A code of ethics that clearly states the principles and values of the organization D. A policy requiring annual internal audits of the claims department

C. A code of ethics that clearly states the principles and values of the organization

Altruism serves the needs of the individual as well as of society. Which one of the following statements is most true of altruism? Select one: A. Altruism requires that insurance practitioners consider neither their own nor their employer's needs. B. An altruistic manner is the basis of the trust placed in the insurer to keep its promises. C. An altruistic manner does not preclude the opportunity to find personal rewards for the actions taken. D. Altruism requires professionals to develop a sense of equity and fairness.

C. An altruistic manner does not preclude the opportunity to find personal rewards for the actions taken.

Maddie is a trainer at Insurance Company. She is trying to emphasize the importance of professional behavior to the new recruits. To be considered a professional, Select one: A. An insurance professional must be altruistic, which means focusing on his or her employer's needs. B. An insurance practitioner can rely on experience to provide valuable insight about the "real world," and need not obtain any other form of continuing education. C. An insurance practitioner must act with integrity, be honest and trustworthy, have a sense of equity and fairness, and accept personal accountability. D. An insurance practitioner need not understand the implications of risk and its affect on individuals and society.

C. An insurance practitioner must act with integrity, be honest and trustworthy, have a sense of equity and fairness, and accept personal accountability.

Jerry is a claim representative with Insurance Company. His wife, Margie, is a dental hygienist at Midtown Dental Clinic. One day, Jerry's supervisor assigns him a small theft claim submitted by Midtown Dental Clinic. Under Canon 1—Altruism of the Ethical Guidelines for Insurance Professionals, which one of the following would be Jerry's best course of action? Select one: A. Deny the claim so as to avoid appearing to benefit Margie's employer. B. Have Margie ask her employer to withdraw the claim. C. Ask his supervisor to assign the claim to another claim representative. D. Pay the claim based on the facts and merits of the case.

C. Ask his supervisor to assign the claim to another claim representative.

Melanie is an Insurance Company employee who has been assigned a mentor, Sal. In his explanation to her about professionalism, Sal should include that Select one: A. Unfortunately, practitioners committed to professionalism often have difficulty adapting to changes in the global marketplace. B. Support of family, friends, and colleagues is irrelevant to achieving the status of a professional in the insurance industry. C. Continuous pursuit of knowledge, utmost good faith in all dealings, and adherence to standards and regulations all contribute to professionalism. D. Aspiring to be a professional need not require much personal sacrifice or time away from family or recreational pursuits.

C. Continuous pursuit of knowledge, utmost good faith in all dealings, and adherence to standards and regulations all contribute to professionalism.

Due in part to its commitment to ethical standards, Do-Right Insurance Company tends to be well-regarded by its customers, is involved in litigation less often, and attracts a higher level of applicants for employment than many of its competitors. These represent which one of the following areas of ethical standards? Select one: A. Regulatory requirements B. Legislative practices C. Economic outcomes D. Social responsibility

C. Economic outcomes

Faced with an ethical dilemma that falls outside of standard company procedures and guidance, Sean and his team are tasked with creating a flowchart to guide them to an appropriate decision. Which one of the following is a typical starting point for an ethical decision-making flowchart? Select one: A. Identify courses of action B. Ask, "Is this my issue to resolve?" C. Identify and articulate conflict D. Identify stakeholders

C. Identify and articulate conflict

Luke is new to the insurance business but desires to be an insurance professional. Luke is facing an ethical dilemma. He seeks advice from four co-workers. Of the following suggestions from Luke's co-workers, which one is the best approach for solving his ethical dilemma? Select one: A. After looking at who will be affected by your decision, pick the solution that benefits the stakeholders you like the most. B. Select the ethical solution that gives you the best ability to avoid getting in trouble yourself. C. Identify the stakeholders, why they did what they did, and the relevant ethical issues. D. Choose the solution that is most likely to avoid a lawsuit brought against you by a relevant stakeholder.

C. Identify the stakeholders, why they did what they did, and the relevant ethical issues.

Rhonda and her sister Karen both work for Insurance Company in a production-oriented environment. Rhonda is quite capable of issuing 20 or more auto applications a day while Karen struggles to complete fewer than a dozen most days. Twice a year, employees must prove competency, and underwriting reviews are conducted to ensure compliance to standards of at least 15 applications per day. Therefore, twice a year, Rhonda goes to Karen's desk on her lunch hour for two weeks during the review period and issues applications for Karen to ensure that she meets the company standards. Rhonda recently took an ethics course and has begun to wonder whether this arrangement is ethical. Which one of the following statements is true? Select one: A. If Rhonda cannot find an ethical canon that specifically addresses her issue, then she can be assured that her conduct is ethical. B. If Rhonda applies rule-based decision making, then she

C. If Rhonda applies situation-based decision making, then she may realize that in the long-run her employer suffers because its review process is being compromised.

Aidan is a new claims representative and he is pondering the importance of professionalism. He should know that Select one: A. When an insurance practitioner aspires to develop the traits of a professional, clients are unlikely to recognize the effort. B. Awards based exclusively on monetary accomplishments recognize an insurance practitioner's professionalism. C. Insurance practitioners who are perceived as professionals will gain an advantage over other practitioners. D. The perception of professionalism is important for insurance practitioners only in terms of the public view.

C. Insurance practitioners who are perceived as professionals will gain an advantage over other practitioners.

Which one of the following statements concerning laws is true? Select one: A. Laws are enough to dictate moral behavior. B. Laws describe moral responses to conflict. C. Laws impose a sense of societal decency and order. D. Laws are ethical tenets.

C. Laws impose a sense of societal decency and order.

Mark is a commercial insurance producer at Insurance Brokers. One of his clients is Hardware Store (HS). Mark has arranged property, liability, and business interruption coverage for HS. One of Mark's friends, George, owns another hardware store in town that competes directly with HS. During a golf game, Mark and George start chatting about the hardware business and Mark discloses details about HS's financial statements and sales figures to George. Which one of the following best describes how the ethical canon governing professional relationships of insurance professionals applies in this case?

C. Mark is in contravention of the canon because he has disclosed confidential information.

Producer Bill has discovered that a producer from another firm has made serious errors in providing coverage to four of his clients. Bill is soliciting these clients and could easily obtain their business by denigrating the other producer's work. To be in compliance with the ethical canon titled Professional Relationships, Bill should Select one: A. Report the other producer to the appropriate insurance companies. B. Report the other producer to the insurance regulator. C. Present his own coverage proposal to the prospective clients. D. Request legal advice on the matter from his attorney.

C. Present his own coverage proposal to the prospective clients.

Renee, an underwriter for an insurer, writes articles explaining personal lines insurance coverages for her local newspaper. The canon of the Code of Professional Ethics—Ethical Guidelines for Insurance Professionals that is most directly addressed by Renee's activity is Select one: A. Continuing Professional Development. B. Diligent Performance. C. Public Education. D. Professional Relationships.

C. Public Education.

Darcy is an underwriter who received an application for a commercial insurance package from Jake, a general contractor. Everything appeared to be in order. Darcy is also on the benevolence committee at her church, where she learned that Jake has requested financial assistance for his family. Through the church committee, Darcy discovered that Jake is a substance abuser and his business is on the verge of collapse. This is information that has an impact on the insurability of Jake's company and Darcy's duties to her employer, but Darcy has taken an oath to keep private that which she learns in the church committee. Darcy feels that she is faced with an ethical dilemma regarding whether she can use the confidential information she learned at church in her underwriting practices. Which one of the following statements is true?

C. The canon of ethics that requires Darcy to place the public interest above her own can justify Darcy keeping quiet about what she learned at church concerning Jake's situation.

As an insurance producer, Allison can demonstrate high ethical standards by helping policyholders understand the coverage provided and Select one: A. The likelihood of future cost increases. B. Similar products from competitors. C. Their responsibilities. D. Applicable insurance regulations.

C. Their responsibilities.

John is an employee of an adjusting firm. He is applying for financial aid to help with tuition for his daughter's education. John does not reveal all of his assets so that financial aid will be greater. John's action Select one: A. Must be self-reported to his employer. B. Does not involve the Code of Professional Ethics—Ethical Guidelines for Insurance Professionals in any way. C. Violates the purpose of the Code of Professional Ethics—Ethical Guidelines for Insurance Professionals. D. Is of no concern as it is not insurance related.

C. Violates the purpose of the Code of Professional Ethics—Ethical Guidelines for Insurance Professionals

As a customer service representative for an insurance agency, Carlos considers himself an insurance practitioner who wants to do well at his job. A successful insurance practitioner must exhibit professionalism because of which one of the following public needs? Select one: A. A high level of insurance product knowledge B. A high level of need for insurance C. A high level of regulation of the business D. A high level of trust

D. A high level of trust

Billie was recently hired as an underwriter in training by a large national insurer. In training, she will learn that Select one: A. High ethical standards are not required in all professions. B. In insurance, high ethical standards are only required of insurers. C. An insurance professional should avoid being overly candid with insureds and claimants. D. A standard of "utmost good faith" exists for many practitioners who work on behalf of insurers.

D. A standard of "utmost good faith" exists for many practitioners who work on behalf of insurers.

Larissa, an insurance underwriter, was eligible for promotion to a senior underwriting position. She became aware that her supervisor, Vicente, has been approving all business from one specific insurance agent whether the business met underwriting criteria or not. Vicente has a romantic relationship with the agent and the company is not aware of this. The insurer requires all staff members to disclose possible conflicts of interest that come to their attention. Larissa wants to notify her company of this breach of ethics through its anonymous hotline but is aware that the hotline really is not anonymous and the supervisor will find out who notified them. Larissa was not sure what to do and was afraid she would lose her chance of promotion if she reported Vicente. Which one of the following types of barriers to ethical decision making is this situation most typical of? Select one:

D. Administrative barrier

Ida has an ethical issue she is trying to solve. To be sure she is in a position to make a decision, she has identified stakeholders and their motivation. She believes she has all of the relevant and objective facts. To consider subjective issues, Ida should Select one: A. Ignore feelings because they are irrelevant to the situation. B. Counsel the final decision maker to ignore his or her feelings. C. Not be concerned with the reaction of the stakeholders to the decision. D. Consider how those affected by the decision view the issue.

D. Consider how those affected by the decision view the issue.

Insurance Company (IC) hired a vendor to perform real estate appraisals. The appraiser is a jovial fellow who prefers to be called "Lucky." Lucky does a great job, far better than any other appraiser IC has retained. The only problem is that when Lucky is in the office, he tells off-color jokes loudly enough for everyone to hear. Employees have complained to IC's management. When IC's business manager has asked Lucky to behave more appropriately, he just laughs and reminds her of what a great job he does. IC has a policy of hiring vendors based on technical merit, as well as a policy prohibiting any type of harassment in the workplace. IC's business manager is not personally offended by the nature of Lucky's joking. Lucky believes that if he loses this contract, other insurers would be happy to retain him. IC's business manager must decide how to resolve the employee complaints concerning Lucky. She is presented with

D. Decision making based on rules.

Thomas, an insurance agent, has the opportunity to quote coverage on a home valued at two million dollars. If he obtains the business at a reasonable rate, the client will insure his commercial business, with annual net revenue of three hundred million dollars, with Thomas. Thomas knows that if he is able to insure both the home and commercial risk with his top insurer, he will become eligible for a substantial bonus. However, the insurer surcharges premium for any risk with wood as a primary heating source. The client's home is heated with a combination wood/electric furnace. Which one of the following decisions would most likely be considered a situation-based decision for Thomas? Select one: A. Advise the client that he is unable to obtain the coverage and the client should find another broker. B. Insure the risk with an insurer who does not provide bonuses but also does not surcharge wood heating. C. Insure the r

D. Discuss the situation with his top insurer and ask for an exception due to the potential commercial policy.

Suzie is a trainer at an insurer who is conducting a class on ethics. Which one of the following statements is correct concerning what she needs to impress upon her students? Select one: A. A purely moral response to a situation cannot be inappropriate. B. Ethics are an individual's personal beliefs about right and wrong. C. Ethics are general codes of expected behavior that are derived from laws. D. Ethics entail knowing what to do when a situation presents more than one "right" answer.

D. Ethics entail knowing what to do when a situation presents more than one "right" answer.

Ethics codes are important for insurance professionals in overcoming procedural barriers to ethical decision making for which one of the following reasons? Select one: A. To provide fairness, equity, and stability in setting salaries B. For successful product innovation C. To address insurer capacity and solvency issues D. For reduction of the possibility of inconsistent management standards

D. For reduction of the possibility of inconsistent management standards

Claim representative Kasha is investigating a homeowners claim involving a tree that fell onto a house during a storm. She explained to the insured that the policy covers removal of the tree but not replacement of the tree. The insured asked whether there are ever circumstances where the policy would cover tree replacement. Kasha knows that the policy would cover tree replacement if the loss had been caused by lightning. Kasha sees some discoloration of the bark of the insured's tree that suggests that lightning had hit the tree in the past, but she is fairly certain that lightning was not involved with this loss. Kasha fears, however, that if she mentions this additional coverage to the insured, the insured will argue that lightning caused the loss. Kasha believes that if the insured becomes contentious, home office will give in and make an unjustified additional payment. If Kasha decides to use an ethical dilemma d

D. Gather information—determine the duties owed.

Grace is a commercial lines producer at Midtown Insurance Brokers. She submitted an application to Insurance Company (IC) on behalf of a client. The underwriter at IC, Dave, is concerned that the building is located in an undesirable, higher-risk area of town. Dave explains his concerns to Grace and asks her to personally inspect the client's premises and take photographs to send to IC. Grace inspects the premises and finds that the building is in poor repair, and the adjacent buildings on both sides are old, wood-framed, and vacant. There is evidence that street people are living in one. Grace carefully takes photographs of the most flattering views of her client's building and sends them to Dave. She feels she wants to do the best she can for her client, so she does not tell Dave that the building is in poor repair or even mention the adjacent buildings.

D. Grace's actions have harmed IC and as a result she has contravened Canon 3.

Jessica is a loss control specialist with an insurer. She often inspects the property and operations of insureds and makes loss control recommendations to the underwriter. Jessica's duties in these situations are best described by which one of the following? Select one: A. Her duties involve the insurer and the policyholder. B. Her duties involve the policyholder and the public with which the policyholder deals. C. Her duties involve the insurer and the public. D. Her duties involve the policyholder, the public, and the insurer.

D. Her duties involve the policyholder, the public, and the insurer.

Procedural barriers that can prevent an insurance professional from making ethical decisions can arise when Select one: A. The decision maker's personal safety is threatened. B. When key documentation is missing or destroyed. C. Witnesses are unavailable. D. Insufficient guidance is available regarding ethical behavior.

D. Insufficient guidance is available regarding ethical behavior.

Like most insurers, Greater North American Insurance Company does its best to abide by a "doctrine of utmost good faith" that exists to ensure the ethical nature of the relationship between Select one: A. Insurers and their employees. B. Insurers and regulators. C. Insurers and reinsurers. D. Insurers and insureds.

D. Insurers and insureds.

Caroline is an underwriting supervisor with Durham Insurance. She has been advised of an anonymous reporting of unethical behavior by one of her underwriters. She is anxious about the dilemma, and decides to use the checklist method to help her resolve it. Caroline has gathered information on the ethical problem, determined how it arose, and identified the various stakeholders involved. Which one of the following should be her next step in the process? Select one: A. Consider whether there is a duty or loyalty to uphold B. Evaluate the dilemma from the situation-based prospective C. Determine who is responsible for resolving the conflict D. Look for an applicable code or standard

D. Look for an applicable code or standard

Laura, a claims processor for Great American Insurance Company, notices that a claim in her queue involves a personal friend. While the claim itself is legitimate, the suggested settlement amount appears to be higher than similar claims in Laura's experience. Her decision on whether to refer her friend's claim for further investigation or to pay the stated amount primarily involves which one of the following? Select one: A. Ethics B. Principles C. Laws D. Morals

D. Morals

James is an insurance producer whose ethical responsibilities include fully assessing customers' risks and recommending appropriate coverage. This illustrates which one of the following key facets of policyholder relationships? Select one: A. Policyholders are parties to the insurance contract. B. Policyholders are consumers of insurance products. C. Policyholders can be legally liable to third-party claimants. D. Policyholders are first-party beneficiaries.

D. Policyholders are first-party beneficiaries.

Magnificent Insurance Company has a carefully written code of ethics to guide its employees towards more ethical decision making. A code of ethics addresses which one of the following types of barriers to ethical decision making? Select one: A. Administrative B. Legal C. Physical D. Procedural

D. Procedural

Underwriter Jessica is confronted with an ethical issue involving an applicant. She wants to handle it ethically. She should remember that ethical behavior is primarily based on Select one: A. What feels like the right thing to do. B. Consideration of applicable laws and morals. C. Application of laws to personal values. D. Reasoned consideration of all issues surrounding a conflict.

D. Reasoned consideration of all issues surrounding a conflict.

LuAnn is a claims manager who strives to resolve claims in an ethical manner. Which one of the following represents a physical barrier to resolving a claim ethically? Select one: A. Her supervisor pressures her to resolve claims as inexpensively as possible. B. Her company lacks a clear policy on the resolution of certain claims. C. Her company does not have a code of ethics. D. Relevant documents from her investigation have been destroyed.

D. Relevant documents from her investigation have been destroyed.

Bernice is a claim adjuster with Insurance Company (IC). She has been assigned a liability claim against IC's policyholder, Garth. The claimant, Calvin, alleges that while at a party hosted by Garth, he became uncharacteristically intoxicated due to the strength of the drinks Garth was mixing and serving. As a result of his intoxication, he fell down the stairs at Garth's house, breaking his back. The injury has left Calvin paraplegic. In Bernice's opinion, Garth is fully liable under state law for Calvin's disability. Which one of the following statements best describes Bernice's responsibilities in this situation? Select one: A. She should consider the case from the perspective of IC, which wants the claim resolved for the least amount possible. B. She should discuss the claim with Garth and determine how he would like to see it handled in terms of settling or going to court. C. She should pay Calvin enou

D. She should consider and evaluate Calvin's pain and suffering, and make a fair offer in settlement of the loss.

Mitsuki visited a local insurance agent to obtain coverage for her yacht. She requested liability coverage in the amount of $100,000 and hull coverage in the amount of $150,000. She asked the agent to submit her request to Watercraft Insurers. The higher the coverage limits, the more money the agent makes in commissions. Which one of the following is the most appropriate action for the agent? Select one: A. The agent should submit a request to Watercraft Insurers with the coverage requested just as Mitsuki asked. B. The agent should refuse to submit a request to Watercraft Insurers until it is determined whether greater coverage limits are advisable. C. The agent should refuse to submit a request to Watercraft Insurers until it is determined whether lower coverage limits are advisable. D. The agent should review the situation with Mitsuki to determine what would be reasonable amounts of coverages.

D. The agent should review the situation with Mitsuki to determine what would be reasonable amounts of coverages.

Marilyn is the personal lines manager at a medium-sized brokerage in a regional center. The staff members are experienced and well-trained and have all been with the brokerage for a number of years. Marilyn knows that one of the customer service representatives (CSRs) was recently widowed and has been suffering financially as a result. She begins to notice small things missing from the office: several boxes of paper towels, two large cans of coffee, dishwashing detergent, paper, pens, and envelopes. Marilyn is faced with an ethical dilemma. She feels a responsibility to her employer, but she feels sympathy toward the CSR that she suspects of taking the items. Which one of the following best identifies one of the principle stakeholders or groups of stakeholders in this dilemma? Select one: D. The other employees in the office

D. The other employees in the office

In its relationships with policyholders, Ocean Avenue Insurance Company promises future payment for covered losses. In return, the insurer must trust that Select one: A. The policyholder will pay all premiums on a timely basis. B. The premium will be sufficient to cover any losses. C. Regulations surrounding the coverage will not change. D. The policyholder has disclosed all requested pertinent facts about the risk

D. The policyholder has disclosed all requested pertinent facts about the risk.

Which one of the following statements is correct? Select one: A. Insurance professionals have a responsibility to insure any and all risks, regardless of the effect this has on insurer profitability. B. Agents are paid on a commission basis because their responsibility to insurers is to sell as many policies as possible. C. Claim representatives should carefully determine the value of each claim and never pay insureds or claimants more than that value. D. Underwriters must balance the customer's need for a fair price and comprehensive coverage with the insurer's profit goals.

D. Underwriters must balance the customer's need for a fair price and comprehensive coverage with the insurer's profit goals.