Ethics Exam

The CPCU Code of Professional Conduct applies to

A. All CPCUs but no one else.

Altruism serves the needs of the individual as well as of society. Which one of the following statements is most true of altruism?

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

Which one of the following statements is correct? Select one:

A. Business ethics are critical when an organization is threatened or faces fundamental change.

The Sarbanes-Oxley federal law requires that publicly traded companies identify principal ethics officers, create anonymous hotlines for reporting unethical behavior, and

A. Establish codes of ethics.

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?

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

Margaret, a CPCU, is the owner of City Insurance Brokers. When one of her personal lines carriers, ABC Insurance, cancels Margaret's agency contract due to lack of sales volume, Margaret is faced with replacing the few clients she had insured with ABC with another carrier. She discovers she can find competitive quotes for most of these clients with other insurers that she represents. However, in the case of three customers, replacing their coverage will result in premium increases of several hundred dollars. Margaret knows that another brokerage in town, West End Insurance, has placed a significant volume of business with ABC Insurance. Which one of the following should Margaret do to comply with the CPCU Code of Professional Conduct?

A. Provide her best quote and tell the clients to go to West End if they wish to stay insured with ABC.

Ethical decision making becomes challenging when the outcomes are harmful, when others disagree with a decision, or when

A. The decision process is obstructed.

The CPCU Code of Professional Conduct includes

B. Advisory Opinions, Disciplinary Penalties, and Canons.

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.

Underwriting supervisor Kristine has learned that one of her employees is not only breaking the rules by looking at her own insurance policies but she is reviewing the policies of her co-workers and telling them how to "get around the system" to reduce their premiums. Kristine has reviewed the situation and considered the ethical issues and is at the stage she must make a decision. Her decision is almost immediate but now she must monitor the effects of her decision and evaluate the effectiveness of anticipated outcomes. By analyzing the positive and negative results of her decision, Kristine can

B. Improve the decision-making process for future ethical dilemmas.

The major groups to which insurance professionals owe ethical responsibilities are

B. Insurers, policyholders, and the public.

Which one of the following statements is correct?

B. Organizations that focus on short-term profits and that fail to adhere to high ethical standards often do so at the expense of their long-term success.

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?

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.

By exhibiting high ethical standards when dealing with policyholders, insurance professionals might be able

B. To earn the trust of skeptical policyholders.

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 commission Anil would earn on the account. After examining stakeholders, and motivations, which one of the following should be Anil's next course of action?

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

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

B. Using that knowledge to ensure success in the business.

Rules of the CPCU Code of Professional Conduct

C. Are enforceable standards of behavior for CPCUs.

Matt, a CPCU, is an automobile claims adjuster with ABC Insurance. He is assigned a claim involving Ted, an ABC insured, and Marina, a third-party claimant. Ted had not seen a stop sign and hit Marina's car broad-side in the middle of the intersection. There was damage to both vehicles and although Ted was not injured, Marina suffered soft tissue injuries to her neck and back and will be off work for an estimated twelve weeks. Which one of the following should Matt do to comply with the CPCU Code of Professional Conduct?

C. Ensure that both Ted's and Marina's claims are settled promptly, equitably, and fairly.

Which one of the following statements is correct?

C. Insurers must serve the public trust and maintain careful stewardship of monies designated for the benefits of policyholders and claimants.

Erin is an insurance producer dealing with a renewal of her largest and most important client. This client was responsible for bringing Erin into the insurance business and for her personal and financial success. The client tells her that he is very close to purchasing another company that would have troublesome liability exposures. He asks Erin not to reveal any information at this time. Erin knows that after renewal, if the client closes the purchase, insurers will have to automatically cover the new liability exposures for a period of time. This ethical dilemma is best identified as

C. Long-term versus short-term.

Which one of the following best distinguishes between morals and ethics?

C. Morals provide a codified set of acceptable behavior.

The net result of maintaining high ethical standards from an economical standpoint is

C. Reduction in operational expenses and reduction in costs relative to fines or legal defense.

A successful insurance practitioner must exhibit professionalism because of which one of the following public needs?

D. A high level of trust

Merve is a reinsurance professional who just received her CPCU designation. Merve is thrilled with what she learned and is grateful that the years of study and testing are over. She just received a notice of a local reinsurance seminar sponsored by the Reinsurance Section of the CPCU Society. To best comply with the CPCU Code of Professional Conduct concerning professional knowledge, Merve should

D. Attend the reinsurance seminar.

Laws can be said to

D. Cover the entire spectrum of human activities.

Mark is faced with making an ethical decision regarding an application he has received from a producer. Mark fears that if he were to take an ethical position on the application, he might lose his job. Which one of the following is true regarding this situation?

D. Regardless of the decision made, Mark's job is protected by the whistle-blower provision of the Sarbanes-Oxley Act and therefore he does not need to fear loss of his job.

Newman is a claim representative who is investigating coverage for a new claim. He quickly realizes that the policy sold to the insured was not the one the insured believes he purchased. There would be coverage if the right policy was provided, but as it is, there is no coverage. Newman could honor the claim as if it were brought under the policy the insured expected. Otherwise, the agent could face an error and omissions claim. If Newman considers all the possible decisions and outcomes for each and bases his final decision on who will be helped and who will be hurt, and to what degree, he is practicing

D. Situation-based decision making.