Ethics Exam

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School

University of Toronto *

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HLLQP

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Finance

Date

Jan 9, 2024

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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.””

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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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Select one: a. Trafficking in insurance b. Inducing to insure c. Tied selling d. Premium rebating Feedback Your answer is correct. Correct answer: Premium rebating Rationale Premium rebating involves an agent giving back a portion of the premiums. The correct answer is: Premium rebating Question 9 Correct Mark 1.00 out of 1.00 Flag question Question text This regulatory body's principal responsibility is to administer the regulatory system that is applicable to insurance intermediaries that fall under their authority. Select one: a. The Canadian Council of Insurance Regulators b. Canadian Insurance Services Regulatory Organizations c. Canadian Life and Health Insurance Association (CLHIA) d. The insurance regulator in the province in which Feng resides Feedback Your answer is correct. The answer is "Canadian Insurance Services Regulatory Organizations" Rationale As per section 4.1.3 Canadian Insurance Services Regulatory Organizations (CISRO) Relevant sections of exam preparation manual: 4.1.3 Canadian Insurance Services Regulatory Organizations (CISRO) The correct answer is: Canadian Insurance Services Regulatory Organizations Question 10

Correct Mark 1.00 out of 1.00 Flag question Question text Claire and Adam were married for over 20 years when Adam suddenly died. After his death Claire realized that Adam owed much more than he had in assets. Given this scenario what will the executor of Adam's estate do? Select one: a. Sell Adam's assets to pay off the balances of the credit cards b. Declare the estate bankrupt c. Sell Adam's assets and give the proceeds to his wife d. Sell Adam's assets and pay off as much of his debts as possible Feedback Your answer is correct. The correct answer is "Declare the estate bankrupt" Rationale As per section 1.2.9, when an individual dies, the first duty of the estate representatives is to pay the debts and taxes owed by the deceased. It is entirely possible that there will not be enough money in the estate for all the creditors to be paid. In such a case the beneficiaries of the will inherit nothing. It is entirely possible for an estate to be bankrupt, just as the individual was bankrupt during life. Relevant sections of exam preparation manual: 1.2.9 Bankruptcy The correct answer is: Declare the estate bankrupt Question 11 Correct Mark 1.00 out of 1.00 Flag question Question text A life insurance agent who received a referral from a real estate agent has told the Realtor that he will compensate her for the referral. Given this scenario which of the following statements is most correct? Select one:

a. As long as the life insurance agent and the real estate agent are licensed, the life insurance agent may split his commission with her b. The life insurance agent must disclose that he is splitting his commission with the real esate agent because she is a realtor c. The life insurance agent must disclose all relevant details of any referral fee or compensation arrangement to his clients d. The life insurance agent must disclose that he is splitting his commission, but does not have to disclose the details Feedback Your answer is correct. The answer is "The life insurance agent must disclose all relevant details of any referral fee or compensation arrangement to his clients" Rationale As per section 4.2.4.3 Commission sharing, “Moreover, it is an obligation of the agent to disclose to his client that there has been or will be commission splitting and provide all relevant details of the commission splitting to his client.” Relevant sections of exam preparation manual: 4.2.4.3 Commission sharing The correct answer is: The life insurance agent must disclose all relevant details of any referral fee or compensation arrangement to his clients Question 12 Correct Mark 1.00 out of 1.00 Flag question Question text Gregory has a disability insurance policy that will provide him with monthly income of $3,200 should he become disabled as defined by his policy. Gregory is concerned about what he feels is the financial uncertainty of large corporations and would like to know what he would receive, if anything, should he become disabled and the insurance company become bankrupt. Given this scenario what is the most correct of the following statements? Select one: a. Gregory would receive his full month income from Assuris b. Gregory would not be entitled to receive anything c. Gregory would have to apply for resolution with the OLHI d. Gregory would receive $2,720 per month from Assuris Feedback

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Your answer is correct. The correct answer is "Gregory would receive $2,720 month from Assuris" Rationale As per section 4.1.4.3 Assuris, Table 4.1, Assuris’ protection, the amount of the monthly income would be 85% of the promised benefits, or $2,720 Relevant sections of exam preparation manual: 4.1.4.3 Assuris The correct answer is: Gregory would receive $2,720 per month from Assuris Question 13 Correct Mark 1.00 out of 1.00 Flag question Question text Ten years ago Samantha, a life insurance agent, sold her good friend Tom a twenty year term life insurance policy in which he was both the policy holder and the life insured. Tom designated his best friend, Janet, as beneficiary. Tom died and the insurance company received notice of his death from his executor. Given this scenario what was the next step in this process? Select one: a. Janet had to contact the insurer to request a claim form b. Samantha contacted the insurer to request the notice of death c. The insurer contacted Samantha to help Janet complete the claim form d. The insurer notified Janet so that she could complete the claim form Feedback Your answer is correct. The answer is "The insurer contacted Samantha to help Janet complete the claim form" Rationale "Janet had to contact the insurer to request a claim form" is incorrect because the next step is that Samantha will contact Janet. "Samantha contacted the insurer to request the notice of death" is incorrect because the insurer does not give the notice of death, it receives it "The insurer contacted Samantha to help Janet complete the claim form" is most correct as per section 3.1.3 Notice of Claim, which states that, “The insurer is not required to notify any benefici ary on death but, if there is an agent who has serviced the deceased, the insurer will contact the agent.”

"The insurer notified Janet so that she could complete the claim form" is incorrect as per Section 3.1.3 Notice of claim Relevant sections of exam preparation manual: 3.1.3 Notice of claim The correct answer is: The insurer contacted Samantha to help Janet complete the claim form Question 14 Correct Mark 1.00 out of 1.00 Flag question Question text Phillipe owned two life insurance policies. He purchased five years ago for a face amount of $300,000. This policy also has an accidental death benefit rider. The other policy was purchased one year ago with a face amount of $200,000. Tragically, last week he committed suicide after losing his wife to cancer. How much will Phillipe’s beneficiaries receive in total from both policies? Select one: a. $100,000 b. $200,000 c. $400,000 d. $300,000 Feedback Your answer is correct. Correct answer: $300,000 Rationale Policies have a suicide-exclusion clause. The policy will not pay a death benefit if death is caused by suicide in the first two years after the issue of the policy. In Phillipe’s case, the $300,000 policy was in force for five years and hence, will pay out the benefit. The $200,000 policy was in force for only one year and therefore, the benefit will be denied as the death was caused by an act of suicide. The correct answer is: $300,000 Question 15 Correct Mark 1.00 out of 1.00 Flag question

Question text An insured had a whole life policy that named her cousin as beneficiary. The insured died, and her cousin filed the appropriate claim form with the insurance company. The insurance company denied the claim as it felt the insured had misrepresented her health on the application. Given this scenario, which of the following statements is most correct? Select one: a. The cousin has no recourse and the decision of the insurance company is incontestable b. The cousin cannot file a lawsuit because she has not suffered any damages c. The cousin can file a law suit depending on the time frames dictated in her jurisdiction d. The cousin can file a law suit against the insurance company at any time after receiving notification Feedback Your answer is correct. The answer is "The cousin can file a law suit depending on the time frames dictated in her jurisdiction" Rationale As per section 1.3.2 Limitation periods, A limitation period is a timeframe during which a court action must be started, or the right to sue is lost forever. Once someone discovers that a civil wrong has been done to them, the limitation period clock starts ticking. There are different limitation periods for different civil wrongs and each jurisdiction dictates this.48 It can occasionally take some time before damage, like hidden faulty building construction, for example, is discovered. In other cases, knowledge of the wrong is immediate. Prompt legal advice is always advisable.” Relevant sections of exam preparation manual: 1.3.2 Limitation periods The correct answer is: The cousin can file a law suit depending on the time frames dictated in her jurisdiction Question 16 Correct Mark 1.00 out of 1.00 Flag question Question text Cain, a construction worker, suffered a dismemberment after falling from some scaffolding. Cain is not covered by a disability insurance policy. Out of the following list, which one is likely to make payments to cover Cain’s loss? Select one: a. Workers' Compensation b. Employment Insurance

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c. Canada Pension Plan d. No-Fault Automobile Insurance Feedback Your answer is correct. Correct answer: Workers' Compensation Rationale Though Cain is not covered by an insuranc e policy, he is covered by Workers’ Compensation, which provides benefits for workplace injuries. The correct answer is: Workers' Compensation Question 17 Correct Mark 1.00 out of 1.00 Flag question Question text A client applied for a term life policy with her agent, Jake. Jake then sent the application to the insurance company. Over the following several days the insurance company underwrote the application and approved it. Jake then met with his client and delivered the policy, at which time Jake obtained a cheque for the premium payment and confirmed that there had been no changes to the client's health or lifestyle. Given this scenario which of the following would constitute the insurance company’s offer to insure the client? Select one: a. Jake's delivery of the policy to the client b. Their acceptance of the application c. The insurance company’s approval of the application d. Their cashing of the premium cheque Feedback Your answer is correct. The answer is "Jake's delivery of the policy to the client" Rationale As per section 2.2.1 Rules about forming an individual insurance contract states, The process of forming any contract is often described as having two steps, called “offer” and “acceptance.” It is the insurer’s tender (i.e. delivery) of the policy which constitutes the “offer,” and that “acceptance” takes place only when the applicant decides to take the policy. Relevant sections of exam preparation manual: 2.2.1 Rules about forming an individual insurance contract

The correct answer is: Jake's delivery of the policy to the client Question 18 Correct Mark 1.00 out of 1.00 Flag question Question text Suzette delivered a policy to her client earlier today. This policy was issued by the insurer six days ago. Her client signs the acceptance forms and asks her how many days she has to take a free look at the policy before she can no longer cancel it without penalty. How much time does Suzette tell her client that she has? Select one: a. 10 days from policy issue date b. 10 days from the policy delivery date c. 15 days from application date d. 15 days from policy issue date Feedback Your answer is correct. Correct answer: 10 days from the policy delivery date Rationale When an individual policy is delivered, the policyholder is said to have a “10 - day free look.” This is to allow her time to review the policy to confirm that it is consistent with what was expected when she applied for the policy. During this time, she can change his mind and return the policy for a full refund. The correct answer is: 10 days from the policy delivery date Question 19 Correct Mark 1.00 out of 1.00 Flag question Question text Adam is in the process of divorcing his spouse. As part of the divorce agreement Adam must pay child support until their children are 18. To ensure that Adam's life insurance policy will take care of this child support obligation, which of the following options is most correct? Select one:

a. Name the children as beneficiaries and put those funds in trust b. Name his spouse as a beneficiary in his will for the amount owing c. Name his spouse as irrevocable beneficiary in his insurance policy d. Name his spouse as revocable beneficiary in his insurance policy Feedback Your answer is correct. The answer is "Name his spouse as irrevocable beneficiary in his insurance policy" Rationale As per section 2.1.4.1 Irrevocable beneficiar y designations, which states that “If the policyholder names a beneficiary as an irrevocable beneficiary, then they can only change (revoke) that designation if the irrevocable beneficiary consents to the change. They must also get the consent of the beneficiary to withdraw policy cash, pledge or assign the policy, take policy loans, or surrender the policy.” Relevant sections of exam preparation manual: 2.1.4.1 Irrevocable beneficiary designations The correct answer is: Name his spouse as irrevocable beneficiary in his insurance policy Question 20 Correct Mark 1.00 out of 1.00 Flag question Question text Ariel is unhappy with the investment returns on her universal life insurance policy. After speaking with some friends she feels that her investment is being poorly managed. Even though she has complained to her insurance company it has not resolved the issue to her satisfaction. Given this scenario which regulatory authority should Ariel contact to resolve her complaint? Select one: a. The Canadian Council of Insurance Regulators b. The insurance regulator in the province in which Ariel resides c. The Ombudsman for Life and Health Insurance d. Canadian Life and Health Insurance Association (CLHIA) Feedback Your answer is correct. The correct answer is "The insurance regulator in the province in which Ariel resides" Rationale

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As per section 4.1.1 Provincial and territorial regulatory authorities, The federal, provincial and territorial governments legislate and enact regulations for insurance companies. However, federal supervision under the Insurance Companies Act, as well as by the Office of the Superintendent of Financial Institutions (OSFI), is primarily “to determine the financial soundness” of the federally incorporated life insurance companies, whil e the provinces and territories are responsible not only “to determine the financial soundness” of the provincially or territorially incorporated life insurance companies (as the case may be), but also for licencing insurance agents and regulating “the lic encing of insurers operating within their jurisdictions as well as the marketing of insurance products.” Relevant sections of exam preparation manual: 4.1.1 Provincial and territorial regulatory authorities The correct answer is: The insurance regulator in the province in which Ariel resides

Ethics Exam

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