Life & Health Insurance Exam (National Portion)Ethics and SuitabilityEasy
An insurance producer is reviewing a client's existing health insurance policy and discovers that the client, Mr. Lee, is paying for duplicate coverage for a benefit that is already fully covered by his employer's group plan. Mr. Lee was unaware of this redundancy. The producer's ethical obligation is to:
- AIgnore the duplicate coverage as it benefits the producer through higher commissions.
- BAdvise Mr. Lee of the duplicate coverage and recommend appropriate adjustments.
- CSuggest Mr. Lee keep both policies to ensure maximum coverage.
- DSuggest Mr. Lee switch to a more expensive, comprehensive plan.
Show answer & explanationAnswer & explanation
Correct answer: B. Advise Mr. Lee of the duplicate coverage and recommend appropriate adjustments.
A producer has a fiduciary duty to act in the client's best interest. Discovering duplicate coverage means the client is paying unnecessarily, and the producer's ethical obligation is to inform the client and recommend cost-effective solutions, which may include eliminating the redundant policy.
Why the other options are wrong
- A. Ignoring duplicate coverage for personal gain is a clear breach of ethical conduct and fiduciary duty.
- C. Keeping duplicate coverage is usually not in the client's best financial interest.
- D. Suggesting a more expensive plan when duplicate coverage is the issue is unethical and not in the client's best interest.
Fiduciary Duty - Redundancy
A producer's ethical and legal obligation to act in the client's best financial interest, which includes identifying and advising against unnecessary or duplicate insurance coverage that does not provide additional value.
- Prevents clients from overpaying for coverage.
- Requires thorough review of existing policies.
- Demonstrates client advocacy and trust.
Memory trick: FIDO: Always Act FOR the Client.