Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueMedium
An agent is helping a client complete a life insurance application. The client admits to having been treated for a serious illness five years ago but states that they are now fully recovered. The client then suggests omitting this information from the application to avoid higher premiums. If the agent agrees to omit this information, what ethical violation has occurred?
- ADefamation.
- BConcealment.
- CTwisting.
- DRebating.
Show answer & explanationAnswer & explanation
Correct answer: B. Concealment.
Concealment is the intentional withholding of material facts, which, if known, would have influenced the insurer's underwriting decision. By agreeing to omit the serious illness, the agent and client are engaging in concealment.
Why the other options are wrong
- A. Defamation involves making false statements to harm an insurer's reputation.
- C. Twisting involves replacing a policy using misrepresentation.
- D. Rebating involves offering a portion of the premium as an inducement to buy.
Concealment
The intentional withholding of material facts by an applicant for insurance, which, if known, would have influenced the insurer's underwriting decision.
- Intentional omission.
- Must be a material fact.
- Can void a policy.
Memory trick: Bad agents try to hide, twist, or bribe, but the truth always finds its way out.