BCP Professional Ethics in Insurance 1 — Questions and Answers
Question 1: What does 'conflict of interest' mean for an insurance agent in Singapore?
- When an agent sells both life and general insurance
- When an agent's personal interests could compromise their duty to act in the client's best interest (Correct answer)
- When an agent represents two different insurers
- When an agent earns commission higher than market rate
Correct answer: When an agent's personal interests could compromise their duty to act in the client's best interest
A conflict of interest arises when an agent's personal interests (e.g., higher commissions for specific products) could compromise their professional duty to recommend what is genuinely best for the client.
Question 2: What is the ethical obligation of an insurance agent when a client's needs change?
- Continue selling the same products regardless of changed needs
- Review the client's coverage and recommend appropriate adjustments, even if it means lower premiums for the agent (Correct answer)
- Immediately cancel all existing policies
- Refer the client to another agent
Correct answer: Review the client's coverage and recommend appropriate adjustments, even if it means lower premiums for the agent
Professional ethics require agents to periodically review clients' needs and coverage, recommending adjustments to ensure coverage remains appropriate — even if this results in lower commissions for the agent.
Question 3: What does 'churning' mean in insurance sales ethics?
- Selling insurance products to high-net-worth clients
- Inappropriately encouraging clients to cancel existing policies and buy new ones, primarily to generate new commissions (Correct answer)
- Selling multiple policies to the same client
- Transferring clients between agents within the same company
Correct answer: Inappropriately encouraging clients to cancel existing policies and buy new ones, primarily to generate new commissions
Churning is the unethical practice of inducing clients to cancel existing policies and replace them with new ones without genuine benefit to the client, primarily to generate new commission income for the agent.
Question 4: What is the ethical requirement regarding confidentiality for insurance professionals in Singapore?
- Client information may be shared freely within the industry
- Client information must be kept confidential and not disclosed without consent or legal requirement (Correct answer)
- Only financial information needs to be kept confidential
- Confidentiality only applies to life insurance clients
Correct answer: Client information must be kept confidential and not disclosed without consent or legal requirement
Insurance professionals are ethically and legally obligated to maintain strict confidentiality of all client information, disclosing it only with the client's consent or when legally required (e.g., AML reporting).
Question 5: What is 'twisting' in insurance sales ethics?
- Selling insurance products using complex financial illustrations
- Inducing a client to cancel a policy from one insurer and replace it with a policy from another, using misrepresentation (Correct answer)
- Training agents on technical product knowledge
- Converting term policies to whole life policies
Correct answer: Inducing a client to cancel a policy from one insurer and replace it with a policy from another, using misrepresentation
Twisting involves inducing a client to switch from one insurer's policy to another's through misrepresentation or incomplete comparison of the policies, to the detriment of the client.
Question 6: What professional obligation does an insurance agent have when a client requests unsuitable coverage?
- Accept the client's instruction without comment
- Explain the risks of the unsuitable coverage, document the client's informed decision, but still respect the client's autonomy (Correct answer)
- Refuse to assist the client entirely
- Report the client to MAS immediately
Correct answer: Explain the risks of the unsuitable coverage, document the client's informed decision, but still respect the client's autonomy
When a client requests coverage the agent considers unsuitable, the agent must explain the concerns and risks clearly and document the client's informed decision. Ultimately, the client's autonomy must be respected, but the agent must have fulfilled their advisory duty.
BCP Professional Ethics in Insurance 1
What does 'conflict of interest' mean for an insurance agent in Singapore?