Question 1

Alexandria is a claims supervisor who demands that her claims representatives are up to date on the latest insurance laws. She knows that laws are important because laws can be said to

Select one:

A. Cover the entire spectrum of human activities.

B. Encompass every type of ethical behavior.

C. Dictate moral behavior.

D. Establish a code of appropriate behavior.

Question 2

The manager of Paris Insurance Agency conducts a weekly meeting of her staff to review past and current insurance laws. Laws are important for insurance professionals because

Select one:

A. Laws provide specific moral responses for situations.

B. All laws are in the best interests of the consumer.

C. An insurance transaction must be legal to be ethical.

D. Laws exclusively define moral behavior.

Question 3

Underwriter Jessica is confronted with an ethical issue involving an applicant. She wants to handle it ethically. She should remember that ethical behavior is primarily based on

Select one:

A. Reasoned consideration of all issues surrounding a conflict.

B. What feels like the right thing to do.

C. Consideration of applicable laws and morals.

D. Application of laws to personal values.

Question 4

Billie was recently hired as an underwriter in training by a large national insurer. In training, she will learn that

Select one:

A. A standard of "utmost good faith" exists for many practitioners who work on behalf of insurers.

B. An insurance professional should avoid being overly candid with insureds and claimants.

C. In insurance, high ethical standards are only required of insurers.

D. High ethical standards are not required in all professions.

Question 5

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

Select one:

A. Placing the insured's interest above the interests of the insurer.

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

C. Making others aware of the extent of the knowledge possessed.

D. Being able to apply that knowledge to risk and insurance circumstances.

Question 6

A professional needs to exhibit which one of the following in his or her conduct?

Select one:

A. Physical use of skills to solve problems

B. Athletic ability to solve problems

C. Power of intellect to solve problems

D. Extraordinarily high intelligence quotient (IQ)

Question 7

The ethical standards to which insurance professionals must adhere are rooted in which one of the following areas?

Select one:

A. Personnel hiring policies

B. Social responsibility

C. Custom and practice

D. Common law

Question 8

Claire is a new insurance professional who has learned in training that ethical conduct is important in the insurance industry. The ethical standards to which insurance professionals must adhere are rooted in regulatory requirements, economic outcomes, and

Select one:

A. Common law

B. Personnel hiring policies

C. Custom and practice

D. Social responsibility

Question 9

Annie is a rehabilitation caseworker for a workers compensation insurer. She is taking a course that covers the history of workers compensation and she is learning that workers compensation is important because

Select one:

A. Before there was no-fault workers compensation, a worker was not able to sue an employer in tort when an employer negligently injured the worker.

B. Insurance professionals fulfilled their social responsibility by developing no-fault workers compensation to assist injured workers and reduce the exposure of the employer.

C. Workers compensation insurance benefits employers and injured employees but cannot benefit society as a whole.

D. Workers compensation is a system where groups of workers take care of injured fellow workers because there is no insurance system in place to compensate injured workers.

Question 10

An insurance professional who focuses on the goals of society instead of his or her own goals is best serving the needs of which one of the following groups?

Select one:

A. Insurers

B. The public

C. Government

D. Policyholders

Question 11

Demonstrating high ethical standards by explaining coverage and the duties of the policyholder is best carried out by

Select one:

A. An underwriter.

B. A loss control specialist.

C. A premium auditor.

D. A broker.

Question 12

Emily is a producer on a difficult risk. She has gathered extensive information regarding an insurance applicant. In order for Emily to meet her professional responsibilities to the insurer, Emily should

Select one:

A. Submit to the insurer only the information that favors lower premiums.

B. Recommend coverage that is the most profitable for the insurer.

C. Review the applicant's risk exposure carefully to place appropriate coverage.

D. Recognize a mutual interest and do what is best for the insurer and herself.

Question 13

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?

Select one:

A. After looking at who will be affected by your decision, pick the solution that benefits the stakeholders you like the most.

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

C. Select the ethical solution that gives you the best ability to avoid getting in trouble yourself.

D. Choose the solution that is most likely to avoid a lawsuit brought against you by a relevant stakeholder.

Question 14

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

Select one:

A. Individual versus community.

B. Justice versus mercy.

C. Long-term versus short-term.

D. Truth versus loyalty.

Question 15

Marilyn is the personal lines manager at a medium-sized brokerage in a regional center. The staff members are experienced and well-trained and have all been with the brokerage for a number of years. Marilyn knows that one of the customer service representatives (CSRs) was recently widowed and has been suffering financially as a result. She begins to notice small things missing from the office: several boxes of paper towels, two large cans of coffee, dishwashing detergent, paper, pens, and envelopes. Marilyn is faced with an ethical dilemma. She feels a responsibility to her employer, but she feels sympathy toward the CSR that she suspects of taking the items. Which one of the following best identifies one of the principle stakeholders or groups of stakeholders in this dilemma?

Select one:

A. The insurers the brokerage represents

B. The employees of neighboring businesses

C. The other employees in the office

D. The suppliers of the missing items

Question 16

Rhonda and her sister Karen both work for Insurance Company in a production-oriented environment. Rhonda is quite capable of issuing 20 or more auto applications a day while Karen struggles to complete fewer than a dozen most days. Twice a year, employees must prove competency, and underwriting reviews are conducted to ensure compliance to standards of at least 15 applications per day. Therefore, twice a year, Rhonda goes to Karen's desk on her lunch hour for two weeks during the review period and issues applications for Karen to ensure that she meets the company standards. Rhonda recently took an ethics course and has begun to wonder whether this arrangement is ethical. Which one of the following statements is true?

Select one:

A. If Rhonda cannot find an ethical canon that specifically addresses her issue, then she can be assured that her conduct is ethical.

B. If Rhonda applies rule-based decision making, then she will consider the situation from Karen's perspective.

C. If Rhonda applies situation-based decision making, then she may realize that in the long-run her employer suffers because its review process is being compromised.

D. If Rhonda applies people-based decision making, then she will have to determine whether any of her supervisors created a rule prohibiting her conduct.

Question 17

Life insurance producer Mack is aware that his company has replaced an inferior life insurance product with a superior policy. The sales commission on the new product is lower than the commission on the policy it is replacing. He is therefore eager to sell more of the inferior products while they are available due to the higher commission. He is aware the new product is better for the insured and is faced with an ethical dilemma. Mack convinces himself that he should market the old product as being unique and one that is the customer's last chance to have the opportunity to purchase the product. Although his resolution may be wrong, Mack's decision, from an ethical decision-making standpoint, is

Select one:

A. Situation-based.

B. Function-based.

C. Rules-based.

D. People-based.

Question 18

Burt's young son belongs to a scouting organization. A father of a fellow scout has volunteered to be the group's treasurer. Burt, as a bond underwriter, knows from an application he had rejected that the other father had been in trouble for embezzlement, but Burt's employer has a policy against disclosing publicly that which is learned in the course of underwriting. Burt is contemplating whether he should reveal to the scouts that which he knows. His dilemma could probably be resolved by

Select one:

A. Recognizing that the issue is one of practicality and not ethics.

B. Considering that his employer may someday want the rejected account.

C. Analyzing whether any laws, regulations, or standards apply to the situation.

D. Realizing that the scouts are a not-for-profit organization to which no ethical duty is owed.

Question 19

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

Select one:

A. Change the company policy to remove any ambiguity.

B. Completely eliminate future unethical behavior on the part of the employees involved in these activities.

C. Enhance the reputation of the organization and protect its stakeholders.

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

Question 20

Oliver is an underwriting manager.During a recent staff meeting, two of his underwriters expressed concerns about what they considered unethical behavior by one of the producers.After gathering more facts, and reviewing company practices and professional codes, Oliver determines that there is an ethical concern.Which one of the following is Oliver's next step in resolving this dilemma?

Select one:

A. Evaluate the dilemma from a people-based prospective

B. Analyze the positive and negative impact on the stakeholders

C. Determine who is responsible for resolving the conflict

D. Decide on a course of action

Question 21

Underwriting supervisor Tom has been receiving reports from his employees that Pam, who works in his unit, has an evening job as a waitress in a nearby town. While this is not a direct conflict of interest, his employees are upset because Pam calls in sick on most Fridays and then works her second job. This is a potential ethical dilemma for Tom and he must be aware of unethical situations that may arise. The first step in addressing this problem is for Tom to

Select one:

A. Consider the personal impact of the decision such as alienation, isolation, or other negative effects.

B. Identify the conflict or ethical problem, if he is using a flow chart or checklist approach.

C. Search for any applicable code, standard, or regulation that may apply to Pam's situation.

D. Complete the background work and then identify the appropriate decision maker.

Question 22

Procedural barriers that can prevent an insurance professional from making ethical decisions can arise when

Select one:

A. The decision maker's personal safety is threatened.

B. Insufficient guidance is available regarding ethical behavior.

C. Witnesses are unavailable.

D. When key documentation is missing or destroyed.

Question 23

Aldo knows of criminal behavior at the insurer where he works, but he is afraid to say anything for fear of losing his job. A fellow employee in which he confides suggests that he research federal whistle-blower laws. The primary reason for the creation of federal whistle-blower statutes was to

Select one:

A. Protect individuals who report unethical activities.

B. Create a fail-safe mechanism for reporting unethical behavior.

C. Facilitate and reward the reporting of unethical behavior.

D. Provide anonymity for individuals wishing to report unethical behavior.

Question 24

Under which one of the following circumstances can physical barriers to ethical decision making prevent an insurance professional from reaching an ethical decision?

Select one:

A. When the processes are complicated and procedures are cumbersome

B. When key documentation is missing or destroyed

C. When tools or processes for making ethical decisions are not known

D. When internal and external pressures prevent insurance professionals from following codes of conduct

Question 25

The American Institute for CPCU (American Institute) confers the CPCU designation. The CPCU designation can be revoked by the

Select one:

A. Ethics Policy Committee of the American Institute.

B. Ethics Counsel of the American Institute.

C. Board of Ethical Inquiry of the American Institute.

D. Board of Trustees of the American Institute.

Question 26

Which one of the following statements is correct regarding the CPCU Code of Professional Conduct (the Code)?

Select one:

A. Individual CPCUs and candidates cannot request Advisory Opinions to resolve questions regarding interpretation of the Code.

B. Formal published Advisory Opinions are intended to be used by all persons subject to the Code.

C. The American Institute for CPCU's Ethics Ombudsman is responsible for developing and publishing all Advisory Opinions.

D. The sole purpose of the Board of Ethical Inquiry is to investigate alleged breaches of the Code.

Question 27

Joyce is a CPCU and a senior claim adjuster with Insurance Company. Because of her experience, she tends to be assigned larger, more complex claims. Her supervisor assigns her a loss involving an explosion and building fire at a hardware store. The supervisor explains that the fire spread to two neighboring buildings, and toxic fumes from burning paints, solvents, and varnishes required the evacuation of several other buildings in the area. A number of employees and passers-by were injured either directly by the explosion or indirectly by the toxic fumes. The claim will involve first-party fire and water damage, third-party liability, and a business income loss. This is the type of claim that Joyce particularly enjoys resolving. When she opens the file she realizes that the store is owned by her father-in-law. Which one of the following should Joyce do to comply with the CPCU Code of Professional Conduct?

Select one:

A. Say nothing to her supervisor and adjust the claim generously in her father-in-law's favor.

B. Advise her supervisor of her relationship with the policyholder and promise to adjust the claim objectively.

C. Say nothing to her supervisor and adjust the claim to the best of her ability.

D. Tell her supervisor that the policyholder is a relative and ask that the claim be reassigned.

Question 28

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?

Select one:

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

B. Settle both parties' claims, but give Ted preferential treatment as he is ABC's customer.

C. Attempt to settle both parties' claims for as little as possible in order to save ABC money.

D. Settle both parties' claims but give preferential treatment to Marina because she is the victim in this case.

Question 29

Lloyd is a commercial property underwriter at Insurance Company (IC). Two years ago, he completed his studies and obtained the CPCU designation. Due to recent changes in workers compensation legislation in one of the states in which IC operates, the insurer has arranged for a one-day seminar to explain the changes and the impact they will have on underwriting and claim settlement. Considering Lloyd's obligations under the Code of Professional Conduct (the Code), which one of the following statements is correct?

Select one:

A. The Code requires Lloyd to remain current on all changes in insurance legislation.

B. Lloyd is required to complete any training made available by his employer.

C. Because Lloyd has his CPCU, further training is considered unnecessary.

D. Because the seminar is not directly related to Lloyd's job, he is not obliged to attend.

Question 30

Janice is a CPCU employed by an insurance company. She began her career as an underwriter and underwriting manager, but for the past ten years she has worked in human resources. She was recently promoted to Vice President of Human Resources. Janice has decided to take a university course in the coming semester. Which one of the following courses would help Janice best comply with her obligations under the Code of Professional Conduct?

Select one:

A. Employee development

B. Statistics

C. History of insurance

D. Risk management

Question 31

Freja is a loss control specialist for an insurer and a CPCU. While inspecting locations of an applicant for insurance, she notices lapses in routine maintenance of certain mechanical and electrical equipment. However, the applicant is not applying for mechanical breakdown insurance. Which one of the following would be Freja's best choice regarding the lapses in maintenance to comply with Rule 3.1 of the Code of Professional Conduct concerning material information?

Select one:

A. Report the lapses as it is material to her professional activity

B. Report the lapses only with the management of the applicant

C. Not report the lapses as they are not material to the business activity of insuring the risk

D. Recommend that the applicant obtain mechanical breakdown insurance

Question 32

Kenta, a CPCU, was involved in a non-insurance transaction he believed was legal, but resulted in his conviction for a "third degree" felony. Which one of the following best describes the application of the Code of Professional Conduct canon concerning laws and regulations and its rules to Kenta's situation?

Select one:

A. The rules as written dictate immediate suspension.

B. Kenta's CPCU designation is automatically suspended upon notice of the conviction to the American Institute for CPCU.

C. Because the crime was not insurance related, the canon has no application.

D. The rule prohibiting misrepresentation or concealment is applicable.

Question 33

Insurance consumer Lachlan thinks he has a legitimate complaint relative to a CPCU's actions that he believes fell well below professional competency. Lachlan files a complaint with the Board of Ethical Inquiry. Which one of the following statements best describes when the Board of Ethical Inquiry would take action on Lachlan's complaint?

Select one:

A. When notified by legal counsel for Lachlan that actions of the CPCU allegedly violated civil law

B. During the investigation of the same complaint by the insurance regulator to assist in that investigation

C. When a proven violation caused unjust harm and discredited the CPCU designation

D. During the investigation into the CPCU's actions by his employer

Question 34

Hans is a commercial lines producer at ABC Insurance Brokerage and a CPCU. When he was hired, Hans signed a non-competition agreement. Under the terms of the agreement, if Hans voluntarily leaves his employment he cannot work for another brokerage in the same city for a period of two years. Hans resigns to accept a position with a competing brokerage just down the street from ABC. The owner of ABC Insurance Brokerage contacts the Board of Ethical Inquiry (BEI) to lodge a complaint against Hans under Canon 4 of the Code of Professional ethics, alleging that the breach of contract is proof of professional incompetence. Which one of the following best describes how the BEI would respond?

Select one:

A. The BEI would involve itself in the situation only if either Hans or ABC initiated a civil lawsuit to resolve the issue.

B. The BEI would instruct Hans to abide by his contractual obligations and resign from the new brokerage.

C. The BEI would suspend Hans' CPCU designation until he complies with his contractual obligations under the non-competition agreement.

D. The BEI would not intervene or arbitrate between Hans and ABC Insurance Brokerage because the issue involves a contractual matter.

Question 35

Anita is a personal lines underwriter who recently received the CPCU designation. Anita is proud of her accomplishment and is committed to fulfilling her ethical responsibilities under the Code of Professional Ethics. She has set herself a goal to complete one activity to support each of the Canons in the Code. Which one of the following activities would best fulfill Anita's obligations under Canon 5 regarding raising professional standards of the insurance profession?

Select one:

A. Taking a personal development course such as yoga or auto repair

B. Writing a professional article for an insurance trade journal

C. Serving on the head office audit team to audit branch offices

D. Taking a continuing education course related to her job duties

Question 36

Casey is a veteran boiler and machinery claim representative for an insurer. While inspecting various claims of insureds, he notices many boiler and machinery exposures of the insureds for which no coverage is provided. Casey suspects that many producers are missing these exposures. As a CPCU, Casey's best action in the spirit of Canon 5 of the Code of Professional Conduct related to raising professional standards would be to

Select one:

A. Offer a seminar to local businesses relative to the exposures and available coverages.

B. Inform insureds as to the uncovered exposures.

C. Offer seminars to producers on boiler and machinery exposures and coverages.

D. Inform the individual producers about the uncovered exposures.

Question 37

Juhani, a producer and CPCU, has learned from an insurance client that the client is in secret negotiations for a merger. If the merger is successful, the client would control a new business with significant new products liability exposures. A renewal for the client is pending and Juhani is preparing a renewal submission. To best comply with Rule 6.1 of the Code of Professional Conduct as it relates to confidential information, Juhani should

Select one:

A. Disclose the potential merger.

B. Ask the client for permission to disclose the potential merger.

C. Keep the merger information confidential until it occurs.

D. Pose the merger as a hypothetical to the underwriter.

Question 38

Elin is a surety producer and a CPCU. She regularly deals with legal and accounting information. She notices that certain financial information provided by a contractor shows a deteriorating financial position. To best comply with Rule 6.1 of the Code of Professional Conduct as it concerns confidential information needed by a professional, Elin should

Select one:

A. Report the newest financial information to the surety.

B. Suggest that a competing contractor consider merging with the client.

C. Do nothing as the information is proprietary.

D. Counsel the client as to methods to improve the financial position.

Question 39

Brigitte is a commercial lines producer and a CPCU. She works at the second largest insurance brokerage in the area. The largest brokerage has an agency agreement with ABC Insurance, a carrier that Brigitte's employer does not represent. Brigitte has heard unconfirmed rumors that ABC Insurance is slow to pay claims and provides poor service in terms of loss control. When Brigitte visits one of her larger accounts to discuss the client's upcoming renewal, the client advises Brigitte that he has received a quote from her competitor, ABC, and that it is significantly lower than what the client is currently paying. Brigitte quickly tells the client that ABC has a poor reputation within the industry for bad service and slow payment of claims. The client thanks Brigitte, and renews the policy. Which one of the following best describes the application of Canon 7 of the Code of Professional Conduct as it relates to improving the public understanding of insurance?

Select one:

A. Brigitte is probably not in compliance with Canon 7 because the information she provided the client was not objectively verified.

B. Brigitte is in compliance with Canon 7 because she is informing her client about another insurer in the marketplace.

C. Brigitte is in compliance with Canon 7 because she did not fabricate information to intentionally mislead the client.

D. Brigitte is probably not in compliance with Canon 7 because she has made negative statements about an insurance carrier.

Question 40

Furkan, a CPCU and reinsurance employee, learns that a large branch office of a primary insurer is considering offering insurance education courses for local insurance personnel. Furkan would have the time to teach a course if one was offered within his competence. Which one of the following would most accurately reflect Furkan's obligation under the Code of Professional Conduct?

Select one:

A. He should be ready to teach any course offered if asked.

B. He should volunteer to teach any appropriate course.

C. He has no obligation as his company has no reinsurance agreements with the insurer offering the courses.

D. He has no obligation as the courses are not offered by his CPCU Society chapter.

Question 41

Frederik wants to publicize the fact that he is a CPCU. He examined Canon 8 of the Code of Professional Conduct, its rules and guidelines and cannot find a prohibition from using the CPCU key in an unusual way that he has in mind. To avoid violating Canon 8, Frederik's best action should be to request an opinion from

Select one:

A. An attorney.

B. The Ethics Counsel of the American Institute.

C. His CPCU Society chapter's ethics officer.

D. The Ethics Committee of the CPCU Society.

Question 42

Derrick is an insurance agency owner and a CPCU. He is very active both in his community and in the local chapter of the CPCU Society. When an employee at another agency in town is charged with defrauding her employer of several hundred thousand dollars, the press discovers that that individual holds the CPCU designation. Local media immediately call to interview Derrick and ask him to comment on the situation. In reply Derrick says, "As a CPCU and a representative of The Institutes (TI), I can only say that this individual's actions have been highly unprofessional and completely unethical and I assure you that she will lose the right to use the CPCU designation." Which one of the following best describes the application of the Code of Professional Conduct (the Code) in this situation?

Select one:

A. Derrick is in compliance with the Code because he is informing the public about the disciplinary process of the TI.

B. Derrick is in violation of the Code because he is making public comments about the conduct of a fellow CPCU.

C. Derrick is in violation of the Code because he is appearing to represent the TI in an official capacity.

D. Derrick is in compliance with the Code because he is reinforcing the necessity of integrity on the part of those who hold the designation.

Question 43

Vaughn is a commercial lines underwriter and a CPCU. Vaughn discovers that a co-worker and CPCU, Jennifer, has been accepting expensive gifts from several brokers in exchange for writing marginal accounts at preferred rates. When he asks her about it, Jennifer confirms that she has been doing so, but justifies it by saying that she has done the same thing for years, and only a few of those accounts have developed a poor loss ratio. Vaughn brings the matter to the attention of the underwriting manager, who investigates and ultimately fires Jennifer. She also reports Jennifer to the Board of Ethical Inquiry (BEI). The BEI elects to investigate the case. Under the circumstances, which one of the following best describes Vaughn's responsibilities under Canon 9 of the Code of Professional Conduct regarding integrity of the Code?

Select one:

A. Vaughn is obliged to keep any information he has about Jennifer confidential.

B. Vaughn is obliged to contact the BEI and volunteer to testify at any hearing.

C. Vaughn is obliged to reveal what he knows to the BEI upon request.

D. Vaughn reported the situation to his boss; he has no further obligations under Canon 9.

Question 44

Franz is a claims adjuster who has been working hard for several years to complete the requirements for the CPCU designation. He has two exams left to go, for which he expects to sit later this year. His wife, Anita, is very proud of his efforts and for his birthday she gave him a CPCU ring. She encourages him to wear it as motivation to study extra hard. Which one of the following describes how Franz could best meet his obligations under the Code of Professional Conduct?

Select one:

A. Ask Anita to return the ring until the designation has been conferred.

B. Keep the ring but not wear it until the designation has been conferred.

C. Tell Anita to wear the ring until the designation has been conferred.

D. Wear the ring proudly.

Question 45

The Institute's Board of Ethical Inquiry (BEI) has found that a complaint brought before it against Zeke, a CPCU, merits disciplinary action. The BEI may administer all of the following penalties against Zeke, EXCEPT:

Select one:

A. Reprimands in the form of informal rebukes given limited publication

B. Requiring payment of restitution to those harmed by Zeke's conduct

C. Revocation or suspension of the privilege to use the CPCU designation

D. Private admonitions, requesting that Zeke cease and desist

Question 46

Cindy is an applicant for the CPCU program. Cindy recently committed and was convicted of a felony. Which one of the following statements is true?

Select one:

A. There is a process whereby Cindy, if deemed to be fully rehabilitated, may still pursue the CPCU designation.

B. There is a two-year waiting period before Cindy's CPCU studies can be pursued again.

C. Cindy is banned for life from pursuing the CPCU designation.

D. Cindy can still pursue the CPCU designation upon recommendation by a parole officer.

Question 47

Thurston, a CPCU, is an exclusive agent for a large personal lines insurer. His state has an anti-declination law that disallows refusing to insure someone based solely on his or her lawful occupation or profession.

Kirk appeared in Thurston's office seeking life, homeowners, and auto insurance for his family. Kirk is a well-known plaintiff attorney who specializes in auto and other accident claims. Kirk's clients have sued the insureds of Thurston's principal and Thurston's principal itself, successfully, many times. For this reason, Thurston dislikes Kirk and does not want his business, creating what Thurston believes is an ethical dilemma.

Which one of the following statements is true?

Select one:

A. Thurston must determine the values at stake, and uphold the value of not supporting a plaintiff attorney in any way.

B. There is no ethical dilemma because one is free to deal or not deal with whomever one chooses.

C. The CPCU canon of ethics that concerns obeying laws and regulations resolves Thurston's dilemma.

D. Thurston does not have an ethical dilemma because the insurer would not want Kirk's business, either.

Question 48

On an application for auto insurance, Juan was asked whether he had, during the past year, driven a car while using a hand-held cellular telephone. Juan mentioned to the agent, Sally, that he had done so a couple of times, but feels that he is a safe enough driver for it to be irrelevant. Sally agrees, and is contemplating telling Juan that if he promises not to do so in the future, he should answer that he has not done so in the past. Which one of the following statements is a correct analysis of how Sally, who is a CPCU, should approach any ethical dilemma created by the contemplated course of action?

Select one:

A. Sally should apply the Golden Rule and realize that if she were in Juan's shoes, she would want to take advantage of the contemplated course of action.

B. Situation-based decision making would work best for this dilemma because the consequences of its resolution are relatively unimportant.

C. Sally's inquiry could end under the CPCU Code of Professional Conduct because of its rule that prohibits misrepresentation and concealment material to professional activities.

D. Using a checklist approach, Sally would seek the source of the problem, and since it is she, Sally can take whatever course of action she chooses.

Question 49

Nick, an underwriting manager, is proud to have earned his CPCU designation. For this reason, he obtained a personalized license plate for his family car that reads "CPCU." Mildred, a CPCU in Nick's department, asked him if he was aware that he was in violation of a rule associated with the CPCU Code of Professional Conduct concerning proper use of the CPCU initials. He replied that he had not violated the rule, in that he and his wife own the car together and his wife works as a nurse in the "Cardiac Progressive Care Unit" of the local hospital, which is called the "CPCU" for short. He told Mildred that if anyone challenges his use of CPCU on the plate he will say it pertains to his wife's profession. Which one of the following courses of action should Mildred take?

Select one:

A. She should recognize that rules are aspirational only and nothing can be done.

B. She should use an ethical dilemma decision-making flow chart and recognize that the issue is Nick's to resolve, not hers.

C. She should urge Nick to seek advice from the American Institute's Ethics Counsel and tell Nick that if he does not do so, she will.

D. She should accept that Nick has found a legitimate loophole to the rule.

Question 50

The local CPCU Society chapter plans to sponsor a high school essay contest on "The Role of Insurance in Society." The winners will receive awards that look like football trophies, except instead of a football on top, there will be a large key imprinted with "CPCU." Which one of the following statements is true?

Select one:

A. The organizers should have no concerns over their intended use of "CPCU" since a trophy does not constitute jewelry.

B. The organizers should make their own determination as to whether the contemplated use of "CPCU" is dignified and professional.

C. The organizers must first obtain explicit permission from the American Institute for the contemplated use of "CPCU."

D. The organizers may proceed as long as the initials "CPCU" are no taller than one and one-quarter inch.