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1 Sally works for Insurance Company in the underwriting department...

1 Sally works for Insurance Company in the underwriting department where she implements policy changes. In reviewing a policyholder's address change, Sally realizes that the policyholder deserves a refund because her policy was being improperly rated at the old address. To make the correction according to company procedures and legal requirements, Sally would have to refund the difference in premium for the last ten renewals and would have to calculate interest on each period. She decides to simply make the address change and save the insurer some time and money instead. Sally's decision is clearly unethical under an analysis that is

Select one:

A. Function-based.

B. Situation-based.

C. People-based.

D. Rules-based.


2 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.


3 Joshua is insured with InsureCo through its agent, Olivia. He has an automobile and a commercial property policy with InsureCo. Joshua's son Harry, who lives at home, is driving the insured vehicle. He loses control and hits a guardrail causing $4,500 damage to the vehicle. Joshua asks Olivia for advice. Olivia knows that InsureCo's guidelines state that one at-fault accident, whether a claim is paid or not, results in an automatic premium increase of twenty-five percent. If Joshua pays for the damage himself the insurer may never know about the accident.

Olivia's decision is to advise InsureCo of the accident. Which one of the following decision-making tools is Olivia most likely using when she makes her decision?

 

Select one:

A. Situation-based decision making

B. People-based decision making

C. Ethics-based decision making

D. Rules-based decision making


4 Insurance Company (IC) provides company cars to claim managers who have metropolitan territories. The company's written policy is to use these vehicles only for business and there is a strict prohibition against having passengers for any reason whatsoever.

Claim manager Barb recently gave birth to a son. She would like to stop by her son's daycare center to pick him up daily. This would take her only five miles a day out of her way and this helps Barb save time and use of her own car. Barb rationalizes that the side trip actually benefits IC because it allows her to spend less time switching vehicles and more time at work and it allows Barb to be more focused on her claim files. Which one of the following statements is correct?

Select one:

A. From a rules-based decision analysis, the equities rule in favor of Barb using her company car to pick up her son from daycare.

B. Rules-based decision making always places people and situations first and it would justify a decision by Barb to use her company car to pick up her son from the daycare center.

C. Rules-based decision making recognizes that one rule does not fit all circumstances and would justify Barb's plans to use her company car to pick up her son from the daycare center.

D. From a rules-based decision analysis, it would be unethical for Barb to use her company car to pick up her son from daycare.


5 Newman is a claim representative who is investigating coverage for a new claim. He quickly realizes that the policy sold to the insured was not the one the insured believes he purchased. There would be coverage if the right policy was provided, but as it is, there is no coverage. Newman could honor the claim as if it were brought under the policy the insured expected. Otherwise, the agent could face an error and omissions claim. If Newman considers all the possible decisions and outcomes for each and bases his final decision on who will be helped and who will be hurt, and to what degree, he is practicing

Select one:

A. Checklist-based decision making.

B. Situation-based decision making.

C. Rules-based decision making.

D. People-based decision making.


6 Thomas, an insurance agent, has the opportunity to quote coverage on a home valued at two million dollars. If he obtains the business at a reasonable rate, the client will insure his commercial business, with annual net revenue of three hundred million dollars, with Thomas. Thomas knows that if he is able to insure both the home and commercial risk with his top insurer, he will become eligible for a substantial bonus. However, the insurer surcharges premium for any risk with wood as a primary heating source. The client's home is heated with a combination wood/electric furnace.

Which one of the following decisions would most likely be considered a situation-based decision for Thomas?

Select one:

A. Insure the risk with the insurer without disclosing that the primary heating is a wood/electric furnace.

B. Advise the client that he is unable to obtain the coverage and the client should find another broker.

C. Insure the risk with an insurer who does not provide bonuses but also does not surcharge wood heating.

D. Discuss the situation with his top insurer and ask for an exception due to the potential commercial policy.


7 Erma travels on company business frequently. Her travel expenses are paid by the company but she must fill out an expense sheet to be reimbursed for her meals. Knowing that receipts are not required for meals under $25, Erma always submits expenses for three expensive meals when traveling even though she often stays at facilities that provide free breakfasts and inexpensive lunches. This falsification and padding of expenses is an example of wrongly applied

Select one:

A. Situation-based ethical decision making.

B. Altruism-based ethical decision making.

C. Function-based ethical decision making.

D. Rules-based ethical decision making.


8 Ethics codes are important for insurance professionals in overcoming procedural barriers to ethical decision making for which one of the following reasons?

Select one:

A. For successful product innovation

B. To provide fairness, equity, and stability in setting salaries

C. For reduction of the possibility of inconsistent management standards

D. To address insurer capacity and solvency issues

Answer & Explanation
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