CPCU Ethics test 2025
COMPREHENSIVE EXAM
QUESTIONS |FREQUENTLY
TESTED QUESTIONS |RECENTLY
TESTING REAL EXAM QUESTIONS
|VERIFIED SOLUTIONS (100%
CORRECT)
Morals/Laws/Ethics - ANSWER 3 elements of ethical behavior
morals - ANSWER - personal principles of right and wrong\n- defined or influenced
by religion, society, governmental entities, and other individuals
laws - ANSWER codified legal tenets of what is/isn't acceptable
Ethics - ANSWER - Rules of conduct/guidelines provided by a professional/social
system\n- entails following guidelines established to provide a course of action when
law is not applicable, and more than one course of action could be considered "right"
from a moral or legal perspective
High Ethical Standards - ANSWER - A professional's work should always reflect
integrity. This is how a professional earns consumers' trust. In the insurance industry,
a "doctrine of utmost good faith" exists to ensure the ethical nature of the relationship
between insured and insurers.\n- This standard extends beyond the insurer to agents,
brokers, claims representatives, loss control representatives, and other practitioners
who perform work on behalf of the insurer.\n- insurance practitioners must act with
integrity, be honest and trustworthy, communicate openly, have a sense of equity and
fairness, and accept personal accountability
Traits of Professionalism: What it Takes - ANSWER - high ethical standards\n-
professional competence\n- altruism\n- commitment to continuing education\n-
participation in an association of a society\n- ability to think and act independently\n-
recognition as a professional
Doctrine of Utmost Good Faith - ANSWER It's a standard, or guiding principle, that
obligates all parties in a contractual agreement to act honestly and share all critical
information related to the transaction. It applies to insurance, real estate, and other
business markets.
, Professional Competence - ANSWER - insurance practitioners must know how
different coverages apply in particular situations, understand the implications of risk
and its effect on individuals and society, and apply that knowledge to help customers
protect themselves from risk exposures\n- aware of their abilities as well as their
limitations and sometimes require us to admit that we "don't know what we don't
know" and seek help from others
Altruism - ANSWER unselfish concern to for the welfare of others\n(examples
include)\n- leaving home (even late at night) to help a customer who suffered a
devastating loss\n- working long hours in the wake of a catastrophe to help insureds
recover\n- educating the public on loss control techniques
Commitment to Continuing Education - ANSWER - each area of insurance demands
specific, specialized knowledge that must be built on a broad educational
foundation\n- insurance professionals must continually update their knowledge in
response to changes in the legal environment, new regulations, emerging loss
exposures, and new statutes\n- may be required by law in some states as a prerequisite
for producer licensing and license renewals
Participation in an Association or Society - ANSWER - have established standards
for ethical behavior specific to the specialty of their members\n- ex: often provide
formal continual education resources that satisfy licensing requirements.\n- have
professionals codes that address the ethical standards and ideals that the group
requires of its members
Ability to Think and Act Independently - ANSWER While professionals may consult
with peers or mentors when handling a difficult issue, professionals, ultimately, are
accountable for their thoughts, decisions, and actions. True professionals strive to
make informed, independent decisions based on careful review and consideration.
Recognition as a Professional - ANSWER recognized in many difference forms
through positive public and peer perception\n- Awards by professional
organizations/peer groups\n- Designations\n- Continuing education
achievements/degrees\n- Referrals\n- Positive customer reviews/ratings
insurers, policyholders, and the public - ANSWER different groups of stakeholders
that insurance professionals have responsibilities with
Insurers - ANSWER - in the business to provide their customers with protection from
financial loss, and to do so, they must also earn a fair profit\n- must trust that the
policyholder has disclosed all requested pertinent facts about the risk\n- must trust
that the agent has recommended appropriate coverage by assessing the potential
profitability of prospective policies and considering prospective loss histories\n-
needs to be confident that the underwriter has priced the risk accurately and, after a
claim, that claims personnel will accurately determine liability and settlement
amounts
Four key facets of policyholder relationships - ANSWER 1. Policyholders are parties
to the insurance contract\n2. policyholders are consumers of insurance products\n3.
,Policyholders are first-party beneficiaries\n4. Policyholders can be legally liable to
third-party claimants
policyholders are parties to the insurance contract - ANSWER - policyholders have
specific rights and duties under insurance contracts\n- Insurance professionals
demonstrate high ethical standards by helping policyholders understand the coverage
provided and their responsibilities\n- however, insurance professionals must be
mindful that they also represent insurer's interests, so they must balance their
responsibilities to the insurer and to the policyholder
policyholders are consumers of the insurance products - ANSWER - insurance is a
product that individuals and businesses normally purchase because they have to rather
than want to. In addition, it may seem costly to policyholders who can't necessarily
see the benefits.\n- For these reasons, insurers depend on their reputations and staff to
build relationships with customers. To succeed, insurers must be responsive to
consumers' needs.
Policyholders are first-party beneficiaries - ANSWER Policyholders must trust that
the coverage they purchase is sufficient to indemnify them for losses. As a result,
insurance professionals must be careful to fully assess customers' risks and
recommend appropriate coverage for those risks while, at the same time, protecting
insurer solvency.
Policyholders can be legally liable to third-party claimants - ANSWER When bad
things result from their won negligent actions, policyholders rely on insurers to
defend them if they're sued by third parties. Insurance professionals who act
according to high ethical standards do everything in their power to protect their
policyholders from out-of-pocket loss
The Public - ANSWER depends on insurers to pay claims as much as each individual
policyholder does
Underwriters (protect public interest) - ANSWER develop products that will
indemnify but not provide an opportunity for financial gain from insured losses
producers (protecting public interest) - ANSWER evaluate policyholder risks and
recommend adequate coverage for those risks to ensure indemnification
claims reps (protecting public interest) - ANSWER provide fair and prompt
settlement of losses to help policyholders and third-party claimants recover from them
safety/loss control professionals (protecting public interest) - ANSWER provide risk
mitigation services to reduce and prevent injury to members of society
Indemnification - ANSWER the process of restoring an individual or organization to
pre-loss financial condition - helps maintain order in society, reducing the public's
dependence on charitable organizations
moral hazard - ANSWER A condition that increases the likelihood that a person will
intentionally cause or exaggerate loss
, morale hazard (attitudinal hazard) - ANSWER a condition of carelessness or
indifference that increases the frequency or severity of loss
Three steps of ethical decision making - ANSWER 1. Identify the stakeholders\n2.
Determine motivation for actions\n3. analyze the ethical issues
stakeholders - ANSWER - either involved in the dilemma or will be affected by the
outcome\n- are associated with the actions that led to the dilemma\n- should be
involved in analyzing the dilemma\n- will be affected by the decision or outcome
What are their rights, expectations, and needs? - ANSWER the question to ask about
all stakeholders
reasons people make inappropriate decisions - ANSWER - moral lapses (brought on
by greed or selfishness)\n- rationalization of poor behavior\n- misplaces loyalty\n-
self-preservation\n- short-term thinking\n- cultural influences\n- peer pressure\n-
good intentions gone awry\n- lack of knowledge
determining motivation for actions - ANSWER determines why certain decisions
were made or actions taken that led to the dilemma
analyze the ethical issues - ANSWER - analyzing the interests at stake and the
actions taken\n- presence of any laws, regulations, and guidelines governing the
situation - should serve as the initial steps in determining the relevant issues and how
to respond to them
three perspective lenses that guide decision making - ANSWER 1. Rules-based
decision making\n2. Situation-based (or ends-based) decision making\n3. people-
based decision making 4
rules-based decision making - ANSWER - considers whether any established rules or
laws govern an action\n- if any laws, regulations, or standards apply to a situation, a
professional is duty bound to follow the applicable rule if it prescribes mandatory
conduct\n- application of rules may not always be definitive (ex: laws prohibit unfair
discrimination in establishing insurance rates and underwriting guidelines. But what's
considered "unfair" can vary by jurisdiction
situation-based decision making - ANSWER - also known as ends-based decision
making, analyzes the potential outcomes of possible decisions.\n- involves making a
decision based on who will benefit from the decision, who will be damaged or hurt by
it, and the extent of the ramifications of potential outcomes.\n- requires placing group
needs over individual needs\n- a risk or insurance professional should evaluate
possible results and determine the best outcome for the broadest group - this process
requires forecasting outcomes
people-based decision making - ANSWER - requires professionals to consider the
personal circumstances involved in any decision and calls for a degree of empathy,
including the ability to consider a decision and its outcome from someone else's
perspective\nconsiders subjective issues involving feelings and impressions -
COMPREHENSIVE EXAM
QUESTIONS |FREQUENTLY
TESTED QUESTIONS |RECENTLY
TESTING REAL EXAM QUESTIONS
|VERIFIED SOLUTIONS (100%
CORRECT)
Morals/Laws/Ethics - ANSWER 3 elements of ethical behavior
morals - ANSWER - personal principles of right and wrong\n- defined or influenced
by religion, society, governmental entities, and other individuals
laws - ANSWER codified legal tenets of what is/isn't acceptable
Ethics - ANSWER - Rules of conduct/guidelines provided by a professional/social
system\n- entails following guidelines established to provide a course of action when
law is not applicable, and more than one course of action could be considered "right"
from a moral or legal perspective
High Ethical Standards - ANSWER - A professional's work should always reflect
integrity. This is how a professional earns consumers' trust. In the insurance industry,
a "doctrine of utmost good faith" exists to ensure the ethical nature of the relationship
between insured and insurers.\n- This standard extends beyond the insurer to agents,
brokers, claims representatives, loss control representatives, and other practitioners
who perform work on behalf of the insurer.\n- insurance practitioners must act with
integrity, be honest and trustworthy, communicate openly, have a sense of equity and
fairness, and accept personal accountability
Traits of Professionalism: What it Takes - ANSWER - high ethical standards\n-
professional competence\n- altruism\n- commitment to continuing education\n-
participation in an association of a society\n- ability to think and act independently\n-
recognition as a professional
Doctrine of Utmost Good Faith - ANSWER It's a standard, or guiding principle, that
obligates all parties in a contractual agreement to act honestly and share all critical
information related to the transaction. It applies to insurance, real estate, and other
business markets.
, Professional Competence - ANSWER - insurance practitioners must know how
different coverages apply in particular situations, understand the implications of risk
and its effect on individuals and society, and apply that knowledge to help customers
protect themselves from risk exposures\n- aware of their abilities as well as their
limitations and sometimes require us to admit that we "don't know what we don't
know" and seek help from others
Altruism - ANSWER unselfish concern to for the welfare of others\n(examples
include)\n- leaving home (even late at night) to help a customer who suffered a
devastating loss\n- working long hours in the wake of a catastrophe to help insureds
recover\n- educating the public on loss control techniques
Commitment to Continuing Education - ANSWER - each area of insurance demands
specific, specialized knowledge that must be built on a broad educational
foundation\n- insurance professionals must continually update their knowledge in
response to changes in the legal environment, new regulations, emerging loss
exposures, and new statutes\n- may be required by law in some states as a prerequisite
for producer licensing and license renewals
Participation in an Association or Society - ANSWER - have established standards
for ethical behavior specific to the specialty of their members\n- ex: often provide
formal continual education resources that satisfy licensing requirements.\n- have
professionals codes that address the ethical standards and ideals that the group
requires of its members
Ability to Think and Act Independently - ANSWER While professionals may consult
with peers or mentors when handling a difficult issue, professionals, ultimately, are
accountable for their thoughts, decisions, and actions. True professionals strive to
make informed, independent decisions based on careful review and consideration.
Recognition as a Professional - ANSWER recognized in many difference forms
through positive public and peer perception\n- Awards by professional
organizations/peer groups\n- Designations\n- Continuing education
achievements/degrees\n- Referrals\n- Positive customer reviews/ratings
insurers, policyholders, and the public - ANSWER different groups of stakeholders
that insurance professionals have responsibilities with
Insurers - ANSWER - in the business to provide their customers with protection from
financial loss, and to do so, they must also earn a fair profit\n- must trust that the
policyholder has disclosed all requested pertinent facts about the risk\n- must trust
that the agent has recommended appropriate coverage by assessing the potential
profitability of prospective policies and considering prospective loss histories\n-
needs to be confident that the underwriter has priced the risk accurately and, after a
claim, that claims personnel will accurately determine liability and settlement
amounts
Four key facets of policyholder relationships - ANSWER 1. Policyholders are parties
to the insurance contract\n2. policyholders are consumers of insurance products\n3.
,Policyholders are first-party beneficiaries\n4. Policyholders can be legally liable to
third-party claimants
policyholders are parties to the insurance contract - ANSWER - policyholders have
specific rights and duties under insurance contracts\n- Insurance professionals
demonstrate high ethical standards by helping policyholders understand the coverage
provided and their responsibilities\n- however, insurance professionals must be
mindful that they also represent insurer's interests, so they must balance their
responsibilities to the insurer and to the policyholder
policyholders are consumers of the insurance products - ANSWER - insurance is a
product that individuals and businesses normally purchase because they have to rather
than want to. In addition, it may seem costly to policyholders who can't necessarily
see the benefits.\n- For these reasons, insurers depend on their reputations and staff to
build relationships with customers. To succeed, insurers must be responsive to
consumers' needs.
Policyholders are first-party beneficiaries - ANSWER Policyholders must trust that
the coverage they purchase is sufficient to indemnify them for losses. As a result,
insurance professionals must be careful to fully assess customers' risks and
recommend appropriate coverage for those risks while, at the same time, protecting
insurer solvency.
Policyholders can be legally liable to third-party claimants - ANSWER When bad
things result from their won negligent actions, policyholders rely on insurers to
defend them if they're sued by third parties. Insurance professionals who act
according to high ethical standards do everything in their power to protect their
policyholders from out-of-pocket loss
The Public - ANSWER depends on insurers to pay claims as much as each individual
policyholder does
Underwriters (protect public interest) - ANSWER develop products that will
indemnify but not provide an opportunity for financial gain from insured losses
producers (protecting public interest) - ANSWER evaluate policyholder risks and
recommend adequate coverage for those risks to ensure indemnification
claims reps (protecting public interest) - ANSWER provide fair and prompt
settlement of losses to help policyholders and third-party claimants recover from them
safety/loss control professionals (protecting public interest) - ANSWER provide risk
mitigation services to reduce and prevent injury to members of society
Indemnification - ANSWER the process of restoring an individual or organization to
pre-loss financial condition - helps maintain order in society, reducing the public's
dependence on charitable organizations
moral hazard - ANSWER A condition that increases the likelihood that a person will
intentionally cause or exaggerate loss
, morale hazard (attitudinal hazard) - ANSWER a condition of carelessness or
indifference that increases the frequency or severity of loss
Three steps of ethical decision making - ANSWER 1. Identify the stakeholders\n2.
Determine motivation for actions\n3. analyze the ethical issues
stakeholders - ANSWER - either involved in the dilemma or will be affected by the
outcome\n- are associated with the actions that led to the dilemma\n- should be
involved in analyzing the dilemma\n- will be affected by the decision or outcome
What are their rights, expectations, and needs? - ANSWER the question to ask about
all stakeholders
reasons people make inappropriate decisions - ANSWER - moral lapses (brought on
by greed or selfishness)\n- rationalization of poor behavior\n- misplaces loyalty\n-
self-preservation\n- short-term thinking\n- cultural influences\n- peer pressure\n-
good intentions gone awry\n- lack of knowledge
determining motivation for actions - ANSWER determines why certain decisions
were made or actions taken that led to the dilemma
analyze the ethical issues - ANSWER - analyzing the interests at stake and the
actions taken\n- presence of any laws, regulations, and guidelines governing the
situation - should serve as the initial steps in determining the relevant issues and how
to respond to them
three perspective lenses that guide decision making - ANSWER 1. Rules-based
decision making\n2. Situation-based (or ends-based) decision making\n3. people-
based decision making 4
rules-based decision making - ANSWER - considers whether any established rules or
laws govern an action\n- if any laws, regulations, or standards apply to a situation, a
professional is duty bound to follow the applicable rule if it prescribes mandatory
conduct\n- application of rules may not always be definitive (ex: laws prohibit unfair
discrimination in establishing insurance rates and underwriting guidelines. But what's
considered "unfair" can vary by jurisdiction
situation-based decision making - ANSWER - also known as ends-based decision
making, analyzes the potential outcomes of possible decisions.\n- involves making a
decision based on who will benefit from the decision, who will be damaged or hurt by
it, and the extent of the ramifications of potential outcomes.\n- requires placing group
needs over individual needs\n- a risk or insurance professional should evaluate
possible results and determine the best outcome for the broadest group - this process
requires forecasting outcomes
people-based decision making - ANSWER - requires professionals to consider the
personal circumstances involved in any decision and calls for a degree of empathy,
including the ability to consider a decision and its outcome from someone else's
perspective\nconsiders subjective issues involving feelings and impressions -
