The following set of ethical mandates aligns directly with California’s Insurance Code, market conduct standards, and general professional ethics. This course material is structured to:
- Define the mandate (what it means).
- Explain its application (how agents should apply it in practice).
- Provide concrete examples (to make it relatable).
Place the Customer’s Interest First
The foundation of insurance ethics is loyalty to the customer. Agents must prioritize the client’s financial security and well-being above commissions, quotas, or company pressure.
Application:
- Recommend coverage that genuinely fits the client’s needs, not the product with the highest payout.
- Disclose any conflicts of interest.
- Refuse to participate in deceptive sales practices, even if pressured.
Examples:
- Advising a young family to purchase affordable term life insurance rather than steering them toward an expensive permanent policy they don’t need.
- Recommending a lower-cost health plan with better coverage for the client, even though your commission is smaller.
Know Your Job – and Continue to Increase Your Level of Competence
Insurance laws, products, and market conditions are constantly evolving. Competence means not only mastering the basics but also committing to continuous professional education.
Application:
- Stay up to date with California Insurance Code changes and CDI bulletins.
- Take continuing education (CE) courses beyond the minimum required.
- Seek mentorship, training, or industry certifications.
Examples:
- Completing specialized training in cyber liability coverage as more small businesses seek protection.
- Studying changes in California wildfire homeowners’ coverage requirements to advise clients accurately.
Identify the Customer’s Needs and Recommend Products and Services That Meet Those Needs
Insurance isn’t “one size fits all.” Ethical practice means conducting a proper needs analysis before suggesting products.
Application:
- Ask probing questions to uncover risks, goals, and financial realities.
- Match recommendations to what the client actually needs—not what’s easiest to sell.
Examples:
- A client says they are self-employed and concerned about missing work due to illness. The agent recommends disability income insurance rather than pushing only health coverage.
- An older client expresses concerns about leaving assets to grandchildren. The agent discusses life insurance with estate planning benefits.
Accurately and Truthfully Represent Products and Services
Misrepresentation damages trust and is prohibited under CIC §§ 780–782. Agents must give complete and truthful information.
Application:
- Explain exclusions, waiting periods, and limitations clearly.
Avoid exaggerating returns, guarantees, or “risk-free” claims.
Examples:
- Telling a client that a policy has a 30-day waiting period before disability benefits begin.
- Correcting a client who believes flood damage is covered under homeowners insurance (when it’s not, unless added).
Avoid Jargon; Use Layperson’s Language When Possible
Insurance terms can be confusing. Ethical communication requires simplifying complex information so clients can make informed decisions.
Application:
- Translate terms like “deductible,” “aggregate limit,” or “indemnification” into plain English.
- Check for understanding by asking clients to restate key points.
Examples:
- Explaining a deductible as “the amount you pay out-of-pocket before your coverage “kicks in.”
Saying “cash value is like a savings component inside your policy” instead of using technical investment terminology.
Stay in Touch with Customers and Conduct Periodic Coverage Reviews
A client’s needs evolve—marriage, children, business growth, retirement. Ethical practice means maintaining the relationship, not treating insurance as a one-time sale.
Application:
- Schedule annual or semi-annual policy reviews.
Send reminders about major life events that may trigger coverage needs.
Examples:
- Calling a client after they purchase a home to review homeowners and umbrella liability coverage.
- Meeting with a client nearing retirement to discuss long-term care options.
Maintain Confidentiality and Protect the Privacy of Customer Information
Agents are trusted with sensitive financial and health information. Laws like CIC §§791–791.29, HIPAA, and the CCPA require strict safeguards.
Application:
- Use secure storage (locked file cabinets, password-protected systems).
- Limit access to client files on a “need-to-know” basis.
- Never discuss client information casually or outside of authorized contexts.
Examples:
- Encrypting email communications when sending policy details.
- Refusing to share a client’s medical history with an outside vendor without written consent.
Keep Informed of and Obey All Insurance Laws and Regulations
Compliance is not optional. Agents are responsible for knowing and following the California Insurance Code, Title 10 of the CCR, and CDI directives.
Application:
- Stay updated on CE requirements.
- Avoid unlicensed activity (e.g., selling products outside your authority).
- Report suspected fraud in accordance with CIC §§1872.41.
Examples:
- Notifying CDI and your SIU when you suspect an applicant has submitted forged documents.
- Refusing to sell securities-related products without the proper FINRA license.
Avoid Unfair or Inaccurate Remarks About the Competition
Healthy competition benefits consumers, but disparaging others undermines professionalism and may violate CIC §§790.03.
Application:
- Compete on product value and service—not rumors or false claims.
- Correct misconceptions without speaking negatively about another agent or company.
Examples:
- Saying, “That insurer’s policy has higher deductibles, but let’s compare the total cost,” instead of, “That company cheats its clients.”
- Explaining your company’s claims turnaround time factually, without speculating about a competitor’s weaknesses.
