State RegulationsTN specificDifficulty 3/5
A producer tells an applicant that the life policy he already owns has no remaining value and urges him to exchange it for a new contract, although the old policy still has substantial cash value. Under Tennessee's replacement framework, which duty is most directly violated?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Tenn. Comp. R. & Regs. 0780-1-24-.05 requires producers to handle replacements honestly and with full disclosure, and falsely describing an existing policy as worthless in order to push an exchange corrupts the applicant's informed decision. Misrepresentation in a replacement setting is exactly the conduct Tennessee's replacement rules and unfair trade practices framework, enforced by the Tennessee Department of Commerce & Insurance, exist to stop.
Why the other options are wrong
- B) No duty requires forwarding the new application to the existing insurer before discussion; the producer's duty is honest disclosure, not procedural submission.
- C) There is no premium-refund duty in the replacement rules; the violation is the misrepresentation, not any failure to disgorge commissions.
- D) Holding multiple appointments does not itself require advance notice to the Commissioner, and that concept is unrelated to misstating an old policy's value.
Memory hook
Calling a living policy worthless to force a swap is misrepresentation, not salesmanship.