State RegulationsCO specificDifficulty 2/5
A producer in Denver recommends a life policy that pays him the highest first-year commission, even though a lower-cost policy better fits the client's stated needs and budget. Under the suitability standards administered by the Colorado Division of Insurance, which duty has the producer failed?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Colorado's suitability standards, administered by the Colorado Division of Insurance, require a producer to have a reasonable basis for believing the product recommended fits the applicant's needs and financial objectives. Steering a client toward a product that enriches the producer rather than serving the client violates that duty and exposes the producer to Division discipline.
Why the other options are wrong
- A) Colorado suitability standards do not condition a recommendation on obtaining advance written consent from the client; the duty concerns the basis for the recommendation itself.
- C) No producer can or must guarantee a policy will never lapse; suitability concerns the fit of the recommendation, not future performance guarantees.
- D) Suitability requires tailoring the recommendation to each client; offering everyone the producer's own policy is the opposite of a needs-based approach.
Memory hook
Suit the product to the person, not the producer's pocket.