Under California Insurance Code Section 10234.8, what duty do insurers, brokers, and agents owe to policyholders and prospective policyholders in connection with long-term care insurance?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC Section 10234.8 establishes an explicit consumer-protection duty for LTC insurance: all insurers, brokers, agents, and others engaged in the business of insurance owe a policyholder or prospective policyholder a duty of honesty and a duty of good faith and fair dealing. Subdivision (b) makes clear that conduct during the offer and sale of the policy before purchase is relevant to any action alleging a breach of these duties, meaning deceptive sales tactics can be evidence of a breach. This statutory duty reinforces the ethical obligations agents hold when recommending and selling long-term care coverage in California.
Why the other options are wrong
- B) The statute imposes duties of honesty, good faith, and fair dealing; it does not require any guarantee of the lowest market premium.
- C) Selling the largest policy regardless of need contradicts suitability requirements and the duty of good faith; coverage must fit the applicant's needs.
- D) The duty runs to the policyholder, not away from them; the insured is entitled to policy information, and confidentiality restrictions concern other parties, such as the dissemination limits in Section 10234.95(e).
Memory hook
Section 10234.8: honesty plus good faith plus fair dealing — California's LTC sales commandment.