A life insurance agent, acting as a sole proprietor, discovers a significant error in a client's application that, if uncorrected, would lead to an uninsurable risk being accepted by the insurer. The agent is aware that correcting the error would likely result in the client being declined coverage and potentially impacting the agent's commission. Under these circumstances, which of the following actions is MOST consistent with an agent's ethical and professional obligations under Canadian regulations?

Question: A life insurance agent, acting as a sole proprietor, discovers a significant error in a client's application that, if uncorrected, would lead to an uninsurable risk being accepted by the insurer. The agent is aware that correcting the error would likely result in the client being declined coverage and potentially impacting the agent's commission. Under these circumstances, which of the following actions is MOST consistent with an agent's ethical and professional obligations under Canadian regulations?

Answer options: ✅ Immediately inform the insurer of the error and advise the client of the necessary correction, even if it jeopardizes the application.

• Attempt to subtly rephrase the information to mitigate the error without outright misrepresentation, hoping the insurer does not notice.
• Proceed with the application as submitted, assuming the insurer's underwriting process will uncover the error independently.
• Advise the client to withdraw the application and reapply at a later date, hoping the issue resolves or becomes less apparent.

Correct answer: Immediately inform the insurer of the error and advise the client of the necessary correction, even if it jeopardizes the application.

Explanation: Agents have a fiduciary duty to both their clients and the insurer. Ethically and professionally, an agent must act with utmost good faith, which includes the obligation to disclose all material facts to the insurer and ensure the accuracy of information provided on an application, as stipulated by provincial insurance acts and codes of conduct.