California Life and Health Insurance Practice Exam

An agent's attempt to stop the replacement of an existing life insurance policy is known as?

1. Total loss prevention

2. Conservation

3. Retention

4. Replacement aversion

The correct answer is: Conservation

The term used to describe an agent's efforts to prevent the replacement of an existing life insurance policy is conservation. This practice focuses on retaining the existing policyholder's business rather than allowing them to switch to a new policy elsewhere. Agents often engage in conservation to preserve their relationship with clients and maintain their commissions from existing plans. Conservation involves explaining the benefits of the current policy, addressing any concerns the policyholder may have, and demonstrating how the existing coverage continues to meet their needs effectively. This proactive approach is essential for agents as it helps in fostering client loyalty and reducing the loss of commissions tied to their managed policies. The other terms listed don’t accurately describe this practice. Total loss prevention typically pertains to risk management strategies aimed at preventing complete losses in various contexts, not specific to life insurance policy replacements. Retention generally refers to the broader process of keeping clients or customers but does not specifically indicate the actions taken to stop policy replacements. Finally, replacement aversion, while it suggests a negative stance towards policy replacement, is not the commonly accepted term used within the insurance industry.