Certified Anti-Money Laundering Specialist Certification (CAMS) Practice Exam

In the insurance industry, what does the term 'agent' refer to?

1. Any individual selling insurance policies

2. A contractor responsible for underwriting risks

3. An entity carrying out due diligence functions for the insurer

4. A representative of policyholders

The correct answer is: An entity carrying out due diligence functions for the insurer

In the insurance industry, the term 'agent' specifically refers to a representative who acts on behalf of the insurance company to sell its products, manage customer relationships, and facilitate communication between the insurer and the policyholder. The correct choice highlights that an agent is essentially a facilitator who aids in executing the insurer's functions, including the important task of conducting due diligence to verify customer identities and assess risk levels. This role is crucial to ensure compliance with regulations and to prevent insurance fraud, making it essential for agents to possess knowledge about both the products they sell and the underlying duties they perform on behalf of the insurer. The other options either mischaracterize the role of an agent or relate to different positions within the insurance framework. While insurance agents do sell policies, this function alone does not capture the complete essence of their responsibilities. They are not typically contractors responsible for underwriting, nor are they solely representatives for policyholders, as they must balance the interests of both the insurer and the insured.