Final answer:
The correct action for an agent is to discuss the new health insurance policy with the insured, maintaining open communication and transparency. Canceling a policy without consent or submitting a new policy without knowledge is unethical. This is consistent with best practices in the insurance market where informed decisions are crucial.
Step-by-step explanation:
When an agent is in the process of replacing the insured's current health insurance policy with a new one, the proper action from the listed options would be to Contact the insured to discuss the new policy. This is essential for maintaining transparency and ensuring that the insured is aware of the changes and conditions of the new policy. It is the agent's duty to provide this information before any changes are made, and it is unethical and potentially illegal to cancel the current policy or to submit a new policy application without the insured's consent. Ongoing communication with the insured is also important to address their needs and preferences, potentially waiting for the insured to request a change in their policy before taking any action.
As it pertains to the wider context of the insurance market, this type of ethical procedure is critical. Insured individuals often know more about their health risks or driving habits than the insurance company can determine, thus open dialogue helps in making appropriate decisions concerning insurance coverage.