A newly licensed producer writes policies almost exclusively on her own life, her family members, and her own business interests. Most states treat this pattern as:
- A.RebatingRebating is returning part of a commission or giving unauthorized inducements to a buyer - not writing coverage on oneself.
- B.TwistingTwisting is misrepresentation-driven replacement of another insurer's policy - unrelated to insuring one's own interests.
- C.Controlled business, which may justify denying or revoking her license if it exceeds the allowed portionCorrect. A license used chiefly to earn commissions on one's own risks is controlled business and is restricted.
- D.Ordinary self-dealing that licensing laws do not addressLicensing laws directly address this - the controlled business limitation exists precisely for this pattern.
Why: Licenses exist to serve the public, not to let individuals collect commissions on their own coverage. Writing predominantly on oneself, family, or one's own business is 'controlled business,' and exceeding the state's allowed proportion is grounds for license denial or revocation.
A newly licensed producer plans to write policies on himself, his spouse, his parents, his two siblings, and the small business he partly owns, expecting these to make up nearly all of his production. He does not intend to solicit the general public. What regulatory concept does this raise?
- A.Controlled business, which most states restrict as a proportion of a producer's total productionCorrect. States limit controlled business so licenses are not obtained mainly to collect commissions on one's own coverage.
- B.Nothing; a producer may write any amount of business on himself and his family without restrictionIncorrect. Controlled business limitations exist precisely to restrict this pattern.
- C.Rebating, because he benefits financially from policies he sells to himselfIncorrect. Rebating means giving a client part of the commission or something of value to induce a purchase, which is not what is described.
- D.Twisting, because he is placing coverage without soliciting the publicIncorrect. Twisting is inducing a client to replace existing coverage through misrepresentation. No replacement is involved here.
Why: This is CONTROLLED BUSINESS - insurance written on the producer, the producer's own family, or entities in which the producer has a financial interest. Most states restrict the proportion of a producer's business that may be controlled business, and may refuse to issue or renew a license held primarily for that purpose. The point of the restriction is that a license is meant for genuinely serving the public, not for capturing commissions on coverage one would have bought anyway.