California Life and Health Insurance Practice Exam

What is required after a life agent sells an insurance policy to an applicant without being appointed by the insurer?

1. The agent must refund the commission

2. Notice of appointment must be submitted to the Commissioner

3. The insurer must approve the sale retrospectively

4. No action is required

The correct answer is: Notice of appointment must be submitted to the Commissioner

When a life agent sells an insurance policy without being appointed by the insurer, it is crucial for compliance with insurance regulations that a notice of appointment is submitted to the Commissioner. This requirement serves to formally document the relationship between the agent and the insurer, ensuring that the agent is recognized as authorized to conduct business on behalf of that insurer. This process helps maintain regulatory oversight and protects consumers by ensuring that agents meet necessary qualifications and are working under appropriate guidelines. Other potential answers do not align with the regulatory framework surrounding insurance sales. For instance, while the agent may face consequences regarding commissions in other contexts, simply refunding the commission does not address the need for formal notification to regulate the agent's activity correctly. Approval from the insurer for the sale retrospectively is also not standard practice; agents must typically be appointed prior to making a sale to avoid such issues. Finally, stating that no action is required overlooks the essential regulatory compliance necessary when an agent operates without proper appointment, which is not only about the relationship with the insurer but also about upholding the standards set by the insurance regulatory body.