State RegulationsFL specificDifficulty 2/5
An agent collects an annual premium on a life policy and, before remitting anything, deducts the full first-year commission and sends the insurer only the balance. Under Florida's rules on premium accountability, this is:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under Chapter 626, Florida Statutes, premiums collected by an agent are held in a fiduciary capacity for the insurer and the insured, not as the agent's own earnings; compensation may be taken only as the insurer authorizes, such as through an agreed account-current arrangement. Unilaterally deducting a commission from a collected premium is an unauthorized use of fiduciary funds. In practice, agents should remit collected premiums and take compensation only under the insurer's compensation plan.
Why the other options are wrong
- A) A commission is not the agent's property upon collection; it is compensation that the insurer's authorization must release.
- C) Tax treatment has nothing to do with the fiduciary character of the collected premium.
- D) The impropriety is complete at the unauthorized deduction; a later cancellation is not what makes it wrong.
Memory hook
Collected premium = insurer's money on trust.