State RegulationsMA specificDifficulty 2/5
A Massachusetts agency wants to pay a referral fee to an unlicensed acquaintance who steered a client that resulted in a life policy sale. What does Massachusetts law say?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
M.G.L. c. 175, § 177 prohibits paying a commission for an insurance transaction to a person who is not licensed for that line of insurance. A referral fee tied to a completed sale is a commission in substance, so the unlicensed acquaintance may not lawfully be paid, no matter how the agency labels the payment. Massachusetts contains no dollar cap that would legalize such payments.
Why the other options are wrong
- B) No statutory cap legalizes commissions to unlicensed persons; M.G.L. c. 175, § 177 prohibits the payment altogether.
- C) Whether the acquaintance signed the application is irrelevant; the compensation for steering the sale is what M.G.L. c. 175, § 177 forbids.
- D) Client consent cannot license the unlicensed; the prohibition protects the licensing system itself, not the parties' preferences.
Memory hook
No license, no commission — Massachusetts doesn't pay strangers.