State RegulationsMI specificDifficulty 2/5
A Michigan producer's appointment is terminated, and her producer license later lapses. The insurer keeps receiving renewal premiums on life policies she sold and delivered while properly licensed. What may the insurer do with the commissions on those renewals?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
M.C.L. 500.1240 prohibits paying commissions for new sales to a person who is required to be licensed but is not, but it expressly allows renewal or deferred commissions to be paid when the person was licensed at the time of the sale. Termination of the appointment under the Insurance Code of 1956 does not strip a producer of commissions she already earned on properly sold business.
Why the other options are wrong
- A) There is no forfeiture to the Insurance Director; the statute protects earned renewal and deferred commissions rather than confiscating them.
- B) The 30-day clock is a relic of other notice rules; no regicensing deadline governs payment of commissions already earned on prior sales.
- C) Renewal premiums are owed under the policies; the statutes provide no mechanism for converting earned producer commissions into policyowner refunds.
Memory hook
Licensed at the sale, paid at the renewal: past sales keep paying even after the license lapses.