Under Pennsylvania's long-term care compensation rules (31 Pa. Code 89a.129) and penalty provisions (31 Pa. Code 89a.128), which arrangement is permissible?
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Why C is correct
Pennsylvania's long-term care compensation rule, 31 Pa. Code 89a.129, permits compensation arrangements that do not act as an incentive to replace existing long-term care coverage inappropriately, and the penalty provision, 31 Pa. Code 89a.128, subjects violations to regulatory penalties. Together with the suitability rule of 31 Pa. Code 89a.121, the scheme keeps producer pay aligned with the client's needs rather than with churn. The Pennsylvania Insurance Department enforces the penalty provision against both improper arrangements and the producers who accept them.
Why the other options are wrong
- A) A replacement-only bonus is the exact incentive the compensation rule forbids, because it pays for churn rather than for appropriate coverage.
- B) Producer compensation comes from the insurer's premium economics, never as a direct levy on the policyholder's benefits.
- D) The Pennsylvania Insurance Department does not reimburse producers for sales; compensation is an insurer-producer arrangement within regulatory limits.
Memory hook
No pay for churn: LTC compensation must follow the client's needs, with penalties waiting.