State RegulationsTN specificDifficulty 2/5
A Tennessee producer is asked by a client to place a policy with an insurer that is not licensed to do business in Tennessee. What is the producer's proper course?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
T.C.A. § 56-6-114 marks an insurer without Tennessee authorization as an unauthorized insurer, and Tennessee law prohibits transacting insurance business with such an insurer. Client consent does not cure the defect; the producer who places the business with an unauthorized insurer risks disciplinary action by the Commissioner under Tennessee's licensing provisions. The proper course is to decline and seek an authorized market.
Why the other options are wrong
- A) Client consent is irrelevant to licensure status; the prohibition on unauthorized insurers protects the regulatory system, not just the individual customer.
- C) Holding the premium in a fiduciary account does not authorize the transaction; the placement itself with an unauthorized insurer is the violation.
- D) Reporting to another state's regulator does not satisfy Tennessee's requirement that the insurer be authorized by the Tennessee Department of Commerce & Insurance.
Memory hook
No Tennessee license, no Tennessee placement — client consent cannot license an insurer.