State RegulationsTX specificDifficulty 2/5
Marcus, who holds no Texas license, introduces friends to an agent, discusses the benefits of a particular life policy with them, and receives a share of the commission on each sale. How is Marcus's activity characterized?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under the Texas Insurance Code definitions applied to licensing (TIC 4001.003 and TIC 4001.006), a person acts as an agent when, for compensation, he solicits insurance on behalf of an insurer, takes or transmits an application, or negotiates a policy. Explaining a specific policy's benefits and sharing in the commission is solicitation and negotiation for compensation, so Marcus must hold a Texas license before he does it. An unlicensed person who performs those acts is subject to TDI sanctions and to repayment of the compensation received.
Why the other options are wrong
- B) Changing the label does not remove the licensing obligation; a license is still required to transact the business.
- C) Discussing specific policy benefits and sharing commission goes well beyond a bare referral and requires a license.
- D) The exemption analysis looks at the activity performed, not at whether the prospects are acquaintances.
Memory hook
Explain the policy or share the commission, and you need a license.