State RegulationsTX specificDifficulty 2/5
A Texas life agent asks an unlicensed acquaintance to send clients over and pays that person a percentage of every commission the referrals produce. What is the result of this arrangement?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under TIC 4001.157 and TIC 4005.053-.054, an agent may share a commission only with a person who is licensed for the same kind of insurance and, where required, appointed by the insurer. Paying a percentage of commissions to an unlicensed person is prohibited however the payment is labeled, and if the payment benefits the applicant it may also be rebating under TIC 541.056. Disclosure and a limited role do not license the recipient.
Why the other options are wrong
- B) Restricting the person to clerical or referral activity does not authorize payment of a share of commissions.
- C) Disclosing the payment to the policyowner does not supply the license the recipient lacks.
- D) Paying a percentage of the commission generated by a referral is sharing a commission, whatever the parties call it.
Memory hook
No license, no share — a percentage of commission only goes to someone licensed for that line.