A Texas agent wants to split his commission with an unlicensed friend who explained the policy and helped complete the application. May he do so?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under TIC 4005.053(a), an insurer or agent engaged in the business of insurance in this state may not pay to any person, directly or indirectly, and may not accept from any person, a commission or other valuable consideration for a service performed by that person as an agent in this state unless the person holds a license to act as an agent in this state. TIC 4005.053(c) separately bars an agent from paying an unlicensed person a commission or other valuable consideration for the solicitation or negotiation of an insurance contract, or a fee for referring a customer based on that customer's purchase of insurance. Explaining coverage and helping complete the application is soliciting, so paying the friend a share is prohibited. Practical consequence: TIC 4005.053(a) reaches payment in either direction, so both the agent who pays and the unlicensed person who receives are exposed.
Why the other options are wrong
- A) Disclosure does not cure it; under TIC 4005.053(a) a person who does not hold a license cannot lawfully be paid for acting as an agent, whether or not the insurer knows.
- B) The test is what the person did, not who signed or collected; explaining the policy and completing the application is soliciting or negotiating the contract.
- D) TIC 4005.053(a) covers payment made directly or indirectly, so paying through the licensed agent rather than the insurer makes no difference.
Memory hook
No license means no commission, paid directly or indirectly.