An unlicensed person solicits and sells a life insurance policy in California. Under California Insurance Code Section 1633, this conduct is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Section 1631 requires a valid license to solicit, negotiate, or effect contracts of insurance in California, and Section 1633 provides the penalty: a person who transacts insurance without a valid license is guilty of a misdemeanor punishable by a fine not exceeding $50,000, imprisonment in county jail for up to one year, or both. The prohibition applies broadly to any unlicensed person who acts in the capacities of an agent or broker, regardless of whether the premium is later remitted to the insurer. Even receiving a commission or holding oneself out as a producer without a license is prohibited, which is why applicants must be licensed and appointed before they engage in any sales activity.
Why the other options are wrong
- B) The statute classifies unlicensed transacting as a misdemeanor, not a felony, with a maximum penalty of one year in county jail rather than years in state prison. A misdemeanor classification still carries real consequences, including a criminal record and loss of the privilege to practice.
- C) Transacting without a license is prohibited even if the premiums are later remitted to the insurer; remitting the money does not cure the licensing violation. The act of transacting itself is the violation; later remitting the premium does not retroactively cure the absence of a license.
- D) Section 1633 imposes criminal penalties — a fine of up to $50,000 and/or up to one year in jail — not merely a civil warning or reprimand. The penalty structure is criminal in nature and is intended to deter unlicensed activity that could harm consumers.
Memory hook
No license, no soliciting — sell without one and the fine can hit fifty grand.