Question 21

An agent can share commissions ONLY with an individual who is licensed for the type of insurance written.

An agent is permitted to share commissions solely with individuals who hold the appropriate licensing for the specific type of insurance involved in the transaction.

A) employed by the insurer involved in the sale.

While an agent may work closely with employees of the insurer, being employed by the insurer does not qualify someone to receive shared commissions. The key requirement is that the individual must hold the necessary license for the type of insurance being sold.

B) licensed for the type of insurance written.

This option is correct as it aligns with the regulations governing commission sharing. Only individuals who possess the proper licensing for the specific insurance type can legally participate in commission sharing, ensuring compliance and professionalism in the industry.

C) an out-of-state insured.

An out-of-state insured refers to a person who holds an insurance policy in a state different from where they reside. This status does not relate to commission sharing eligibility, as licensing is the primary factor governing such arrangements, not the residency of the insured.

D) an employee of the agency.

Though employees of the agency may be involved in the sales process, they must still be licensed for the type of insurance written to receive shared commissions. Employment alone does not satisfy the licensing requirement necessary for legal commission sharing.

Conclusion

The correct answer, option B, highlights the essential requirement that individuals must be licensed for the specific type of insurance to participate in commission sharing. The other options fail to meet this regulatory standard, emphasizing the importance of proper licensing in maintaining industry integrity and compliance.