Question 69

Horace will face regulatory consequences if XYZ Insurance Company issues the policy without an appointment.

If Horace places an insurance policy directly with XYZ Insurance Company, the company will be subject to a fine of three times the premium received if it issues the policy without appointing him as an agent.

A) the company must issue the policy

This option is incorrect because it implies that XYZ Insurance Company is obligated to issue the policy regardless of Horace's appointment status. In reality, without proper appointment, the company is not required to issue the policy and could incur penalties.

B) the company will be subject to a fine of three × the premium received if it issues the policy without appointing Horace

This option is correct as it accurately reflects the regulatory consequences for XYZ Insurance Company if they issue a policy without having appointed Horace as their agent. Such actions violate insurance regulations, leading to potential fines.

C) Horace will be considered a guarantor of the policy

This option is incorrect because being a guarantor requires a formal agreement or obligation, which does not apply to Horace's situation since he is not appointed to represent XYZ Insurance Company and has no such responsibility.

D) the company will transfer the policy to an agent-appointed company

This option is incorrect as there is no requirement for XYZ Insurance Company to transfer the policy to another agent-appointed company. The company can choose to reject issuing the policy instead of transferring it.

Conclusion

The correct option, B, highlights the regulatory obligations that XYZ Insurance Company faces regarding agent appointments and the penalties for non-compliance. All other options fail to accurately represent the legal implications of Horace's lack of appointment or misinterpret the responsibilities and actions of the involved parties.