State RegulationsPA specificDifficulty 2/5
An insurer discovers it has been paying commissions to a producer for months without ever appointing her for that line of insurance. Under the producer appointment statute (40 P.S. § 310.71), what is required to put the arrangement on lawful footing?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under 40 P.S. § 310.71, an insurer must appoint a producer before the producer acts for it, and 31 Pa. Code § 37.61 governs how appointments are effected with the Pennsylvania Insurance Department. Selling without an appointment is unauthorized, and commissions for such sales rest on no lawful basis. The cure is a proper appointment going forward — not retroactive papering, purchase, or backdating.
Why the other options are wrong
- A) Payment of commissions does not create an appointment; the appointment must precede the sales activity under 40 P.S. § 310.71.
- C) Appointments are regulatory filings, not commodities sold by a board; they are effected through the Pennsylvania Insurance Department under 31 Pa. Code § 37.61.
- D) Backdating files to mask unappointed selling compounds the problem rather than curing it.
Memory hook
Appoint first, sell second, commission third — never the reverse order.