State RegulationsTX specificDifficulty 1/5
A Texas agent refers a client to a licensed agent at another agency, and the two agents agree to split the commission. Is this permitted?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under TIC 4005.053(a), the prohibition turns on whether the person receiving the payment holds a license to act as an agent in this state: an insurer or agent may not pay a commission or other valuable consideration for a service performed as an agent to a person who is not licensed. Once both agents are licensed, splitting the commission is permissible. Practical consequence: the mechanics of the split are a matter for the two agents and the insurer to agree on, subject to the insurer's own appointment and compensation rules.
Why the other options are wrong
- B) A common appointment is not required; under TIC 4005.053(a) the controlling question is whether each person receiving a share holds the required license.
- C) Sharing between licensees at different agencies is permitted, because the prohibition is aimed at payments to unlicensed persons.
- D) Commission sharing between licensed producers is permitted and is not confined to payments between an agent and the appointing insurer.
Memory hook
Licensed to licensed, split freely; licensed to unlicensed, never.