Question

In: Operations Management

Harvey Smidlap is an insurance agent. To facilitate writing an insurance policy for Wilhelmina Jones, Harvey...

Harvey Smidlap is an insurance agent. To facilitate writing an insurance policy for Wilhelmina Jones, Harvey agrees to give Wilhelmina a portion of the commission he receives on the sale this policy to Wilhelmina. Which one of the following statements about Harvey’s action is true?

Select one:

a. It is illegal in almost all states.

b. It is required in almost all states.

c. It is legal in most states.

d. It is proper in all states

Solutions

Expert Solution

a. It is illegal in almost all states.

This practice of splitting the commission with the insured party is an unfair practice of competition and a deceptive act insurance business. This is violation of the Model Act relating to unfair methods of competition and unfair and deceptive acts and practices in the business of insurance. Therefore, this type of extra contractual incentive as offered by Harvey to Wilhemina is illegal.


Related Solutions

A principal-agent problem can arise when an insurance agent sells a policy to a buyer who...
A principal-agent problem can arise when an insurance agent sells a policy to a buyer who uses it as an incentive to behave badly. a principal hires an agent to do something on their behalf, but the principal cannot perfectly observe the agent's actions. an agent hires a principal to do something on their behalf, and the agent can observe the principal's actions. a principal uses an agent to accomplish a task the principal wants credit for completing. Which of...
Pat contracts with an Ajax Insurance Company agent for a $50,000 ordinary life insurance policy.
Fact Pattern #1:Pat contracts with an Ajax Insurance Company agent for a $50,000 ordinary life insurance policy. The application form is filled in to show Pat's age as 32. In addition, the application form asks whether Pat has ever had any heart ailments or problems. Pat answers no, forgetting that as a young child he was diagnosed as having a slight heart murmur. A policy is issued. Three years later, Pat becomes seriously ill and dies. A review of the...
1. Jim Harvey, your client, owns a life insurance policy on his own life. He has...
1. Jim Harvey, your client, owns a life insurance policy on his own life. He has paid $6,500 in premiums, and the cash surrender value of the policy is $25,000. Jim Harvey borrowed $25,000 from the insurance company, using the cash surrender value as collateral. He is considering canceling the policy in payment of the loan. Jim Harvey would like to know the federal income tax consequences of canceling his insurance policy. Discuss the tax implications. 2. As we know,...
Distinguish between an insurance broker and an insurance agent
Distinguish between an insurance broker and an insurance agent
Harvey Alexander, a professional football player, has just declared himself a free agent. Two teams, the...
Harvey Alexander, a professional football player, has just declared himself a free agent. Two teams, the Pittsburgh Steelers and the Miami Dolphins, have made Harvey the following offers to obtain his services: Pittsburgh Steelers: $1 million signing bonus payable immediately and an annual salary of $1.5 million for the 5-year term of the contract. Miami Dolphins: $2.5 million signing bonus payable immediately and an annual salary of $1 million for the 5-year term of the contract. With both contracts, the...
What does it mean to someone to connect in today’s world, and how does writing facilitate...
What does it mean to someone to connect in today’s world, and how does writing facilitate those connections?
An insurance agent sells dental insurance, medical insurance, and life insurance. He checks sales since the...
An insurance agent sells dental insurance, medical insurance, and life insurance. He checks sales since the beginning of the year and finds that he has sold 50 dental, 48 medical, and 28 life insurance policies. Some customers purchased more than one type: 22 bought both dental and medical, 18 bought both medical and life, 12 bought both dental and life, and 8 bought all three types. How many of these customers bought exactly one of the three types of insurance...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life insurance. The average amount of profit returned per year by each type of insurance policy is as follows: Policy                            Yearly Profit/Policy Homeowner’s               $50 Auto 40 Life 75 Each homeowner’s policy will cost $18.20, each auto policy will cost $14.50 and each life insurance policy will cost $30.50 to sell and maintain. He has projected a budget of $80,000 per year. In addition, the...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life...
An insurance agent plans to sell three types of policies— homeowner’s insurance, auto insurance and life insurance. The average amount of profit returned per year by each type of insurance policy is as follows: Policy/Yearly Profit/Policy Homeowner’s $50 Auto 40 Life 75 Each homeowner’s policy will cost $18.20, each auto policy will cost $14.50 and each life insurance policy will cost $30.50 to sell and maintain. He has projected a budget of $80,000 per year. In addition, the sale of...
Eric's property was damaged in an accident. He phoned his agent to see if the loss was covered under his property insurance policy.
Eric's property was damaged in an accident. He phoned his agent to see if the loss was covered under his property insurance policy. The agent said, "As long as the cause of loss is not specifically excluded in the policy, the loss is covered." Based on the agent's answer, what type of insuring agreement appears in the policy?  Extended-perils coverage  Named-perils coverage Unconditional coverage "All-risks" coverage
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT