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.
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