PSI Life Exam Practice Test

Which of the following is permitted under the proper exchange of business?

1. Giving gifts to clients for referrals

2. Splitting a commission between two intermediaries licensed in the same line of insurance

3. Transferring a policy from one company to another

4. Advertising for another intermediary’s clients

The correct answer is: Splitting a commission between two intermediaries licensed in the same line of insurance

Splitting a commission between two intermediaries licensed in the same line of insurance is permitted under the proper exchange of business because it complies with regulatory standards that allow licensed professionals to collaborate on business transactions. This practice encourages cooperation among agents and ensures that clients receive personalized service while allowing intermediaries to benefit financially from shared efforts. When both parties hold the relevant licenses and adhere to industry regulations regarding commission-sharing, this approach is deemed acceptable and promotes ethical business practices. In contrast, giving gifts to clients for referrals could become problematic if it violates regulations regarding inducements or creates a conflict of interest. Transferring a policy from one company to another is often subject to specific guidelines and requirements that must be followed to ensure compliance with laws governing insurance transactions. Advertising for another intermediary's clients can raise ethical concerns and may violate regulations that prohibit misleading advertisements or unauthorized solicitation. Therefore, the correct answer highlights an accepted practice that maintains the integrity of the insurance profession.