Which statement regarding commissions and compensation is INCORRECT?

• A. An insurer may pay a commission to an unlicensed producer who is appointed by the insurer
• B. Commissions must be paid only to licensed producers
• C. Commissions must be disclosed to clients
• D. Fees may be charged for services as allowed by state law

Answer: (C)

The main idea being tested is how commissions and compensation are handled in life insurance practice, including licensing, appointment, and disclosure norms. Commissions are a form of compensation paid to the producer for selling the policy, and regulators generally focus on who may receive them and when disclosure is required for any additional fees.

The statement about commissions needing to be disclosed to clients is not the regulatory rule in most situations. Commissions are typically considered internal compensation to the producer and do not have to be revealed to the client. What may need to be disclosed are any separate fees charged for services, and those fees must be disclosed in writing if they are allowed by state law. The other points align with the broader framework: commissions are generally tied to licensed producers, there can be rules about compensation tied to appointed individuals, and fees for services can be charged where state law permits.