Life License Qualification Program (LLQP) Practice Exam

What is NOT a consequence for placing business with an unauthorized insurer?

1. Third degree felony

2. Insurance license revoked

3. Responsible for unpaid claims

4. First degree misdemeanor

The correct answer is: First degree misdemeanor

Placing business with an unauthorized insurer can have several serious legal consequences, reflecting the importance of regulatory compliance in the insurance industry. Among these consequences is the possibility of criminal charges, which could range from misdemeanors to felonies, depending on the severity of the violation and the jurisdiction's laws. While unauthorized insurers can lead to significant legal repercussions, a first-degree misdemeanor typically involves crimes that are less severe than felonies. For instance, a third-degree felony generally indicates a more serious offense that carries heavier penalties, including the possibility of prison time. In contrast, sanctions such as the revocation of an insurance license or being held responsible for unpaid claims emphasize the accountability that agents face when dealing with unauthorized insurers. Therefore, a first-degree misdemeanor, being a less severe consequence than the revocation of the license or being subject to financial liability for claims, is not typically associated with the actions of placing business with unauthorized insurers. Thus, the classification of a first-degree misdemeanor is not consistent with the more severe consequences that typically follow such misconduct.