An unlicensed person negotiates the terms of a life insurance contract with an applicant but never signs or delivers the policy. Under California Insurance Code Section 35, this conduct is best described as:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Section 35 defines 'transact' as applied to insurance to include four activities: (a) solicitation; (b) negotiations preliminary to execution; (c) execution of a contract of insurance; and (d) the transaction of matters subsequent to the execution of the contract and arising out of it. Negotiating the terms of a life insurance contract is therefore transacting insurance even if no policy is ever signed and no premium is ever collected. Under Section 1631, a person may not solicit, negotiate, or effect contracts of insurance, or act in a licensed capacity, without a valid license from the Commissioner, so the unlicensed negotiation is unlawful.
Why the other options are wrong
- C) Execution of the policy is only one of the four acts listed in Section 35. Negotiation alone is expressly sufficient to constitute transacting insurance, so the fact that the policy was never executed does not make the conduct legal.
- D) Solicitation is expressly listed as a transacting activity under Section 35(a). It is a regulated activity that requires a license, so an unlicensed person engaging in solicitation is acting unlawfully.
- A) The statutory definition turns on the acts of soliciting, negotiating, executing, or handling matters subsequent to execution. No premium need be collected for the conduct to qualify as transacting insurance.
Memory hook
Transact = solicit, negotiate, execute, or handle follow-up. Any one act triggers the license requirement.