A California-licensed agent places a client's life policy with an insurer that is NOT admitted to transact business in California, without using a surplus line broker. This action is:

Why A is correct

CIC Section 703 prohibits any person from acting as an agent for a nonadmitted insurer in California, with a limited exception for surplus line brokers transacting in accordance with the surplus line law. A life agent placing coverage with an unadmitted carrier is therefore acting without authority and is subject to penalties. 'Admitted' means the insurer holds a California certificate of authority.

Why the other options are wrong

• B) Client disclosure cannot cure a statutory prohibition; Section 703's bar applies regardless of consent.
• C) A lower premium is not an exception; the surplus line process, not price, governs lawful access to nonadmitted markets.
• D) Being licensed in another state does not make an insurer admitted in California; admission requires a California certificate of authority.

Memory hook

Nonadmitted + no surplus line = no business. Section 703 closes that door.

Why A is correct

Section 703 generally prohibits any person from acting as an agent or broker for a nonadmitted insurer — an insurer not authorized to transact insurance in California — subject to the surplus line exception. A licensed surplus line broker may place coverage with a nonadmitted insurer only when the coverage is not reasonably available in the admitted market and the requirements of the surplus line law are satisfied. Being domiciled in another state, maintaining a California office, or holding an agent's license does not cure the illegality; the insurer itself must be admitted or the placement must go through the surplus line channel.

Why the other options are wrong

• B) Domicile in another state does not make the insurer admitted in California; unless the insurer is admitted or the coverage is placed through the surplus line market, the transaction is prohibited.
• C) Maintaining an office in California does not constitute admission to transact insurance; the insurer must hold a valid California certificate of authority.
• D) The agent's license does not authorize representing a nonadmitted insurer; Section 703 restricts the agent's activity based on the insurer's admitted status.

Memory hook

Nonadmitted insurer = no California business through agents, unless a surplus line broker. Admitted first, agents later.