In which scenario would a producer face scrutiny for controlled business violations?

In the context of controlled business violations, the scenario that would raise concern is when a producer exceeds the allowed percentage in commissions. Controlled business refers to insurance business that is primarily written on the producer’s own account—essentially, when agents are writing policies for friends, family, or their own interests. Regulatory bodies impose restrictions on the amount of business that can be written in this manner to prevent potential conflicts of interest and abuse of the system.

When a producer exceeds the permitted commission percentages on controlled business, it can be seen as unfairly profiting from close relationships rather than competing fairly in the open market. This practice may lead to regulatory scrutiny because it can create a situation where the producer is not acting in the best interests of consumers or maintaining the integrity of the insurance practice.

The other scenarios do not inherently suggest violations of controlled business regulations. Receiving commissions from a client is standard practice in the industry, paying referral fees to licensed employees is typically permissible within regulatory guidelines, and providing insurance advice is a fundamental role of insurance producers. However, exceeding commission limits directly relates to how controlled business is regulated and monitored, making it a clear point of concern.