Illinois Life Producer State-designated Practice Exam

Which of these statements is true regarding controlled business?

1. It must be the primary focus of the producer's activity

2. It should not exceed premiums on other business within 12 months

3. It can be unlimited in amount

4. It is exempt from regular licensing requirements

The correct answer is: It should not exceed premiums on other business within 12 months

The statement that controlled business should not exceed premiums on other business within 12 months is accurate because it addresses regulatory concerns about producers engaging predominantly in writing policies for individuals or businesses that they have a personal interest in, which can create conflicts of interest. This limit ensures that producers maintain a responsible balance in their business practices, promoting fair competition and consumer protection. Controlled business typically refers to the practice where licensed producers solicit insurance for clients with whom they have a personal or professional connection, such as family members or employers. By limiting the amount of controlled business to not exceed premiums from other (unaffiliated) sources, the regulation prevents potential exploitation where agents might prioritize sales to known individuals over seeking broader, more diverse clientele. This rule is a part of the regulatory framework meant to ensure that insurance producers do not solely rely on controlled business as their primary source of income, which can lead to unethical selling practices and could negatively impact market integrity. Therefore, keeping controlled business within a certain limit helps to uphold ethical standards within the insurance industry.