Renewal Insurance 1 Practice Test

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You recently purchased a book of commercial business from a retiring agent who did not always return audit return premiums. What action should you take?

Attempt to recover the return premiums from the former agent; if unsuccessful, notify customers of the situation.

When you take over a book of business, you’re responsible for premiums that are owed, including audit premiums that weren’t remitted by the seller. The correct approach is to first pursue recovery of those return premiums from the former agent who collected them; if recovery isn’t possible, you should then notify customers about the situation so they’re aware and you can address any shortfalls. Notifying customers first could hinder recovery, and doing nothing or suing the insurer misplaces responsibility and leaves the issue unresolved.

Notify customers before attempting recovery.

Do nothing; it's the former agent's problem.

Sue the insurer for damages.

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