Life-Producer Maryland Life Producer Exam (Series 20-27) Questions and Answers

Purpose of nonforfeiture options.

Nonforfeiture options ensure that a policyowner does not lose all value if premiums stop.

Evaluate each option.

A. Endowment value option

Not a standard nonforfeiture option.

B. Extended term insurance option

Uses cash value to buy term insurance for the same face amount, not the same policy type.

C. Loan value option

Involves borrowing, not policy continuation.

D. Reduced paid-up insurance option

Correct. Uses net cash value to purchase a paid-up policy of the same type with a reduced face amount.

Maryland consumer protection relevance.

Maryland nonforfeiture requirements ensure policyholders retain fair value upon lapse.

Conclusion.

The reduced paid-up insurance option meets the description, making option D correct.

Accelerated benefits are often triggered by the inability to perform activities of daily living (ADLs), which are standard measures of functional capacity.

Dressing (A), Eating (B), Bathing (C): Correctly identified as ADLs used to assess eligibility for benefits.

Speaking (D): Not classified as an ADL under Maryland insurance definitions or long-term care benefit triggers.

Qualified retirement plans are regulated by IRS rules:

Contributions cannot exceed IRS limits (C), which are updated annually.

Contributions are not arbitrarily determined by employers (A) or based on employee performance (D).

Employers may make varying contributions, invalidating (B).

Offering settlements below fair value (D) is prohibited as an unfair claims settlement practice under Maryland law. Insurers must handle claims in good faith and pay fair settlements based on policy terms.

Negotiating claims (A): Permitted when there are legitimate disputes over coverage or liability.

Denying claims (B): Allowed if based on valid policy exclusions or conditions.

Including arbitration provisions (C): Legal, provided they comply with state guidelines and are not coercive.

Unfair claims settlement practices include:

Misrepresenting policy provisions.

Failing to promptly investigate or settle claims.

Attempting to settle for less than reasonable amounts.

Purpose of the needs approach.

The needs approach calculates the amount of life insurance needed to meet specific financial obligations upon the insured’s death.

Apply the concept.

It considers income replacement, debts, education costs, and final expenses.

Evaluate each option.

A. Types of individuals

Prospecting issue, not a needs analysis.

B. Amount of life insurance

Correct. This is the primary use of the needs approach.

C. Best companies

Product selection issue, not needs-based.

D. Prospecting method

Sales strategy, not needs-based.

Maryland suitability relevance.

Maryland requires producers to make suitable recommendations, and the needs approach supports suitability and good faith.

Conclusion.

The needs approach is used to determine how much insurance to recommend.

Role of federal securities regulation.

Securities laws regulate investments such as:

Stocks

Bonds

Variable life insurance

Variable annuities

Authority of the SEC.

The Securities and Exchange Commission (SEC) is the federal agency created by Congress to:

Enforce federal securities laws

Regulate securities markets

Protect investors

Relevance to insurance producers.

Maryland producers selling variable products must:

Hold an insurance license, and

Be registered with FINRA and regulated by the SEC.

Why the other options are incorrect.

The other agencies listed do not exist under federal law.

Conclusion.

The SEC enforces securities laws enacted by Congress.

The Maryland Insurance Administration enforces disciplinary measures:

Fraudulent practices (A), mishandling premiums (B), and violating regulations (D) are grounds for suspension or revocation.

Sharing commissions (C) with agents of the same license type is permitted under Maryland law if done legally and transparently.

Cash values in whole life insurance are a key feature, and they:

Accumulate as a result of the level premium concept (A), where excess premiums in the early years of the policy build the cash value.

Are guaranteed in whole life policies, contrary to option B.

Do not equal the face value at age 65 (C) unless specifically structured for that purpose.

Continue to grow beyond age 65 as long as the policy remains active, invalidating option D.

The taxable portion of benefit payments under a life income settlement option depends on the beneficiary’s life expectancy:

Life expectancy impacts (B) how the payments are taxed, as longer payment durations result in more taxable income over time.

The policy’s inclusion in the estate (A) is unrelated to the beneficiary’s life expectancy.

The total death benefit (C) is fixed and not influenced by the beneficiary’s lifespan.

Premium rates (D) are determined during underwriting, not affected by beneficiary life expectancy.

A replacement occurs when a new life insurance policy is purchased, and the existing policy is surrendered, terminated, or its benefits reduced to make way for the new policy.

Replacement (B): This is regulated to ensure the policyholder is not disadvantaged by switching policies, often requiring additional disclosures and forms, like Maryland’s "Important Notice Replacement of Life Insurance or Annuities."

Nonforfeiture (A): Refers to retaining cash value benefits when a policy lapses or is canceled, not applicable here.

Reinvestment (C): Generally relates to financial or investment accounts, not life insurance.

Rollover (D): Pertains to tax-advantaged accounts like IRAs, not applicable to insurance.

Definition of needs analysis.

Needs analysis is a planning method that evaluates:

Income replacement

Debts

Education funding

Final expenses

Survivor needs

Purpose of the method.

To determine how much life insurance is needed, not just whether insurance is needed.

Evaluate each option.

A. Identifies needs of the individual and dependents

Correct. This is the core function.

B. Eliminates future estimates

Incorrect. Inflation and interest must still be considered.

C. Requires underwriter participation

Incorrect. Needs analysis is done by the producer and client.

D. Ignores Social Security

Incorrect. Social Security benefits are included in analysis.

Maryland suitability relevance.

Needs analysis supports suitability and good-faith recommendations required by Maryland law.

Conclusion.

Needs analysis identifies the financial needs of the individual and dependents.

Purpose of underwriting criteria.

Underwriting criteria must relate to risk assessment or policy performance.

Permissible factors.

Gender: Historically used where actuarially justified.

Occupation: Reflects hazard exposure.

Ability to pay premiums: Ensures policy sustainability.

Prohibited factors.

Religion is a protected characteristic and cannot be used in underwriting.

Maryland anti-discrimination rules.

Maryland prohibits unfair discrimination unrelated to actuarial risk.

Conclusion.

Religion is not a lawful underwriting criterion.

The Maryland Insurance Administration (MIA) is the regulatory body responsible for ensuring compliance with state insurance laws, including identifying unfair trade practices:

The Maryland Insurance Administration (A): Has statutory authority to examine insurers’ books and records to investigate potential violations and protect consumers.

National Association of Insurance Commissioners (B): Provides guidance but lacks enforcement powers in Maryland.

Federal Deposit Insurance Corporation (C): Regulates banks, not insurers.

PCIGC (D): Handles claims for insolvent insurers but does not investigate trade practices.

Accelerated benefits allow a policyholder to receive a portion of the death benefit early, often due to terminal illness or specific qualifying conditions:

Decreases the death benefit (D): The accelerated amount reduces the death benefit available to beneficiaries.

Increases the cash value (A): Incorrect; accelerated benefits are drawn from the policy, reducing cash value and death benefits.

Increases the policy premium (B): Premiums generally remain unchanged.

Decreases the grace period (C): Not affected by accelerated benefits.

The principle of estoppel prevents a party from asserting rights or enforcing terms if their prior actions contradicted such enforcement.

Estoppel (C): If the insurer knowingly disregards a policy provision (e.g., a late premium payment), they may be barred from enforcing it later if the policyholder relied on the prior inaction.

Adhesion (A): Refers to contracts where terms are dictated by one party (e.g., the insurer), not applicable here.

Waiver (B): Occurs when an insurer voluntarily relinquishes a known right but does not necessarily create future obligations like estoppel does.

Subrogation (D): Involves transferring the insured’s claim rights to the insurer after a loss, unrelated to this scenario.

Meaning of misrepresentation under Maryland insurance law.

Maryland Insurance Article Title 27 prohibits any false, misleading, or deceptive statements made in the sale of insurance.

Misrepresentation includes failing to clearly disclose the true nature, benefits, or limitations of a policy.

Apply the facts of the question.

The producer either misleads or fails to disclose what the policy truly is.

This directly matches the definition of misrepresentation.

Why the other options are incorrect.

Defamation involves false statements harming another insurer’s reputation, not misleading a consumer.

Unfair discrimination involves treating insureds differently without actuarial justification.

Coercion involves forcing a person to purchase insurance under threat or pressure.

Conclusion.

Failing to disclose the true nature of a policy is a classic example of misrepresentation under Maryland law.

Purpose of key person life insurance.

Key person insurance protects a business against financial loss caused by the premature death of a critical employee.

Types of losses covered indirectly.

Loss of revenue

Loss of expertise or leadership

Costs associated with:

Recruiting a replacement

Training a replacement

Loss of business continuity

Evaluate each option carefully.

A. Tax deduction

Incorrect. Premiums for key person insurance are generally not tax-deductible.

B. Pay estate taxes for the employee

Incorrect. Estate taxes are a personal matter, not a business obligation.

C. Pay the employee’s mortgage

Incorrect. This is unrelated to the business’s financial exposure.

D. Pay for replacement costs

Correct. This is a classic and legitimate use of key person insurance.

Maryland insurable interest relevance.

Maryland law recognizes that businesses have an insurable interest in key employees whose death would cause economic harm.

Conclusion.

Businesses buy key person life insurance to cover financial losses and replacement costs.

Understanding surrender and loan features.

Surrender values and policy loans are features tied to cash value life insurance.

These features are required by nonforfeiture laws, which protect policyowners from losing all value if a policy is discontinued.

Which policies build cash value?

Universal life: Builds cash value → surrender and loan features required.

Twenty payment life: A form of whole life → cash value present.

Endowment insurance: Accumulates cash value and matures at a set age.

Why term life is different.

Five-year term life provides pure death protection only.

No cash value accumulates.

Therefore, no surrender value and no loan provision are required or available.

Maryland nonforfeiture relevance.

Maryland requires nonforfeiture protections only for policies with cash value.

Term insurance is excluded from these requirements.

Conclusion.

Because it has no cash value, five-year term life does not require surrender or loan features.

Meaning of cost basis.

Cost basis represents the amount of after-tax money the owner has invested in the contract.

Non-qualified annuity definition.

A non-qualified annuity is purchased with after-tax dollars, not through a qualified retirement plan.

How cost basis is calculated.

The cost basis equals the sum of all premiums paid, minus any non-taxable withdrawals previously received.

Why this matters for taxation.

When distributions occur:

Earnings are taxable as ordinary income.

The cost basis portion is returned tax-free.

Evaluate each option.

A. Opportunity cost

An economic concept, not a tax basis.

B. Total premiums paid

Correct. This is the owner’s investment in the contract.

C. Guaranteed cash value

A policy feature, not tax basis.

D. Actual cash value

Includes earnings, not just after-tax investment.

Conclusion.

The cost basis of a non-qualified annuity is the total premiums paid.

Understanding IRA transfers.

A direct transfer occurs when funds move directly from one IRA trustee or custodian to another, without the owner taking possession.

Tax treatment of direct IRA transfers.

Because the IRA owner never receives the funds, the IRS does not treat the transfer as a distribution.

There is:

No income tax

No early withdrawal penalty

No reporting as taxable income

Distinguish from rollovers.

A rollover may involve temporary receipt of funds and strict time limits.

A direct transfer avoids these risks entirely.

Evaluate each option.

A. Nontaxable event

Correct. Direct IRA-to-IRA transfers are tax-free.

B. Taxable event

Incorrect. No constructive receipt occurs.

C. Premature distribution

Incorrect. No distribution is made.

D. Required distribution

Incorrect. Required minimum distributions cannot be transferred.

Maryland relevance.

Maryland follows federal income tax treatment for IRA transfers.

Conclusion.

A direct IRA-to-IRA transfer is a nontaxable event.

Purpose of the notice of information practices.

Maryland insurance law requires insurers to inform applicants about how personal information is collected, used, and disclosed.

Evaluate each option.

A. Request information

Incorrect. Applications collect information; notices explain practices.

B. Provide information as it is gathered

Incorrect. The notice explains procedures, not the actual data.

C. Describe methods used in gathering information

Correct. This includes medical reports, consumer reports, and investigative sources.

D. Prohibit collection

Incorrect. Applicants may have access rights, but cannot generally prohibit lawful collection.

Consumer protection relevance.

Transparency in information practices supports informed consent and fair dealing.

Conclusion.

The notice’s purpose is to describe how information is collected, making option C correct.

What a non-qualified annuity is.

A non-qualified annuity is purchased with after-tax dollars, not through a qualified retirement plan (such as an IRA or 401(k)).

Tax treatment of annuity distributions.

Distributions are taxed under the interest-first (LIFO) rule, meaning:

Earnings are taxed first as ordinary income.

Principal (cost basis) is returned tax-free only after earnings are exhausted.

Age-based penalty rule.

If distributions are taken before age 59½, the taxable portion may be subject to:

Ordinary income tax, and

An additional 10% federal penalty tax, unless an exception applies.

Evaluate each option.

A. Fully taxable at all times

Incorrect. Only the earnings portion is taxable.

B. Must begin by age 70½

Incorrect. Required minimum distributions apply to qualified plans, not non-qualified annuities.

C. Before age 59½ may be subject to a penalty

Correct.

D. After age 59½ tax exempt

Incorrect. Earnings are still taxable as ordinary income.

Maryland tax conformity.

Maryland follows federal tax treatment for annuity distributions.

Conclusion.

Early distributions from non-qualified annuities may be subject to a penalty, making option C correct.

Insurance licensing ensures agents meet professional standards:

Licensure demonstrates qualifications (B) to act ethically and competently on behalf of insurers.

It does not limit the number of agents (A).

Sales activity monitoring (C) and rate regulation (D) are separate regulatory functions.

Who is a managing general agent (MGA).

A managing general agent is a person or entity that performs significant underwriting, policy issuance, or claims authority on behalf of an insurer.

MGAs act as an extension of the insurer, not the insured.

Licensing requirement in Maryland.

Maryland law requires MGAs to be properly licensed.

Acting as an MGA without a license is unlawful.

Contractual requirement.

Maryland requires a written agreement between the MGA and the insurer that clearly defines authority, duties, and limitations.

License renewal.

MGA licenses follow Maryland’s standard biennial renewal cycle, consistent with producer licensing.

Why option D is incorrect.

MGAs primarily represent the insurer, not the insured.

Representing the insured is the role of an agent or broker, not an MGA.

Conclusion.

The incorrect statement is that an MGA represents the insured.

General tax rule for life insurance death benefits.

Under federal tax law, life insurance death proceeds paid to a beneficiary are generally income-tax free.

Why this rule exists.

Life insurance is intended to provide financial protection, not taxable income replacement.

Evaluate each option carefully.

A. Exempt from federal income tax

Correct. This is the general rule.

B. Transfer for value

Only applies in limited circumstances when a policy is sold or transferred.

C. Cost recovery rule

Applies to annuities, not death benefits.

D. Interest-first rule

Also applies to annuity distributions, not life insurance death proceeds.

Maryland tax treatment.

Maryland follows the federal rule and does not impose state income tax on life insurance death benefits.

Conclusion.

Life insurance death proceeds are generally income-tax free.

Purpose of mortgage protection insurance.

Mortgage protection life insurance is designed to:

Pay off or reduce the mortgage balance if the insured dies.

Structure of most mortgage protection policies.

The death benefit typically decreases over time as the mortgage balance declines.

However, the premium usually remains level throughout the policy term.

Why level premiums are used.

Level premiums make budgeting easier for homeowners.

The insurer prices the policy based on average risk over the term.

Evaluate each option.

A. Remains level

Correct.

B. Increases every five years

Describes step-rate term insurance, not typical mortgage protection.

C. Increases every ten years

Not standard for mortgage protection.

D. Fluctuates with interest rate

Incorrect. Insurance premiums are not tied to mortgage interest rates.

Maryland consumer disclosure relevance.

Maryland requires producers to explain decreasing benefits and level premiums to avoid consumer confusion.

Conclusion.

Mortgage protection premiums typically remain level.

Definition of single premium whole life insurance.

A single premium whole life policy is funded with one lump-sum premium payment at issue.

No additional premiums are ever required.

What the single premium accomplishes.

That one payment is actuarially calculated to:

Provide lifetime coverage, and

Build immediate cash value sufficient to support the policy for life.

Why other time periods are incorrect.

One month / one year: These describe term or annually renewable policies, not whole life.

To age 65: This describes limited-pay whole life, not single premium.

Maryland consumer protection relevance.

Maryland requires disclosure that single premium policies may trigger tax consequences and MEC status, reinforcing that the payment funds the entire policy duration.

Conclusion.

One premium payment covers the full life of the policy.

A viatical settlement involves selling a life insurance policy to a third party for immediate cash, typically to cover expenses associated with terminal illnesses.

Viatical settlement (C): The policyowner receives a percentage of the death benefit to cover high medical costs or improve their quality of life.

Nonforfeiture options (A): Relate to preserving cash value if the policy lapses, not a sale.

Accelerated death benefit (B): Involves accessing a portion of the death benefit directly from the insurer, not through a third party.

Survivorship policies (D): Cover two insureds and pay the death benefit only after both have passed away, unrelated to this case.

Purpose of the automatic premium loan provision.

The APL provision prevents unintentional policy lapse due to nonpayment of premium.

How the APL works.

If a premium is not paid by the end of the grace period:

The insurer automatically makes a policy loan

The loan amount equals the unpaid premium

The loan is secured by the policy’s cash value

Why the other options are incorrect.

A. Additional insurance: Describes paid-up additions, not APL.

B. Bank loans: APL uses internal policy loans.

C. Waiver of premium: A separate rider, not APL.

Maryland disclosure relevance.

Producers must explain that APL loans accrue interest and reduce cash value and death benefits.

Conclusion.

The APL provision uses a policy loan to pay overdue premiums.

To be legally enforceable, a contract must meet the following requirements:

Offer and acceptance (A): One party must propose terms, and the other must agree to them.

Competent parties (B): Individuals must have the legal capacity to enter a contract (e.g., not minors or mentally incapacitated).

Consideration (C): Each party must provide something of value (e.g., money, services, or promises).

Written evidence (D) is not required for all contracts, as some verbal agreements are enforceable depending on the type of contract (except for specific cases like real estate).

Unfair trade practices under Maryland insurance law.

Maryland Insurance Article Title 27 prohibits unfair methods of competition and deceptive acts in the insurance business.

Evaluate each option.

A. Misrepresentation

Explicitly prohibited as an unfair trade practice.

B. Fraudulent advertising

Prohibited under Maryland law.

C. Illegal inducement

Includes rebating and other improper incentives and is prohibited.

D. Reinsurance

A legitimate, lawful business practice between insurers used to manage risk.

Conclusion.

Reinsurance is not an unfair trade practice, making option D correct.

Tax treatment of deferred annuities.

A deferred annuity accumulates interest on a tax-deferred basis.

Interest earnings are not reported annually while they remain in the contract.

Trigger for taxation.

Federal tax law, followed by Maryland for income reporting, requires taxation only when distributions are received.

Interest is taxed as ordinary income, not capital gains.

Evaluate each option.

A. Annually

Incorrect. This would describe taxable interest accounts, not annuities.

B. After recovering principal

Incorrect. Under the LIFO rules for annuities, interest is taxed first.

C. Upon receiving distributions or income benefits

Correct. This is when taxation occurs.

D. Tax-exempt

Incorrect. Annuities are tax-deferred, not tax-exempt.

Conclusion.

Interest income is reported when distributions are received.

The needs approach assesses financial requirements to determine the appropriate amount of life insurance.

Covering unexpected expenses (B): Emergency reserve funds help beneficiaries handle unforeseen costs, such as urgent repairs, medical emergencies, or temporary loss of income.

College tuition and books (A): This falls under education funding needs, not emergency reserves.

Paying off mortgages (C): This is categorized as debt repayment, separate from the reserve fund.

Providing retirement income (D): This is a long-term goal that requires separate planning, not immediate financial reserves.

The Maryland Insurance Administration (MIA) is a state government entity responsible for regulating the insurance industry in Maryland.

State government (B): MIA enforces insurance laws, reviews policy forms, licenses insurers and producers, and investigates consumer complaints.

Federal government (A): Oversees broader regulations, like ERISA, but does not directly manage state-level insurance matters.

National Association of Insurance Commissioners (C): A regulatory support organization, not a governing body.

Maryland General Assembly (D): Creates state laws, but enforcement falls under the MIA.

Universal life insurance policies offer flexibility and adaptability, but they also have specific rules:

Minimum cash value vs. death benefit (A): Correct. IRS rules require a minimum difference to maintain tax-advantaged status.

Level or increasing death benefits (B): Correct. Policyholders can choose based on their needs.

Cash value withdrawals (C): Correct. Withdrawals are allowed but may incur surrender charges.

Automatic lapse (D): Incorrect. Universal life does not immediately lapse due to missed payments; instead, costs are deducted from the cash value, and the policy remains in force until the cash value is depleted.

When a death claim is filed on a life insurance policy with an outstanding loan:

Deducted from the face amount (A): The death benefit is reduced by the loan balance plus any accrued interest, ensuring the insurer recovers the outstanding debt.

Beneficiary obligation (B): Incorrect. The beneficiary receives the adjusted benefit without personal liability for the loan.

Claim against the estate (C): Incorrect. The loan is tied to the policy, not the estate.

Canceled without adjustment (D): Incorrect, as insurers must recoup the loan amount from the death benefit.

When a group policy is issued to a labor union, Maryland law requires that eligibility criteria ensure fairness and inclusivity:

All of the members of the union (B): Eligible members must be treated equally under the group policy. Coverage cannot exclude individuals based on factors like age or health, provided they are active members.

Members of any union (A): Policies are issued to specific unions, not broadly.

Only members under age 65 (C): Age discrimination is prohibited unless specifically linked to policy provisions.

Healthy members (D): Group policies cannot discriminate based on health status.

Unfair trade practices under Maryland Insurance Law.

Maryland Insurance Article Title 27 and related regulations prohibit misrepresentation, false advertising, and defamation in insurance transactions.

Evaluate each option.

A. Misrepresenting policy benefits

This is expressly prohibited and considered an unfair trade practice.

B. Misrepresenting insurance as shares of stock

This is a classic example of illegal misrepresentation under Maryland law.

C. Publishing false derogatory statements about an insurer’s financial condition

This constitutes defamation and is an unfair trade practice.

D. Sharing commissions with agents who have equivalent licenses

This is permitted in Maryland, provided all parties are properly licensed for the same line of insurance.

Conclusion.

Commission sharing among equally licensed agents is lawful and therefore not an unfair trade practice.

Definition of the law of large numbers.

This actuarial principle states that as the number of exposure units increases, actual losses will more closely match expected losses.

Why insurers rely on this law.

It allows insurers to:

Set accurate premiums

Maintain solvency

Spread risk efficiently

Evaluate each option.

A. Predictability is impaired

Incorrect; predictability improves.

B. Individual losses predicted

Incorrect; only group results are predictable.

C. Predictability improves

Correct.

D. Number of losses decreases

Incorrect; frequency does not necessarily decline.

Maryland solvency oversight relevance.

The Maryland Insurance Administration relies on actuarial predictability to ensure insurers remain financially sound.

Conclusion.

Increasing similar exposure units improves predictability of losses.

What “beneficiary by class” means.

A class designation identifies beneficiaries by group description, not by individual names.

Examples include:

“Children of the insured”

“Surviving spouse”

How benefits are paid.

Members of the class who qualify at the insured’s death receive proceeds.

Shares are divided equally unless stated otherwise.

Evaluate each option.

A. Business life insurance

Incorrect. Class designation can be used in personal policies.

B. No primary beneficiary allowed

Incorrect. A class can be a primary beneficiary.

C. Individuals not named

Correct. The class is described, not named individually.

D. Unrelated beneficiaries

Incorrect. Class members are often family.

Maryland relevance.

Maryland recognizes class designations as valid beneficiary arrangements.

Conclusion.

A class designation means beneficiaries are not named individually.

Purpose of key person life insurance.

Key person (key employee) life insurance is designed to protect a business against financial losses resulting from the death of an individual who is critical to the company’s success.

Evaluate each option.

A. Loss of leadership

A valid reason; leadership loss can disrupt operations and strategy.

B. Reduction of profits

A valid reason; key individuals often generate revenue or manage profit centers.

C. Loss of new business

A valid reason; sales executives or innovators often drive growth.

D. Increased pension liability

Not a valid reason; pension obligations are unrelated to the purpose of key person insurance.

Maryland insurance context.

Maryland recognizes key person insurance as a legitimate business risk management tool, but its purpose is income and continuity protection, not funding employee benefits.

Conclusion.

Increased pension liability is unrelated to key person coverage, making option D correct.

Allowing an applicant to sign a blank or incomplete application (B) violates ethical and legal standards, as it undermines transparency and could lead to disputes about coverage or claims.

Selling insurance to family members (A): Permitted as long as the transactions are conducted ethically and comply with Maryland laws.

Countersigning policies (C): Required in certain situations to validate contracts in Maryland.

Splitting commissions with nonresident producers (D): Permissible under Maryland law, provided both producers are licensed and involved in the transaction.