California Life and Health Insurance Practice Exam

According to California Insurance Code, what is an "insurance broker"?

1. A person who sells insurance directly to consumers

2. A person authorized to assist a broker or agent in transacting insurance

3. An employee of an insurance company

4. A person who only provides financial advice

The correct answer is: A person authorized to assist a broker or agent in transacting insurance

In the context of California Insurance Code, an "insurance broker" is defined as a person who is authorized to assist a broker or agent in transacting insurance. This designation is important because insurance brokers serve as intermediaries who help consumers find insurance products that meet their needs, but they operate independently of any single insurance company. They can represent multiple insurers, enabling them to offer a broader range of options to their clients compared to agents who may be tied to specific companies. This role is vital in ensuring that consumers receive impartial guidance and have access to various policies. The other choices reflect roles or definitions not aligned with the legal definition of an insurance broker. Selling insurance directly to consumers pertains more to insurance agents than brokers, while employees of insurance companies are typically referred to as agents or company representatives rather than brokers. Providing financial advice does not encompass the specific activities associated with the insurance brokerage profession under California law, which centers around the transaction of insurance products and representation of the client's interests in the market.