A business practice exists where an insurance producer generates business from sources wherein they, their immediate family, or their employer exert direct or indirect control. This situation commonly arises when a real estate agency also operates as an insurance agency, primarily selling homeowners insurance to its real estate clients. The key aspect is that the insurance agent’s access to and influence over the pool of potential clients is intrinsically linked to another business they control.
The existence of this practice is subject to regulation in many jurisdictions due to potential conflicts of interest and the risk of unfair market practices. Regulations aim to ensure that consumers are not pressured into purchasing insurance from a specific provider solely because of their existing relationship with the controlling entity. Historically, these rules emerged to prevent the formation of insurance monopolies and to safeguard consumer choice in a competitive marketplace. Benefits of regulation include fostering competition and maintaining the integrity of the insurance industry.
