Montana State Life Insurance Practice Exam

Controlled business refers to insurance written on individuals except for which category?

1. Relatives

2. Neighbors

3. Employees

4. Spouse

The correct answer is: Neighbors

Controlled business refers to insurance policies that an agent writes predominantly on individuals with whom they have a personal relationship, as this could indicate a conflict of interest and raise ethical concerns. The emphasis is on avoiding situations where agents might prioritize their personal connections over their professional responsibilities. In this context, neighbors typically do not fall under the category of controlled business. While neighbors can be considered part of one's community, they are not typically viewed as individuals with whom there is a personal relationship of the same degree as relatives, employees, or a spouse. Insurance regulations generally scrutinize the writing of policies on those who have a close relationship with the agent to ensure that the business is conducted ethically and that the agent’s motivations are transparent. Thus, the relationship with neighbors is less personal compared to the other options, which are explicitly covered by the definition of controlled business due to the closeness of those relationships.