What does "controlled business" refer to in the insurance industry?

In the insurance industry, "controlled business" specifically refers to insurance policies that agents sell predominantly to themselves, friends, or family members. This terminology is important because it addresses potential ethical concerns and conflicts of interest that can arise when agents prioritize sales to personal connections over the needs of a broader client base.

When agents engage in selling controlled business, there is a risk that they may not be acting in the best interest of the policyholders, as their motivations might be influenced by personal relationships rather than objective financial or insurance needs. Regulatory bodies often monitor this type of activity to ensure that agents don’t exploit their positions to benefit themselves financially at the expense of providing fair and unbiased insurance services to the public.

Understanding the term "controlled business" is vital for agents to maintain ethical practices and comply with regulations that govern the insurance industry, reinforcing the necessity for diversification in their client base to avoid any potential ethical pitfalls.