What happens if an insurer employs unlicensed producers?

When an insurer employs unlicensed producers, the implications for the insurer can be significant, which is why the correct choice highlights that the insurer faces a penalty. Insurance regulations are designed to maintain professionalism and protect consumers. Using unlicensed individuals to sell or solicit insurance can lead to various sanctions for the insurer, including fines, restrictions on business activities, or even revocation of the insurer's license.

This regulatory framework ensures that all personnel involved in the insurance process are qualified and authorized to operate within the industry's legal parameters, promoting consumer trust and safeguarding market integrity. Thus, engaging unlicensed producers directly undermines these objectives, resulting in penalties against the insurer who is responsible for ensuring compliance with licensing laws.