Transact (Ins. Code §35) covers four things: solicitation, negotiations preliminary to execution, execution of a contract of insurance, and transacting matters after execution that arise out of the contract. Because post-sale service is part of transacting, it can require a license too. Whether anyone is paid a commission does not matter.
No license, no transacting: nobody may solicit, negotiate or effect insurance contracts without a valid license (§1631), and an insurer's certificate of authority does not exempt anyone. Transacting without a license is a misdemeanor: a fine up to $50,000, up to one year in county jail, or both (§1633).
Federal prohibited-person rule (18 U.S.C. §1033): a person convicted of a felony involving dishonesty or breach of trust may not willfully engage in the business of insurance affecting interstate commerce without the written consent of an insurance regulatory official that specifically refers to this law (commonly called a 1033 waiver). No waiting period ends the bar, and the employer cannot waive it.
Willful violation: a fine, up to 5 years in prison, or both.
Civil penalty (§1034): up to $50,000 per violation, or the compensation received, whichever is greater.
Nonadmitted insurers (§703): unless done by a surplus line broker, acting as agent for, advertising, or otherwise aiding a nonadmitted insurer in California is a misdemeanor, plus forfeiture of $500 and $100 for each month or part of a month the violation continues. No customer loss is needed, and a disclosure does not cure it.
Free insurance (§777.1): an insurer may not offer insurance as an inducement to buy property or services without a separate charge, and no agent, broker or solicitor may arrange it. One exception covers insurance incidental to selling services that costs the seller no more than $1 per purchaser per year. Who pays the premium does not change the result.
Errors and omissions (E&O) insurance is professional liability coverage for producers. It covers claims from negligent acts, errors and omissions in serving clients, such as submitting an application late, misstating what a policy pays, or recommending coverage that leaves a gap. Producers need it because a client can sue over an honest mistake. Commonly excluded: dishonest, criminal or intentional acts, regulatory fines, and a slip-and-fall in the office, which belongs under general liability. Check each policy for its terms.