Two rules keep the market honest. One keeps ordinary producers from fronting for insurers the state has not admitted. The other keeps insurance from being handed out as a sales gimmick.
Nonadmitted insurers (Ins. Code §703): unless done by a licensed surplus line broker, acting as agent for a nonadmitted insurer, or aiding one to transact insurance in California for a home state insured (for example, collecting applications for it), is a misdemeanor. The violator also forfeits to the state $500, plus $100 for each month or fraction of a month the violation continues.
Worked example: a violation lasting 2 months and 10 days counts as three periods: $500 + (3 x $100) = $800. A partial month is not prorated.
Free insurance (Ins. Code §777.1): insurers, agents, brokers and solicitors may not offer insurance with no separate charge as an inducement to buy or rent property or services. A mattress store giving a free renters policy to each buyer is prohibited.
The section lists exceptions, including:
accident insurance offered with subscriptions to a newspaper of general circulation
insurance a credit union provides to members in connection with buying shares
insurance guaranteeing the performance of goods sold
insurance incidental to services that costs the seller no more than $1 a year per purchaser