Property & Casualty Insurance Exam (National Portion)Producers and AdjustersEasy
A property and casualty producer regularly offers clients a substantial portion of their commission as an incentive to purchase policies through them, stating it's a 'special discount for preferred customers.' This practice is not disclosed to the insurer. Which unfair trade practice is the producer committing?
- ADefamation
- BTwisting
- CFalse Advertising
- DRebating
Show answer & explanationAnswer & explanation
Correct answer: D. Rebating
Rebating is the illegal practice of offering an inducement, such as a portion of the commission or anything else of value not specified in the policy, to a client to buy insurance.
Why the other options are wrong
- A. Defamation involves making false statements about another insurer or producer.
- B. Twisting involves inducing a policyholder to lapse or surrender an existing policy for another's detriment.
- C. False advertising involves misleading statements about policies or services to the public.
Rebating
The illegal practice of offering a prospective client an inducement, such as a portion of the producer's commission or other valuable consideration not specified in the policy, to purchase insurance.
- Offering unapproved inducements
- Usually a portion of commission
- Illegal in most states
Memory trick: Rebating is like a secret 'kickback' to lure clients.