Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Common to Life and Health InsuranceMedium
A Florida licensed health insurance agent receives a commission for placing a client with a particular insurer. The agent then offers to split a portion of this commission directly with the client to incentivize the purchase. Which unfair trade practice is the agent committing?
- AChurning
- BRebating
- CTwisting
- DUnfair discrimination
Show answer & explanationAnswer & explanation
Correct answer: B. Rebating
Offering to share a commission with a client as an inducement to purchase a policy is a form of rebating, which is illegal in Florida. Rebating involves offering special favors or inducements not specified in the policy.
Why the other options are wrong
- A. Churning involves excessive policy replacements within the same company for new commissions.
- C. Twisting involves inducing a policyholder to lapse or surrender an existing policy to replace it with another to the insured's detriment.
- D. Unfair discrimination involves charging different rates or offering different benefits to individuals of the same class and risk.
Rebating
An illegal practice where an insurance agent offers any valuable consideration or inducement not specified in the insurance policy, such as a portion of their commission, to persuade a client to purchase a policy.
- Prohibited in Florida.
- Involves offering something of value not in the policy.
- Aims to induce policy purchase.
Memory trick: No secret rebates, only policy rates.