Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Common to Life, Accident, Health and HMOMedium
A life insurance agent in Texas offers a prospective client a portion of their commission as an inducement to purchase a new policy. This practice is specifically prohibited under Texas law as which of the following?
- ARebating
- BUnfair Discrimination
- CCoercion
- DTwisting
Show answer & explanationAnswer & explanation
Correct answer: A. Rebating
Rebating is the illegal practice of offering an applicant for insurance an inducement not specified in the policy, such as a portion of the agent's commission, to persuade them to buy insurance. This is a clear violation of Texas insurance law.
Why the other options are wrong
- B. Unfair Discrimination involves unequal treatment of individuals in the same class, not offering inducements.
- C. Coercion involves using intimidation or threats, not offering a commission kickback.
- D. Twisting involves misrepresentation to induce a policy replacement, not offering a direct financial incentive.
Rebating (Prohibited Act)
The illegal practice of offering any valuable consideration or inducement not specified in the insurance policy, such as a portion of the agent's commission, to a prospective client to persuade them to purchase a policy.
- A direct financial incentive offered outside the policy contract.
- Considered an unfair trade practice.
- Prohibited to ensure fair competition and prevent discrimination.
Memory trick: Rebating a commission, that's a legal intermission.