Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Common to Life, Accident, Health and HMOHard
A Texas-licensed agent receives a commission of $500 for a new life insurance policy. The agent then offers the client a $50 gift card as a thank you for purchasing the policy through them. Is this action permissible under Texas insurance regulations?
- AYes, as long as the gift card is declared as income.
- BNo, offering a gift card is considered an illegal inducement.
- CNo, unless the gift card is offered to all clients uniformly.
- DYes, as long as the value of the gift card does not exceed 10% of the premium.
Show answer & explanationAnswer & explanation
Correct answer: B. No, offering a gift card is considered an illegal inducement.
In Texas, offering anything of value not specified in the policy as an inducement to purchase insurance is generally prohibited as rebating. While some states allow de minimis gifts, Texas law strictly prohibits such inducements with few exceptions, making the gift card illegal.
Why the other options are wrong
- A. Declaring income does not make an illegal inducement permissible.
- C. Uniformity does not negate the prohibition against offering inducements not specified in the policy.
- D. There is no general 10% rule for gift cards as inducements in Texas; rebating is broadly prohibited.
Illegal Inducement (Rebating)
Offering anything of value not specified in the insurance policy as an enticement to purchase insurance.
- Prohibited in Texas.
- Designed to ensure fair competition.
- Includes gifts, special favors, or personal services.
Memory trick: Don't bribe for business, it's a Texas no-go.