Texas General Lines — Life, Accident, Health and HMOTexas Statutes and Rules Common to Life, Accident, Health and HMOEasy
A Texas-licensed agent is found to have offered a prospective client a discount on their annual premium if they purchase a new life insurance policy through them, rather than through another agent. This action is considered which of the following?
- ARebating
- BCoercion
- CTwisting
- DDefamation
Show answer & explanationAnswer & explanation
Correct answer: A. Rebating
Offering a discount on a premium as an inducement to purchase a policy is considered rebating, which is an illegal practice in Texas. This gives an unfair advantage and is anti-competitive.
Why the other options are wrong
- B. Coercion is compelling someone to act against their will through force or intimidation.
- C. Twisting involves misrepresenting a policy to induce a policyholder to lapse or surrender an existing policy to replace it with a new one.
- D. Defamation involves making false or malicious statements about an insurer's financial condition or about an agent.
Rebating
Rebating is an illegal practice where an insurance agent offers a prospective client a portion of their commission or anything of value not specified in the policy as an inducement to buy insurance.
- Illegal in Texas and most states
- Considered an unfair trade practice
- Intended to prevent unfair competition among agents
Memory trick: Don't REBATE, or you'll be in a STATE of trouble!