State RegulationsCO specificDifficulty 1/5
A Colorado producer offers to pay a new client a cash bonus equal to part of the producer's first-year commission if the client buys a policy — an inducement not described anywhere in the contract. This practice is:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
C.R.S. § 10-3-1104(1)(g) prohibits giving, or offering to give, any valuable consideration not specified in the contract as an inducement to purchase insurance. A commission-funded cash bonus is exactly that: it gives this client an advantage other policyholders do not receive, creating illegal price competition between producers for the same product.
Why the other options are wrong
- A) Twisting requires inducing lapse or replacement of existing coverage through misrepresentation; nothing here turns on an existing policy.
- C) The coercion-of-debtors statute addresses loan conditions, not purchase inducements.
- D) The source of the money is irrelevant; inducements outside the contract are prohibited even when funded from commission.
Memory hook
Money back to buy = rebate = barred. The contract lists every perk or none exist.