State RegulationsCO specificDifficulty 1/5
A Colorado producer offers to pay a prospective client a cash bonus out of the producer's own first-year commission if the client buys a policy from him. Under C.R.S. § 10-3-1104(1)(g), this is:
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
C.R.S. § 10-3-1104(1)(g) prohibits offering any valuable consideration not specified in the insurance contract as an inducement to purchase, which includes paying a cash bonus out of the producer's commission. Whether the money comes from the commission or from the premium is irrelevant; the inducement itself is the rebate.
Why the other options are wrong
- A) The source of the funds does not matter; commission-funded inducements are rebates just as premium refunds are.
- B) No client waiver can authorize a rebate, because the prohibition protects all applicants from unequal treatment.
- C) Unfair claim settlement practices concern the handling of claims after a loss, not sales inducements.
Memory hook
Commission-funded gifts are rebates in disguise.