State RegulationsNC specificDifficulty 2/5
A North Carolina producer offers to give an applicant a portion of her own commission as an inducement to purchase a health policy. How is this practice classified under North Carolina law?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under G.S. 58-33-85(a),(b), offering any rebate, discount, premium reduction, or valuable consideration not specified in the policy as an inducement to purchase is rebating, and the insured may not knowingly accept it. The exception for producer compensation covers the commission the insurer pays the producer for the sale, not returning part of that commission to the applicant as a purchase inducement.
Why the other options are wrong
- A) The producer-compensation exception protects the commission the insurer pays the producer; handing part of it to the applicant is exactly what G.S. 58-33-85 prohibits.
- B) Twisting under G.S. 58-33-75 involves willful misrepresentation or incomplete comparisons to induce a lapse, surrender, exchange, or conversion, not giving value to an applicant.
- D) Written consent under G.S. 58-33-85 relates only to service fees in excess of the premium, not to rebates.
Memory hook
Giving your commission to the buyer is rebating - and nobody may knowingly accept it.