A producer offers a prospective client in Charlotte a cash rebate out of the producer's own commission as an inducement to buy a policy. Under G.S. 58-33-85, this offer is:

Why B is correct

Under G.S. 58-33-85, neither an insurer nor a producer may pay or offer any rebate, discount, premium reduction, special favor or other valuable consideration not specified in the policy as an inducement, and the insured may not knowingly accept one. The permitted exceptions — the producer's ordinary compensation and participating-policy dividends — do not cover a cash kickback tied to closing the sale.

Why the other options are wrong

• A) Disclosure does not cure rebating; the inducement itself is unlawful regardless of paperwork.
• C) No first-policy exception exists in G.S. 58-33-85.
• D) Participating-policy dividends are an exception to the prohibition, not a reason the rebate becomes mandatory.

Memory hook

Cash back to close the sale = rebating. Nobody may accept it.

Why A is correct

G.S. 58-33-85(a) bars any insurer or producer from offering or giving a rebate, premium reduction, or valuable consideration not specified in the policy as an inducement to purchase, and G.S. 58-33-85(b) provides that an insured may not knowingly accept one. The exceptions are narrow: producer compensation, participating-insurer dividends and unearned premiums, and trade practices permitted under G.S. 58-63-15(8)b.

Why the other options are wrong

• B) G.S. 58-33-85(b) makes knowing acceptance by the insured itself unlawful, so the applicant is not free of consequence.
• C) Disclosure to the Commissioner does not legalize rebating; only the statutory exceptions in G.S. 58-33-85(a) permit value outside the policy.
• D) No 30-day window exists; rebating is prohibited at all times under G.S. 58-33-85(a).

Memory hook

Rebating fails both ways — offering and knowingly taking are both banned.

Why A is correct

Under G.S. 58-33-85(a) and (b), neither insurers nor producers may offer or give any rebate, discount, credit, premium reduction, special favor, or other valuable consideration not specified in the policy as an inducement to purchase insurance, and the statute also bars the insured from knowingly accepting such an inducement. Returning commission as cash for the purchase is a classic prohibited rebate.

Why the other options are wrong

• B) Written consent has no legalizing effect here; the written-consent rule in the rebate statute concerns service fees charged above the premium, not commission kickbacks.
• C) There is no pre-clearance procedure that makes a rebate lawful; the prohibition is absolute for anything not specified in the policy.
• D) The statute contains no de minimis exception, so even small rebates of commission as inducements are prohibited.

Memory hook

Cash back to close the sale = rebating, banned for giver and taker.