State RegulationsNC specificDifficulty 2/5
A North Carolina producer offers to pay a portion of an applicant's first-year premium out of her own commission to close a sale. How is this treated under North Carolina law?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under G.S. 58-33-85(a),(b), no producer may pay or offer any rebate, discount, premium reduction, special favor, or valuable consideration not specified in the policy as an inducement to purchase, and the insured may not knowingly accept one. Kicking back part of the commission to cover the applicant's premium is a classic illegal rebate, and the producer risks civil penalty and license action.
Why the other options are wrong
- B is wrong because the producer-compensation exception permits the insurer to pay the producer a commission for selling, not to have the producer divert that commission into the applicant's premium.
- C is wrong because the written-consent exception in G.S. 58-33-85 applies to service fees in excess of the premium, not to rebating part of the premium itself.
- D is wrong because uniformity does not cure the violation; any premium reduction not specified in the policy is prohibited regardless of how widely it is offered.
Memory hook
If the discount is not printed in the policy, giving it back is rebating.