State RegulationsNC specificDifficulty 2/5
A licensed North Carolina producer offers to give a prospective client a cash rebate of part of the producer's own commission as an inducement to purchase a life policy. What is this practice called, and what is its status?
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Answer & full 3-part explanation (select an option above, or peek)
Why D 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 valuable consideration not specified in the policy as an inducement to purchase, and the insured may not knowingly accept one. Exceptions include ordinary producer compensation, participating-insurer dividends, and trade practices otherwise permitted by law.
Why the other options are wrong
- A) Twisting is misrepresenting policy terms to induce a lapse or surrender; it is a different practice and equally prohibited.
- B) Coercion involves compelling a course of action; the conduct described is rebating, which is prohibited regardless of insurer approval.
- C) Defamation is disparaging a competitor's financial condition; nothing here disparages another insurer.
Memory hook
Cash back to close the sale is rebating - banned for both sides.