Under Tennessee insurance law, offering a prospective policyowner a rebate of a portion of the premium, or any special favor or advantage in policy dividends not specified in the policy, is:

Why A is correct

T.C.A. § 56-8-104 prohibits rebating: offering or giving any rebate of premiums payable on the contract, any special favor or advantage in dividends or benefits, or any valuable consideration not specified in the policy, as an inducement to purchase. The prohibition protects fair competition by requiring every producer to sell on the policy's own terms. Neither insurer approval nor a written record legitimizes an undisclosed inducement, and the Tennessee Department of Commerce & Insurance treats these offers as disciplinary matters.

Why the other options are wrong

• B) Tennessee's rebating prohibition contains no small-amount exception; any rebate of premium or extra-contractual favor offered as an inducement violates the statute.
• C) Insurer consent in writing does not authorize a rebate; the prohibition applies to the offer itself, regardless of who signs off.
• D) Rebates are not a disclosure item; they are prohibited outright, so no front-page notice can make one lawful.

Memory hook

Premium kickbacks, dividend favors, anything extra not in the policy = rebate = banned.

Why C is correct

T.C.A. § 56-8-104 defines rebates and prohibits offering or giving any rebate of premium, any special favor or advantage in dividends or benefits, or any valuable consideration not specified in the policy as an inducement to purchase insurance. Tennessee, unlike some states, provides no merchandise de minimis exception in the statute, and the Tennessee Department of Commerce & Insurance disciplines producers who rebate.

Why the other options are wrong

• A) Actuarially sound class rating is ordinary and lawful underwriting; it involves no inducement outside the policy.
• B) Declining an applicant who fails underwriting is a routine underwriting decision, not the return of anything of value as an inducement.
• D) Truthful advertising of guaranteed benefits in the insurer's own literature is neither a rebate nor any inducement outside the contract.

Memory hook

Anything of value outside the policy to close the sale is a rebate — even a premium paid on the applicant's behalf.