State RegulationsTN specificDifficulty 1/5
Under Tennessee insurance law, which practice does 'rebating' describe?
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Answer & full 3-part explanation (select an option above, or peek)
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.