State RegulationsTN specificDifficulty 1/5
A producer offers to pay the first premium out of her own pocket as an inducement for an applicant to buy a policy. Under Tennessee law and the interpretation of the Tennessee Department of Commerce & Insurance, this is:
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
T.C.A. § 56-8-104 prohibits rebates and any valuable consideration not specified in the policy given as an inducement to purchase, and the Tennessee Department of Commerce & Insurance has treated the payment of an applicant's premium on the producer's behalf as rebating in disciplinary matters. Personal goodwill, informal approval, or relabeling the payment does not remove it from the prohibition.
Why the other options are wrong
- A) The producer's motive of goodwill is irrelevant; paying the applicant's premium as an inducement falls squarely within T.C.A. § 56-8-104.
- C) Insurer approval cannot authorize conduct the statute prohibits; the rebate ban is a matter of state law.
- D) While premium funds are fiduciary, this conduct is analyzed as an unfair trade practice — rebating — not a fiduciary-duty question.
Memory hook
Pay their premium, pay the penalty: Tennessee calls it a rebate.