State RegulationsTX specificDifficulty 2/5
A Texas life agent tells a prospect, 'Buy this policy from me and I'll give you back part of my commission.' Under TIC 541.056, how is this offer classified?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under TIC 541.056 it is an unfair method of competition and an unfair or deceptive act to offer or pay, directly or indirectly, any valuable consideration not specified in the policy as an inducement to purchase insurance. Cash or other value handed back out of the agent's own commission is exactly that. The source of the money, the insurer's consent and disclosure on the application each fail to cure the violation, and the agent is exposed to license discipline for a prohibited trade practice.
Why the other options are wrong
- B) Disclosure does not make an unlawful inducement lawful.
- C) Rebating turns on the inducement, not on whose money funds it; the agent's own commission counts.
- D) An insurer cannot authorize a practice the Texas Insurance Code forbids.
Memory hook
Cash back to close the sale is rebating, whatever you call it.