State RegulationsTX specificDifficulty 2/5
To close a sale, a Texas agent tells the applicant that he will pay part of the first-year premium out of his own commission. How is this practice classified?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under TIC 541.056, a person may not pay or allow, directly or indirectly, any rebate of premium or any valuable consideration or inducement that is not specified in the policy, as an inducement to insurance. Giving up part of the commission to lower the applicant's cost is exactly that. Practical consequence: both the agent who offers the rebate and the applicant who knowingly accepts it are exposed to enforcement action.
Why the other options are wrong
- A) The rebating prohibition is a marketing and solicitation rule under Chapter 541, not a claim settlement rule, and it applies whether or not the insurer's premium changes.
- B) The insurer's knowledge or consent does not cure it; the prohibition runs against giving the inducement at all.
- C) Commission sharing is permitted only with a properly licensed person; the applicant is not licensed, so passing value to him is a rebate rather than sharing.
Memory hook
Anything sweetening the deal that is not written into the policy is a rebate.