State RegulationsTX specificDifficulty 1/5
A Texas agent tells an applicant, 'Buy the policy through me and I will hand you back part of my commission in cash.' How is this practice classified?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under TIC 541.056, offering or paying any valuable consideration or inducement to purchase insurance that is not specified in the policy is rebating, an unfair method of competition and an unfair or deceptive act. Related rebating prohibitions appear in TIC 1702.102 and TIC 1702.152. The source of the money and the applicant's willingness are irrelevant, and the conduct also exposes the agent to license discipline under TIC 4005.101-.102.
Why the other options are wrong
- A) Rebating is prohibited even when the agent funds the inducement out of earned compensation.
- B) Defamation under TIC 541.053 concerns false statements about the financial condition of a person engaged in the insurance business.
- D) Unfair claim settlement practices are governed by TIC 541.101-.111 and Chapter 542 and concern handling of claims, not inducements to buy.
Memory hook
Cash back from a commission is rebating — if it is not in the policy, it cannot be offered.