Rebating

Producer Calder writes an application for the term policy his client asked for, then quietly adds an accidental death rider the client never requested and never discussed, and quotes a single combined premium so the extra charge is not visible. Which unfair practice does this describe?

1. A.ChurningChurning is a producer generating new business by replacing his own clients existing policies. No replacement occurred here.
2. B.RebatingRebating gives the consumer something of value as an inducement to buy. Here the consumer is being charged more, not given something.
3. C.TwistingTwisting is inducing the replacement of an existing policy through misrepresentation. No existing policy is being replaced.
4. D.SlidingCorrect. Sliding is the addition of an unrequested coverage or fee whose charge is concealed from the consumer.

Why: This is SLIDING: adding a coverage, product or fee the consumer did not request and did not knowingly agree to, and collecting the charge for it. The essence of the offense is concealment of a charge for something unrequested, which is why Calder combined the premium into one figure. It is distinct from REBATING, which gives the consumer something of value, and from TWISTING and CHURNING, which involve inducing the replacement of existing coverage through misrepresentation. Note that offering the rider openly and having the client accept it would be perfectly proper.

A bank officer tells a small business owner that his loan application will be approved only if he buys the required life insurance through the bank's own affiliated insurance agency. Which unfair trade practice is this?

1. A.Rebating.Rebating is giving a client a share of the premium or anything of value not stated in the policy as an inducement to buy. Here nothing is being given to the borrower; something is being demanded of him.
2. B.Coercion.Correct. Conditioning approval of a loan on buying insurance from a particular source is coercion, denying the consumer a free choice of insurer and restraining the business of insurance.
3. C.Defamation.Defamation is making or circulating a false, maliciously critical statement about the financial condition of an insurer or a person. No statement about anyone's finances is involved.
4. D.Twisting.Twisting is inducing a policyowner to drop an existing policy and buy another through misrepresentation or incomplete comparison. No existing policy is being replaced here.

Why: COERCION is any act of boycott, coercion or intimidation that results in, or tends to result in, an unreasonable restraint of or monopoly in the business of insurance. Conditioning credit on the purchase of insurance from a particular source is the textbook example, sometimes described as tying. It denies the borrower a free choice of insurer and producer and is prohibited by the unfair trade practices statutes and by federal banking rules.

Offering a client something of value not stated in the policy as an inducement to buy is the prohibited practice of...

1. A.TwistingTwisting is misleading a client into replacing a policy, not offering an inducement.
2. B.RebatingCorrect — offering an off-policy inducement to buy is rebating.
3. C.CoercionCoercion uses force or pressure; it is not the offering of a reward to buy.
4. D.DefamationDefamation is harming a competitor's reputation, not inducing a purchase.

Why: Rebating is giving or offering any inducement not specified in the policy — cash, gifts, or a share of commission — to persuade someone to buy. It is prohibited in most states even if the client agrees.

Rebating in insurance is:

1. A.A required discountInverts the rule. Nothing obliges a producer to hand anything back, and offering an inducement not spelled out in the contract is precisely the conduct the term describes.
2. B.A nonforfeiture optionA nonforfeiture option is a contractual election for applying cash value once premiums stop. The practice in the stem belongs to trade-practice regulation of how policies are sold, not to the policy's own provisions.
3. C.A dividend optionA dividend option directs how the insurer applies a declared dividend on a participating policy, which is a benefit the contract itself provides. The practice in the stem is an inducement offered outside the contract to win the sale.
4. D.Offering value outside the contract to induce a sale (generally illegal)Correct - rebating is prohibited in most states.

Why: Rebating - offering something of value not stated in the contract to induce a sale - is generally illegal.