What Is Rebating In Life Insurance?

Rebating is a practice where an insurance agent or broker returns a portion of their commission to the insured with the aim of inducing the sale of an insurance policy. In some cases, insurers may also offer discounts on premiums or gifts to incentivize customers to purchase their policies. However, most provinces and states consider rebating illegal as it is viewed as an unfair sales practice that may lead to insurer insolvency and negatively impact consumers.

Country/Jurisdiction Rebating Rules
United States The National Association of Insurance Commissioners developed the Model Act to discourage and penalize rebating practices.
Canada The Canadian Council of Insurance Regulators states that rebating is an offense in most jurisdictions.

It is important to note that the legislation governing rebating varies widely, and brokers or agents engaging in this practice put their insurance license and company at risk. In some cases, even the client may be considered an offender for knowingly participating in the practice.

Overall, rebating is viewed as an unethical and illegal practice that insurance companies and licensed agents must avoid to protect consumers and maintain a fair insurance market.

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