What is the unethical practice called that involves giving a premium reduction or other financial advantage not stated in the policy to induce purchase?

• A. Rebating
• B. Cease and Desist Order
• C. Controlled Business
• D. Eligibility Points

Answer: (A)

Rebating is the unethical practice described here. It means offering a premium reduction or some other financial advantage to induce someone to buy insurance, and that benefit isn’t stated in the policy or approved by the insurer. This undermines the contract’s terms and the pricing structure, giving the inducement outside the agreed policy provisions. That’s why it’s illegal in Michigan and most other jurisdictions, as it creates unfair competition and can distort risk assessment.

For context, this isn’t about legitimate compensation or standard advertising allowances. It also isn’t about regulatory actions (like a cease-and-desist order) or unrelated terms. Those other concepts don’t describe presenting a financial incentive to purchase that isn’t part of the policy.