West Virginia Property and Casualty Licensing Practice Exam

If an insurance agent strikes a deal with a client to waive the first premium payment for homeowners insurance, what is the agent guilty of?

1. Coercion

2. Unethical behavior

3. Rebating

4. Misrepresentation

The correct answer is: Rebating

The correct answer is rebating. This term refers to the practice where an insurance agent offers a client an inducement, such as waiving the first premium payment, to persuade them to purchase an insurance policy. Rebating is typically prohibited, as it can lead to unfair competition and disrupt the insurance marketplace by creating an imbalance where some agents may offer more favorable terms or benefits than others, potentially compromising the integrity of the insurance profession. In the context of the scenario, by waiving a premium, the agent is essentially providing an incentive that is not part of the standard terms or conditions of the insurance policy, which constitutes a violation of legal regulations regarding how insurance can be marketed and sold. This reinforces the importance of adhering to ethical standards and state regulations in the insurance industry to maintain fairness and protect consumers.