New Jersey Life Producer Practice Exam

What is the act of offering something of value not specified in the insurance contract to persuade a purchase?

1. Churning

2. Rebating

3. Twisting

4. Deceptive advertising

The correct answer is: Rebating

The act of offering something of value not specified in the insurance contract to persuade a purchase is referred to as rebating. In the insurance industry, rebating involves providing clients with benefits or incentives outside of the terms laid out in the policy itself, such as cash bonuses, gifts, or other perks, to induce them to buy a policy. This practice is generally considered unethical and, in many jurisdictions, illegal, including in New Jersey. Rebating undermines the integrity of the insurance market by creating an uneven playing field and can lead to consumers making decisions based on incentives rather than the actual value and suitability of the insurance product. Therefore, understanding rebating is crucial for maintaining ethical standards in insurance sales and for compliance with applicable regulations.