Life License Qualification Program (LLQP) Practice Exam

Which of the following is NOT considered rebating?

1. Sharing commissions with an agent licensed in the same line of business

2. Returning premium to a client as an inducement for purchasing a policy

3. Giving something of value to an insured in exchange for their business

4. Offering special dividends

The correct answer is: Sharing commissions with an agent licensed in the same line of business

Sharing commissions with an agent licensed in the same line of business is not considered rebating because this practice typically occurs within the confines of professional relationships and the regulatory framework that governs commission structures. In many jurisdictions, sharing commissions among licensed agents is a standard business practice that recognizes collaboration and mutual benefit without constituting a form of inducement to the client for purchasing a policy. In contrast, returning premium to a client as an inducement, giving something of value in exchange for business, and offering special dividends can all create an incentive that may manipulate the decision-making process of the insured. Such actions could be viewed as attempts to entice clients to choose one policy over another through financial benefits, which regulations often seek to avoid in maintaining fair market practices and ensuring the integrity of insurance transactions. Therefore, the focus is on maintaining a clear distinction between ordinary business practices among agents and improper inducements offered directly to clients.