State RegulationsTN specificDifficulty 2/5
A producer offers to pay an applicant's first premium out of her own pocket if the applicant buys a life policy this week. How should this offer be characterized under Tennessee law?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
T.C.A. § 56-8-104 prohibits returning any part of the premium or giving any valuable consideration not specified in the policy as an inducement, and the Tennessee Department of Commerce & Insurance has treated paying a premium on behalf of an applicant as rebating in disciplinary orders. The producer's offer to fund the first premium is therefore an unlawful rebate regardless of how it is documented or labeled.
Why the other options are wrong
- A) Written acceptance cannot cure an unlawful rebate; the prohibition targets the inducement itself, not the form of the agreement.
- C) Reimbursing the producer would compound the violation, since the payment remains premium returned as an inducement no matter who funds it.
- D) This is a state rebate issue under T.C.A. § 56-8-104, not a referral or federal privacy matter.
Memory hook
Paying the applicant's premium to win the sale is rebating — Tennessee has no goodwill exception.