Question

Grace is a life insurance agent. She is attempting to sell a large life insurance policy, but the prospective purchaser is having second thoughts. To persuade the prospective purchaser, Grace said, "I will earn a $1,000 commission if you buy this policy. I'll give you $500 of my commission if you buy the policy." In most states, what illegal sales practice will Grace be guilty of if she splits her commission with the purchaser?

Answer 1

Grace's offer to split her commission with the policy purchaser is an illegal practice called rebating, which is prohibited in most states because it undermines fair competition and consumer protection.

Step-by-step explanation:

Grace, a life insurance agent, is engaging in a practice known as rebating when she offers to give a portion of her commission to a prospective purchaser if they buy a life insurance policy. Rebating is illegal in most states and refers to the act of offering any unauthorized inducement to purchase an insurance policy. It undermines fair competition and can lead to misrepresentation and unfair consumer practices. The legality of rebating varies by state, but it is generally prohibited as it can create conflicts of interest and negatively affect consumer protection.