The practice involves offering something of value, not specified in the insurance contract, as an incentive to purchase a policy. This ‘something of value’ can take many forms, such as cash, gifts, or special favors. For example, an agent might offer a portion of their commission back to the client, or provide a gift card exceeding a nominal amount, in order to secure the sale. Such actions are generally considered unlawful due to their potential to disrupt fair competition.
The prohibition of this practice is rooted in the desire to maintain integrity within the insurance market. It helps prevent unfair discrimination among policyholders, ensuring that premiums are based on risk assessment rather than extraneous inducements. Historically, controls against these kinds of incentive programs have aimed to level the playing field for insurance providers and protect consumers from potentially misleading or predatory sales tactics.
