What is the illegal practice of offering incentives such as commissions or premium reductions not specified in the insurance contract?

Rebating refers specifically to the practice of returning a portion of the premium to the insured or providing some other incentive not disclosed in the insurance contract. This is considered illegal in many jurisdictions, including Michigan, because it undermines the principles of fair competition and can mislead consumers about the true costs and terms of coverage. When an agent or broker offers such incentives, they may create an unfair advantage that distorts the market and potentially harms other insurers who are adhering to legal and ethical guidelines.

The other terms do not accurately define this practice. Fraud typically involves deception for financial gain but does not specifically refer to the act of providing undisclosed incentives. Inducement can encompass a broader range of actions and is not limited to insurance, while bribery often involves illegal payments for influence rather than incentive structures in insurance contexts. Therefore, rebating distinctly captures the practice of offering undisclosed incentives in the realm of insurance contracts.