Glossary

Rebating

Giving a customer part of an agent's commission or anything of value as an inducement to buy insurance, a practice most states prohibit.

Also called: premium rebate, commission rebate

Rebating happens when a producer or insurer offers a buyer something of value not stated in the policy to win the sale: a share of the commission, a cash payment, a gift, or a premium discount the insurer didn't file. Most states' unfair trade practices laws ban it, and violations can lead to fines or loss of license.

The rationale is that rebates let well-connected or large buyers pay less than others in the same rate class, can mask a poor product choice, and push agents to sell on inducements rather than fit. Hypothetically, if an agent earns $3,000 on a policy and offers the buyer $1,500 of it to switch from a competitor, that's rebating in most states, even if the buyer asked for it.

The rules have loosened at the edges. California and Florida are well-known exceptions that permit some rebating under conditions, and some states have updated their laws to allow certain value-added services or gifts of limited value. Because the rules vary, check with your state insurance department before offering or accepting anything. Rebating is often discussed alongside twisting, another unfair practice; see twisting and churning: replacement sales abuses and how life insurance agents are paid.

Last reviewed October 4, 2026

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Related terms

Producer The legal term for a person licensed by a state to sell, solicit or negotiate insurance, covering agents and brokers alike. Twisting Persuading someone to drop or replace an existing policy by misrepresenting or leaving out key facts, an unfair trade practice under state law. Churning Replacing a client's policy or annuity with a new one, often from the same insurer, mainly to earn fresh commissions rather than to help the client. Insurance commissioner The official who heads a state's insurance department, licensing insurers and agents, reviewing policy forms, monitoring solvency and handling complaints. NAIC (National Association of Insurance Commissioners) The standard-setting body of the chief insurance regulators of all 50 states, D.C. and five territories, which writes model laws and coordinates oversight.

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