Regulation of Insurance Companies

All discount life insurance companies must be licensed to offer cheap life insurance rates and sell in every state in which they intend to do business. States usually have laws to take restrictive action against insurance companies that are not licensed to do business within their borders when violations occur.

Regulation of Insurance Agents

To sell discount life insurance legally, one must have a license from the state. Before an insurance department will issue an agent’s license, the candidate must pass an agent’s licensing examination, which is administered by the department. In some states, the department will issue a temporary license; after the agent passes the licensing exam, a permanent license is issued.
In some states, the agent’s license is perpetual until revoked; in other states, it is subject to renewal at stipulated intervals.

Prohibited Practices

Three violations of ethical selling by insurance agents—rebating, twisting and misrepresentation—have long been punishable in virtually all jurisdictions. Get cheap life insurance rates now.

Rebating

Rebating occurs if the buyer of an insurance policy receives any part of the agent’s commission. An act of rebating also takes place if the agent gives the buyer any consideration of values as an inducement to purchase a policy. The broad definition of rebating includes anything of significant value; for example, a $25 gift certificate, a new bicycle for the applicant’s child, a television set or an expense- paid vacation trip. State regulations, which are very strict in this respect, are designed to prohibit discrimination with policy owners. Rebating is an obvious form of discrimination.
Any agent who is caught rebating to an applicant or policy owner is subject to serious punishment. The person who receives a rebate also may be subject to punishment. If a state law classifies rebating as a misdemeanor by both parties, harsh penalties may be imposed on both the agent and the policy owner. Agents’ licenses may be suspended as part of the penalty assessed against them. Thus, agents should act carefully to avoid any transaction that may be construed as an act of rebating.

Twisting

Twisting is the act of persuading a policy owner to drop a discount life insurance solely for the purpose of selling that person another policy without regard to possible disadvantages for the policy owner. Find cheap life insurance rates.