What is the term for an illegal return of part of a premium as an incentive?

The term for the illegal return of part of a premium as an incentive is known as rebating. This practice involves an insurer or agent offering a portion of the premium back to the policyholder or providing other incentives as a way to persuade them to purchase a policy. Rebating is prohibited because it can lead to unfair competition among insurers and disrupts the principle of equitable treatment in the insurance market. The regulatory intent is to ensure that all consumers have access to the same policy offerings without the influence of inducements that may skew their decision-making process.

In contrast, commission splitting refers to an arrangement where agents share a portion of their commission with other agents, which is generally legal if properly disclosed and compliant with all regulations. Rate evasion relates to circumventing established premium rates, usually resulting in unapproved pricing practices. Underpricing is often used to describe offering products at prices lower than the market rate, which can pose risks to insurance sustainability without the implication of illegal incentive returns.