Colorado Life & Health Insurance Exam — All Questions
2 questions
A Colorado producer offers a prospect a cash payment out of the producer's own commission if the prospect buys a life policy. This practice is:
- a.Allowed if disclosed to the insurer in writing
- b.Allowed for term life only
- c.Prohibited as unlawful rebating✓
- d.Required to be reported but otherwise lawful
Rebating — giving any part of the premium or commission, or other valuable consideration, as an inducement to buy — is prohibited in Colorado under its unfair trade practices law. It is barred because it can lead to unfair discrimination between similarly situated policyholders.
Under a state's unfair trade practices law, 'twisting' is best defined as:
- a.Selling policies to two members of the same family
- b.Using misrepresentation or incomplete comparisons to induce a policyholder to drop an existing policy and buy a new one✓
- c.Failing to send collected premiums to the insurer on time
- d.Backdating an application to secure a lower issue-age rate
Twisting is the use of misrepresentation or misleading comparisons to persuade a policyholder to lapse, surrender, or replace an existing policy in favor of a new one. Colorado treats it as a prohibited unfair practice, along with related abuses such as churning and misrepresentation.