Returning premiums or commissions to a customer outside the contract terms is known as what?

Rebating refers to the practice of returning a portion of the premium or commission to a policyholder or customer, which is not in accordance with the terms laid out in the contract. This action is typically discouraged or illegal in many jurisdictions because it can create an unlevel playing field, where some individuals or companies might be unfairly incentivized to switch insurance providers or obtain coverage based on these unauthorized returns.

In most insurance regulations, especially in South Carolina, rebating is viewed unfavorably because it undermines the integrity of the insurance market and can lead to deceptive practices. Unlike discounting, which might involve explicitly lowering the premium within the terms of the policy, or incentivizing and bonusing, which usually relate to structured programs of rewards within the confines of agreed contracts, rebating is a straightforward act of modifying fees after the fact in a way that is not authorized. This highlights why rebating is the specific term applied to such actions in the insurance industry.