Primerica Life Producer Practice Test

What regulates unfair trade practices such as rebating?

1. Federal law only

2. State insurance regulations

3. Insurance company policies

4. Consumer protection laws

The correct answer is: State insurance regulations

State insurance regulations primarily oversee unfair trade practices like rebating. Each state has its own insurance department that establishes rules and standards designed to ensure fair competition and protect consumers in the insurance market. These regulations specifically address practices deemed unfair or deceptive, such as rebating, which involves offering something of value to induce a client to purchase insurance. State laws are crucial because they vary significantly, allowing states to tailor their regulations to protect consumers while maintaining a fair playing field for insurance providers. Federal laws and consumer protection laws might cover broader issues but do not directly regulate these specific trade practices within the insurance industry. Insurance company policies can guide internal practices but do not have the authority to regulate industry standards across all companies.