What is the illegal act of offering to return a portion of the premium to the insured to induce them to purchase insurance called?

The act of offering to return a portion of the premium to the insured as an incentive to purchase insurance is known as rebating. This practice is considered illegal in many states, including New Jersey, because it undermines the principle of fair competition among insurance providers and can lead to misunderstandings regarding the true cost of insurance coverage. Rebating can also create a situation where consumers may not fully appreciate the value of the coverage they are purchasing, as they might be focusing on the immediate financial return rather than the long-term benefits of the policy.

In contrast, discounting refers to a reduction in the price of a product or service offered to customers, which in insurance could apply in legitimate pricing strategies but not in the context of rebating. Underwriting refers to the process by which insurers assess risk and determine the premium to charge for a particular insurance policy. Premium adjustment typically involves changes made to the premium amount based on certain factors after the policy is in effect, rather than an upfront incentive to induce purchase.