Rebating is the practice of giving or offering to give a client any portion of the agent's commission, a valuable gift, or special inducement not specified in the insurance contract, as an inducement to apply for or renew insurance. Rebating is prohibited by provincial insurance legislation across Canada.
The prohibition protects the integrity of the pricing system: premiums are filed with and approved by provincial regulators. Rebating allows an agent to effectively undercut the filed premium structure, undermining fair competition and regulatory oversight.
Rebating includes: returning part of the commission in cash to the client, paying a client's first premium out of the agent's own pocket, giving gift cards or excessive hospitality as inducements, or reducing fees below a disclosed minimum.
An agent who offers a rebate and a client who requests or accepts one can both be subject to regulatory action under provincial insurance statutes.
Common mistake: treating small gifts (a branded calendar, a pen) as rebating. Most provinces distinguish nominal gifts (of inconsequential value) from valuable gifts that constitute a rebate. The practical test is whether the gift is valuable enough to influence a reasonable person's purchasing decision.
Recall: Define rebating and explain why it is prohibited. Can both the agent and the client face regulatory consequences for a rebate?