Which of the following would be considered an illegal inducement?

• A. Publishing guaranteed dividend rates on a new type of policy
• B. Announcing the opening of a new agency
• C. Delaying payment on a claim because of an incomplete accident report
• D. Advertising that your agency can provide policies with competitive rates

Answer: (A)

Guaranteeing dividends on a policy is not allowed in promotions because dividends for participating policies are not guaranteed and depend on the insurer’s earnings. Advertising guaranteed dividends would mislead buyers into purchasing based on a promised financial benefit rather than the actual policy terms and cost, which is considered an illegal inducement.

Opening a new agency is standard promotional activity and not tied to guaranteeing a policy’s benefits. Delaying payment on a claim because of an incomplete accident report is an operational issue, not a marketing inducement. Advertising that the agency can provide policies with competitive rates is typical marketing, provided the claims about rates are truthful and not misleading.