Cash-Back and Gift Inducements in a Competitive Sale

The arrangement is not permissible. Rebating or offering an inducement outside the policy terms is a conduct breach because it gives one client a benefit not available to others on the same policy, distorts competition, and encourages the client to buy for the inducement rather than for suitable cover. Paying from her own commission does not cure it: the source of the money is irrelevant to the unfair advantage and the misleading impression it creates. It may also breach the insurer's agency agreement, trigger commission clawback, and expose Nida to disciplinary action or licence risk. A gift of a smartphone is the same in substance as cash. The offer can also create a false expectation that future premiums will be similarly discounted. Nida should not match the rival's offer. Instead, she should explain the policy's features, charges, surrender values and limitations, compare needs-based alternatives, and disclose her commission if the insurer's rules require it. If the client chooses the rival product, she should accept that outcome professionally. Competing on inducements damages the client's trust and the integrity of the agency channel.

Nida should acknowledge that the rival has made an offer but explain that she cannot comment on another adviser's compliance and will not criticise the product without facts. She should ask the Ahmeds what they want the plan to achieve: how much education funding is needed, when, and how much they can save annually without strain. She should show the premium, policy term, charges, projected values, surrender penalties, and the consequences of missing premiums. She should compare her proposal with the rival's on a like-for-like basis, including total premiums and guaranteed versus projected benefits, rather than on the cash-back headline. She should disclose her commission and any first-year or renewal remuneration in the manner required by the insurer and regulator, because the client is entitled to know what influences the recommendation. She should also warn that cash-back offers may not be honoured and may indicate unsuitable advice. She should document the comparison and the clients' decision. If the product is not suitable, she should say so even if it loses the sale.

For the Ahmeds, the main risk is unsuitable purchase. A Rs 30,000 inducement can distract from affordability, charges and the risk of lapse if the Rs 300,000 annual premium becomes difficult to sustain. They may later discover that the projected education fund is lower than expected, or that early surrender returns much less than premiums paid. If the inducement is not honoured, they have little enforceable right because it is outside the policy. For Nida, the risks include termination of her agency appointment, forfeiture or clawback of commission, recovery of the inducement, a regulatory complaint and damage to her reputation. If she gave a smartphone, the value may be treated as an undisclosed rebate. The insurer should investigate, request the client file and any evidence of the offer, remind the agent of the no-rebating rule, and take proportionate disciplinary action. It should also review whether the policy was sold on a suitable basis and offer the client the free-look remedy if available. The insurer should document the outcome and consider reporting serious misconduct to the regulator.