Which of the following practices is considered a form of rebating?

Rebating refers to the practice of giving back a portion of the commission or value obtained from an insurance policy to the insured or client. This typically occurs in ways that could incentivize the client to purchase insurance, which can be considered unethical and is often prohibited by insurance regulations.

Sharing one's commission with a client directly involves returning part of the earnings from a policy sale back to the client, thus qualifying as rebating. This practice is misaligned with regulatory standards because it can create unfair competitive advantages and potentially lead to misrepresentation of the policy's value.

In contrast, sharing commissions between producers usually implies internal collaboration among agents and does not involve the insured directly. Paying dividends to policyholders is a legitimate practice for mutual insurance companies, signifying a return of excess premium rather than a rebate. Retrospective rating is a method of setting insurance premiums based on the loss experience of the insured and does not involve any direct return of commission to clients. Thus, the correct choice encapsulates the unethical nature of rebating as it involves a direct financial incentive given to the client from the producer’s earnings.