Which of the following best describes the term 'rebating' in the insurance sector?

The term 'rebating' in the insurance sector refers specifically to the practice of returning a part of the agent's commission to the client. This occurs when an insurance agent offers a portion of their earnings from a policy as an incentive for the client to purchase that policy. Rebating is often viewed as a way to attract customers by providing them with a financial benefit directly tied to the purchase of insurance.

This practice is heavily regulated, and in many jurisdictions, it is prohibited because it can lead to unfair competition and encourage unethical sales practices. The emphasis on commission sharing highlights the relationship between agents and clients and aims to promote transparency in transactions.

In contrast, the other options do not accurately reflect the concept of rebating. Reducing coverage on a policy pertains to a different aspect of insurance management. Issuing bonuses for loyalty refers to rewards programs, which are not typically classified as rebating. Introducing new policies at reduced rates is essentially pricing strategy rather than a commission-related practice. Thus, the focus of rebating is on the financial transactions between agents and clients rather than policy terms or promotional tactics.