Identify the correct statement?

A. Rebate in premium is a discount allowed by the insurer in festival seasons to boost business

B. Rebate is an allowed deduction in large sums assured and low frequency mode of payment

C. Rebate is illegal as it is a kind of bribery

D. All modes of payment are treated as equal for rebate purposes by the insurer

Answer: Option B

Solution(By Examveda Team)

Rebate is an allowed deduction in large sums assured and low frequency mode of payment. Typically most companies offer rebates for higher SA (higher than a certain amount). This is because the cost of servicing of all policies of the same type being almost the same, a higher SA means lower servicing cost per unit of SA. Consequently, this translates to higher profits/returns per unit of SA or per unit of premium paid for the company.