Which Rules Govern Rebates and Illegal Inducements

As mentioned earlier, this appears to be a discount and is a violation of anti-discount laws and illegal incentives. However, if the producer receives a commission at the same time as the fees, he may charge the costs in whole or in part or reimburse them to the insured. An explanation of any compensation or reimbursement should be provided on the remuneration disclosure form at the time of collection of the fee. Note that one state is missing from the list, California. California has the most notable history in terms of insurance discounts, and its current laws governing the practice warranted discussion beyond a simple table. California law originally prohibited insurance discounts of any kind, but the state repealed this law in the 80s. The California Department of Insurance has since clarified the state`s official position on the rebate by referring to other California laws that govern commerce. These laws explicitly prohibit remittances by insurance companies. In this clarification, the ban on discounts between insurance agents/brokers was expressly lifted.

Technically, policyholders can grant discounts, but there are other rules for doing so. The key to the rules is that California`s business and professional codes continue to apply in terms of anti-competition. Therefore, a discount in a way that is interpreted as violating these laws will most likely result in litigation against the agent/broker. Because California doesn`t ban discounts among insurance agents/brokers, its laws surprisingly don`t provide advice on gifts. However, other laws may come into force, especially if the insurance producer also holds a license to sell investment products. Most states define insurance discounts as an offer or incentive that an agent or broker uses to get a potential customer to purchase an insurance policy when the incentive is outside the features of the life insurance policy. For example, if an agent offers to share with the client some of their commissions they earned on policy sales, that`s a discount and it`s illegal in almost every state in the United States and very (and I mean high) frowned upon in the few states that don`t explicitly prohibit it. 1.

An insurance institution shall provide a floral arrangement for the funeral services of the insured`s spouse. This is the manufacturer`s practice when the spouse of an insured or other close family member dies, when the insured had insurance through him with a total annual premium of $5,000 or more. The donation of this flower arrangement appears to be part of an advertising or sales promotion program under the exception of anti-discount laws and illegal incentives. The shipping criteria are rationally linked to a legitimate business purpose and appear to be available to all policyholders who meet the criteria. Therefore, it is permissible if the value of the flower arrangement, taking into account the value of other prizes, goods, merchandise, gift cards, gift certificates or goods given to the insured customer during a period of 12 months, does not exceed the value of 100 USD for this period of 12 months. While most discount conversations take place in the context of new business (i.e. When a customer purchases a new policy), discount laws apply to incentives that are used to convince a current policyholder to continue paying their premiums. Rebate laws generally talk about rebates in a way that isolates insurance companies from insurance producers (i.e., agents and brokers). While there are several reasons to distinguish between the two, the vast majority of states prohibit the same discount for both companies.

In addition, it can generally be assumed that what is illegal for an insurance company is also illegal for a producer and vice versa. .