Nearly all states in the United States have broad statutory prohibitions on the payment of “rebates” or “inducements” in connection with the purchase of insurance. These prohibitions generally preclude insurance carriers, agents and brokers (or others acting on their behalf) from providing or offering to provide a rebate of premium or any other valuable consideration that is not specified in the insurance policy.

Insurance programs involving any products or services being offered to insurance applicants or existing customers need to be structured carefully to ensure that they do not violate these prohibitions.

Examples

Some examples of what may be prohibited under state insurance laws, if not specified in the insurance policy:

• Offering a $200 gift card to every person who purchases an insurance policy.
• An insurance agent sharing a portion of their commission with their client.
• Providing free or reduced cost payroll services to commercial insureds that purchase a commercial liability policy.
• Providing a free or reduced-cost wearable device to existing life insurance policyholders.
• Providing an existing policyholder with a $150 credit for each referral the policyholder provides.

Exemptions

Depending on the state, certain exceptions may be available to prohibitions on illegal rebates and inducements. For example, some states permit insurance carriers, agents and brokers (or others acting on their behalf) to offer certain value-added services to their clients without charge or at a reduced cost as long as these value-added services are provided on a non-discriminatory basis and relate to the insurance coverage. Many states require these value-added services to relate to loss mitigation or loss control or to reduce claim costs.