Rebating & Gifts
While giving gifts to customers is customary in many industries, this practice can lead to ethical problems. For this reason, gift-giving or rebating is generally forbidden in the insurance business. Rebating involves the giving or promising of a valuable consideration intended to be an inducement to the buyer to purchase an insurance policy. The inducement may be cash or any other item of value. Generally, any gift greater than a nominal one could be considered a valuable consideration and a violation of rebating rules.
In Florida, any rebates must be uniformly offered to all prospects in the same actuarial class -- that is to say, the agent may not "pick and choose" which clients will be offered the rebates. If offered, the size of the rebate must also be uniform among those receiving the rebate -- again, no "picking and choosing", although the rebate schedule may allow for differences between policies of different sizes or members of different actuarial classes, so long as factors such as race, age, sex, marital status, residence, or occupation are not used to distinguish the classes. Nor may agents require clients to purchase other ("collateral") products in order to obtain the rebate. Agents who choose to rebate must prominently display their rebating schedules at their place of business and make copies of the schedule available to members of the public. Such schedules must be retained for five years.
Agents must file a copy of the rebating schedule with the the carrier prior to offering rebates on policies issued by that carrier. All rebates given to customers must be consistent with the schedule that is filed with the insurer. Insurers may deny agent permission to offer rebates -- and most do. If an insurer prohibits rebating on policies it underwrites, the agent may not rebate any portion of his or her commission earned from that company.
Gifts of nominal value are permitted under Florida law, with some restrictions. Agents and companies may, for advertising purposes, provide applicants with gifts valued up to $25. Rules of the Department of Financial Services define gifts as "articles of merchandise". The Department does not recognize gift certificates, memberships or other services as "merchandise". Consequently, agents who give away auto club memberships, gift certificates or cash violate the Insurance Code.
SPECIFIC FLORIDA LAWS AND RULES
Rebating -- returning a portion of a commission as an inducement to apply for insurance -- is permitted in Florida in very limited circumstances under Florida Statute 626.572:
(1) No agent shall rebate any portion of his or her commission except as follows:
(a) The rebate shall be available to all insureds in the same actuarial class.
(b) The rebate shall be in accordance with a rebating schedule filed by the agent with the insurer issuing the policy to which the rebate applies.
(c) The rebating schedule shall be uniformly applied in that all insureds who purchase the same policy through the agent for the same amount of insurance receive the same percentage rebate.
(d) Rebates shall not be given to an insured with respect to a policy purchased from an insurer that prohibits its agents from rebating commissions.
(e) The rebate schedule is prominently displayed in public view in the agent's place of doing business and a copy is available to insureds on request at no charge.
(f) The age, sex, place of residence, race, nationality, ethnic origin, marital status, or occupation of the insured or location of the risk is not utilized in determining the percentage of the rebate or whether a rebate is available.
(2) The agent shall maintain a copy of all rebate schedules for the most recent 5 years and their effective dates.
(3) No rebate shall be withheld or limited in amount based on factors which are unfairly discriminatory.
(4) No rebate shall be given which is not reflected on the rebate schedule.
(5) No rebate shall be refused or granted based upon the purchase or failure of the insured or applicant to purchase collateral business.
