For Producers

Rebating and illegal inducements

The Legislature enacted amendments to Washington state laws relating to rebating that were effective in July 2015. The following is a brief summary of the amendments and rule changes along with some suggested best-practices guidelines and examples to assist in promoting compliance and minimizing confusion.

Summary

Insurers and insurance producers may implement advertising or promotional programs that permit the giving of prizes, goods, wares, gift cards, gift certificates or merchandise not exceeding $100 in value in the aggregate per person in any 12-month period. The advertising or promotional program must be offered to all insureds or prospective insureds under similar qualifying circumstances.

See RCW 48.30.140 and RCW 48.30.150 (leg.wa.gov).

Guidelines

The advertising or promotional program must be rationally related to the business of the insurer or producer. The insurer or producer should implement record-keeping processes to be able to provide evidence that the $100 per-person limit for any consecutive 12-month period has not been exceeded.

Examples

1. An insurance producer provides a floral arrangement for the funeral services of the spouse of his/her insured. This is her/his practice whenever an insured’s spouse or other close family member dies where the insured had insurance through him/her with an annual premium totaling $5,000 or more.

The gifting of this floral arrangement appears to be a component of an advertising or promotional program contemplated by the exception to the anti-rebating and illegal inducement statutes. The criteria for sending it is rationally related to a legitimate business purpose and appears to be offered to all insureds who fit the criteria. Thus, it is permitted if the value of the floral arrangement, taking into consideration the value of any other prizes, goods, wares, gift cards, gift certificates, or merchandise, given to the insured client during a 12-month period, does not exceed $100 in value for that 12-month period.

See RCW 48.30.140(4) (leg.wa.gov).

2. An insurance producer gives back a portion of the fee she/he charged to her/his insured client.

As stated, this appears to be a rebate and is a violation of the anti-rebating and illegal inducement statutes. But if the producer receives a commission along with the fee, she/he may offset or reimburse the insured all or a part of the fee. An explanation of any offset or reimbursement should be provided on the compensation disclosure form at the time the fee is charged.

See RCW 48.17.270 (2)(c) and (3)(c) and RCW 48.30.140(5) (leg.wa.gov).

3. An insurance producer offers to give the 100th person who comes in for a quote on insurance coverage a free iPad.

This is not permitted because the value of the iPad exceeds $100.

See RCW 48.30.150(1)(c) (leg.wa.gov).

4. An insurance producer gives prospective new clients a $50 gift card.

This is permitted, but the producer should keep a record of how much each prospect receives to ensure the $100 limit in the aggregate is not exceeded during the 12-month period for each prospect receiving a gift card or other prize, goods, etc.

See RCW 48.30.150(3) (leg.wa.gov).

5. An insurance producer takes his/her insured client along with the client’s family—spouse and two children—to dinner and picks up their part of the tab totaling $350.

This would be permitted if the value of any person’s dinner did not exceed $100 and if the producer had not previously—during the preceding 12-month period—provided the client and any of those members of the client’s family who dined at the producer’s expense, any prizes, goods, wares, gift cards, gift certificates, or merchandise that, when their value is added to the value of each’s dinner, results in a total value in excess of $100. In addition, paying for the dinner of insureds and their families must be part of a promotional program that the producer offers to all insureds under similar qualifying circumstances.

See RCW 48.30.140(4) (leg.wa.gov).

6. An insurance producer writes a large commercial policy for a business and gives the leadership team tickets to a sporting event. The value of each ticket is $75.

This would be permitted if the producer had not previously—during the preceding 12-month period—provided members of the leadership team any prizes, goods, wares, gift cards, gift certificates, or merchandise that, when their value is added to the value of the member’s ticket, results in a total value in excess of $100. In addition, giving sporting event tickets to leadership teams of commercial business clients must be part of a promotional program that the producer offers to all insureds under similar qualifying circumstances.

See RCW 48.30.140(4) (leg.wa.gov). Please note that the cost of the ticket may not be the sole factor in determining its value.