DFS Summarizes Referral Fee Restrictions
The Florida Department of Financial Services (DFS) recently published a reminder relating to restrictions on referrals fees. DFS notes that it commonly receives questions about referral fees and periodically publishes guidance to remind licensees of applicable requirements.
According to DFS, an agent may pay an unlicensed person for referrals of potential clients as long as it complies with section 626.112(8), which states “No insurance agent, insurance agency, or other person licensed under the Insurance Code may pay any fee or other consideration to an unlicensed person other than an insurance agency for the referral of prospective purchasers to an insurance agent which is in any way dependent upon whether the referral results in the purchase of an insurance product.”
Often, licensees ask if they can pay “referral fees, compensation, finder’s fee”, etc. to other agents for referring business to them. When a licensee provides any compensation to another licensee for the referral of business, it is considered commission sharing. DFS advises that lawful commission sharing can only take place between like-licensed individual agents. However, commissions can be paid to a licensed insurance agency. For example, to facilitate paying a share of the commission to a general lines agent for the referral of life insurance business, life insurance commissions can be paid to the general lines agent’s licensed insurance agency. DFS refers interested licensees to sections 626.753, 626.794, and 626.838 for details.