DFS Distinguishes Referral Fees, Marketing Gifts and Inducements
From time to time we receive questions about the various types of referral fees, inducements or other incentives that licensees encounter in the market. The Florida Department of Financial Services reportedly receives these types of inquiries as well as recently published its interpretation of distinctions between referral fees, marketing gifts, and inducements. DFS characterized these types of payments and incentives as follows:
Referral fees – referral fees are either cash or an item given to the source of a referral provided for the referral of a prospective insurance customer. The fees are lawful provided they are given for every referral, not just those that result in insurance sales. Acceptable fees can be paid in cash, with a gift card, merchandise, lottery tickets, etc. There is NO limit on the amount of a cash referral fee or the value of merchandise. For reference, DFS cites section 626.112(8), Florida Statutes.
Marketing/Advertising Gifts – these are items of merchandise given to prospective or current policyholders or to the public that market or advertise a licensee or agency. Acceptable items include coffee mugs, golf balls, golf towels, mouse pads, calendars, etc., and generally include the name of the agent or agency. Cash, gift cards, lottery tickets, etc., are not acceptable advertising gifts. The value of the merchandise given to each person cannot exceed $25. There is no annual cap or limit. For reference, DFS cites section 626.9541(1)(m). Additionally, licensees should note that a proposal pending in the 2017 Florida legislative session might change the nature and limits of allowable advertising gifts.
Unlawful Inducements – the definition of an unlawful inducement in its simplest terms is to give a prospective customer, existing customer or any other entity or person a “thing of value” in exchange for something of value to the licensee. An example is giving any person or entity cash, a gift card, merchandise, lottery tickets, tickets to a sporting event, etc. in exchange for the ability to produce an insurance quote or sell insurance. If another agent or agency sells the same product for the same price, the consumer may choose to work with the licensee that offers a gift card. According to DFS, the law was created in part to deter unfair competition among licensees. DFS refers licensees to section 626.9541(1)(h).