Customer Incentives – What Can Be Done?

Last week’s post was based on the calls I continue to receive about the payment of referral fees on the Free Legal Service Program that I operate for members of the Independent Insurance Agents of Georgia.   Another caller to that program asked me a question about what could be done to encourage referred and other potential customers to actually purchase policies and suggested something I had never considered.  The caller wanted to know if it would be legal to offer to make a donation to a specified charity for every policy of a specified type written during a specified time period, as an incentive for the purchase of that type of policy.  The donation would be made in the agency’s, not the customer’s, name.

The anti-rebate law that was referred to in last week’s post prohibits the giving either “directly or indirectly” of a “valuable consideration or inducement not specified in the [insurance] contract” and the giving of “anything of value whatsoever not specified in the [insurance] contract” as an “inducement to any contract of insurance.”  This and other language in the anti-rebate statute clearly prohibits giving the customer anything of value, but it is not clear whether it applies to something of value that is not given to the customer, either directly or indirectly (e.g., to a member of the customer’s family).  In addition, it is not clear that the making of a charitable contribution under the circumstances described above would be something “of value” within the meaning of the statute, since it would not benefit the customer in any tangible way.   In fact, the beneficiary would be a charitable organization, the giving to which contributes to the public good.

The above analysis assumes that a particular customer or close family member does not have any connection to the charity in question (e.g., is an officer, director, employee, volunteer, or beneficiary of the charity’s activities).  For such a customer, the argument that “value” is being given “indirectly” by the making of a contribution to the charity is easier to make.  But it would be easy enough to exclude such customers from such an incentive program.  To be effective, some market research would probably need to be done on the types of charities to which an agency’s or agent’s target market gives.  Alternatively, if an agency or agent has a favorite local charity, such a program could be used to give it some publicity and may generate referrals from the charity or its supporters.

I am continually amazed at the creative thinking of Georgia’s independent insurance agents.  However, how the Insurance Commissioner’s Office would view the above type of customer incentive program is anyone’s guess.  Therefore, before embarking on such a program, it would be a good idea to ask that Office for its opinion.


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