Rebating in CA

[JRoot]

In CA rebating is legal, but most life insurance companies don't allow rebating from my understanding. I came across Home today and it got me thinking. What kind of agent rebates his clients unless he's provided them with no value? These guys don't seem like they are providing any value, just taking orders.

What are your thoughts on this? Everyone gives a break sometimes on their fees/commisions - Realtors, Mortgage Brokers, Physicians, Attorneys, CPA's. Is this what we'll competing with next?

Shouldn't rebating have tax consequences? I know I get my commission checks as 1099, reminding me I owe taxes. Would the insured have to pay taxes on the rebated money or are they getting taxed and giving up 50%?

I've never given a rebate and just curious if anyone has run into this or has any thoughts on the subject...

 

[TXINSURANCE]

Would the insured have to pay taxes on the rebated money or are they getting taxed and giving up 50%?

The 50% "rebated" would be a biz expense is my guess.

Either way it is SLIMY and EVERY carrier they do this with should shut them down. Why CA allows this is beyond me - should be 100% license revocation, do not pass go, do not rebate $200.

Bad for the industry.

 

[Mr. Bill]

The only way I can think of they can get around it is to rebate a portion of commissions from fees otherwise collected. The way they've got it set up makes no sense to me. Hmmm...

 

[JMO Fan]

Courts struck down anti-rebate laws in CA & FL. But it's impossible to rebate without violating unfair discrimination laws, which are still in place (including CA & FL). So there's no legal way to rebate.

 

[Mr. Bill]

Huh? So how are these clowns 'getting away with it'?

: License Status - Endorsees

 

[LGilmore]

There will always be an agent or a RRep that will kick back money, legal or not. Just wait till you have a group grow in size to become of interest to somebody's brokerage... suddenly a sales retreat in vegas, a fishing trip, ball game tickets...

We're in a business that allows for dirty play, if you're big enough or desparate enough.

I said "no" to something dirty about 5 years ago. It took the guy about an hour to find somebody who would say "yes" and a large book of business was gone.. I did the right thing? but in doing so, I passed on about 40k a year... sometimes doing the right thing sucks bigtime....

 

[JMO Fan]

State insurance departments largely rely upon market conduct exams, with occasional consumer complaints, to catch rebating and unfair discrimination. Not only are those hit-and-miss, they rarely examine agents directly, and almost never talk directly to insureds. Recipients of rebates virtually never complain (and wouldn't be penalized), so rebating often goes unchecked.