Referral Fee Question

[Aram Fingal]

Most states allow you to send some sort of a thank-you gift to clients up to a certain value before it is considered rebating. For example, WA insurance law says something like "a thank you gift of nominal value" which has been generally interpreted to mean about $20. So they're giving you the $10 as a "referral" fee even though you're referring yourself, and the $25 as a thank you for doing business with them.

This only works though because they are giving it to you because YOU bought. If they did the same thing for you referring other people to them, the $10 would still be OK as a referral fee, but the $25 would then become commission splitting (which I guess technically they could still do if you were a licensed agent).

The exact rules and allowable amounts probably vary from state to state, but this is how it would work in WA.

Of course, AAA runs commercials that if I get a quote, I get a $10 gas card, buy the policy, I get a $25 gas card type of thing, and they seem to get by with this rebating. Not sure how.

Dan

 

[ave5544]

This is basic insurance license 101. You cannot get paid per sale if you are not licensed, as it is with any industry I can think for that requires licensing and commissions. If you could, then there would be little point in getting licensed.

 

[Mark]

To keep this simple, just offer a standard referral fee to anyone that send prospects your way. Don't base it on if you make the sale or not.

For every name you give me to call or that comes my way, I will give you a something small in value as a thank you.

It is not a % of the commission or sale or based on if you make the sale or not.

Would everyone agree on this?

 

[GreenSky]

To keep this simple, just offer a standard referral fee to anyone that send prospects your way. Don't base it on if you make the sale or not.

For every name you give me to call or that comes my way, I will give you a something small in value as a thank you.

It is not a % of the commission or sale or based on if you make the sale or not.

Would everyone agree on this?

Congratulations Mark. I think you now understand my point.

Rick

 

[ShannonO]

To keep this simple, just offer a standard referral fee to anyone that send prospects your way. Don't base it on if you make the sale or not.

For every name you give me to call or that comes my way, I will give you a something small in value as a thank you.

It is not a % of the commission or sale or based on if you make the sale or not.

Would everyone agree on this?

This is exactly the way to handle it - you can give other agents a referral gift as well as non-licensed people (incuding clients who send you referrals). BUT you cannot send the thank you/referral gift based on whether or not that person buys from you. If you do a referral rewards program, then you must send the same amount to every person who sends you a referral - you cannot withhold it if that referral does not buy from you.

The OIC here in Washington said it was OK to restrict my referral thank yous based on those who got a quote (not just those who called me). I personally prefer this because I think we all get people who are kicking tires & asking questions but never provide us enough information to provide the quote. I personally do not want to pay out a referral reward based on that because then I have zero chance of ever earning that business. But if I give someone a quote, I might get the business right away or I might get it next year as they reconsider their options. But then I have the information to follow up with them if necessary.

The bottom line is that whatever you do, it cannot be contingent on the client purchasing a product.

 

[cds251]

Does the DOI actually police this sort of thing??

In TX they are not even confirming whether agents have their CE's in order...........its a "random" sample/check so they are hardly likely to get excited with this issue.

 

[djs]

Does the DOI actually police this sort of thing??

Don't worry, other agents will rat you out in a heartbeat. If you cross the line in a serious way, you will get caught. If you give a gift of $16 where only a $15 gift was allowed, you probably will never hear from anyone (unless it involves anything medicare).

Dan

 

[cds251]

Last I heard the DOI doesn't take complaints from agents that seriously (this from someone that works there)......

 

[Josh]

Last I heard the DOI doesn't take complaints from agents that seriously (this from someone that works there)......

Depends on the state. NY takes them *very* seriously, no matter where they come from.

 

[cds251]

Hmmm.....not so sure......

I mean, exactly how long did it take to figure out that 1 man was running the biggest financial fraud in US history???