What you need to know about changes to anti-rebating laws

In 2021 the National Association of Insurance Commissioners (NAIC) adopted provisions to bring changes to anti-rebating laws. Their work updated the group’s Model Unfair Trade Practice Act, to allow insurers and agents exceptions to provide consumers with value-added products and services that are not specified in a customer’s policy.

Examples for how this may apply to your business

While the NAIC’s reforms only become effective when adopted by individual state legislatures, the updated Model Act is aimed at allowing more innovation in insurance products and services. the new laws, agents and insurers can now provide customers with products and services designed to minimize risk, reduce claims, or advance other specified goals.  .The reform also clarified the NAIC’s guidance around when and how agents and insurers can offer marketing-related gifts and services, including meals.

Commercial insurance sales

The NAIC changes allow for commercial insurance sales to be exempt from rebating rules, this eliminates the previous $50 dollar threshold allowed for meals, gifts, etc. for commercial clients would change to no specified amount, but an amount that is “reasonable in comparison to the premium.”

Personal lines

NAIC recommended that the permissible amount that can be spent on meals and items to the lesser of 5% of premium or a set amount of $250.

Value-added products and services

The reform allows insurers and agents to provide products and services designed to minimize risk, reduce claims, or advance other specified goals. Examples could include security tools and smart home devices for home customers, anti-theft tools for auto customers, or a wellness program for life insurance customers.

Raffles or drawings

If adopted, the NAIC updates allow for raffles or drawings with the following criteria:

1. There is no financial cost to entrants to participate.
2. The drawing or raffle does not obligate participants to purchase insurance.
3. The drawing or raffle is open to the public.
4. The raffle or drawing is offered in a manner that is not unfairly discriminatory

Where is this happening?

Anti-rebating laws have been around over a century and many states have already repealed, carved out exceptions, or more recently adopted the NAIC model law.

States that have adopted or are working toward reform include:

• Alabama – 2019
• Arizona – 2019
• Connecticut – 2022
• Georgia – 2022
• Indiana – 2021
• Kansas – 2022
• Kentucky – 2022
• Minnesota – 2022
• Missouri – 2020
• Nebraska – 2022
• North Dakota – 2021
• New Mexico – 2021
• Ohio – 2022
• Rhode Island – 2022
• South Carolina – 2022
• Wisconsin – in draft

Work with your attorney or advisor, or your department of insurance to understand the status of anti-rebating laws in your state.

What are the benefits?

Higher customer satisfaction

Adoption of the reform gives opportunities to meet consumers where they are and provide innovative solutions (e.g. smart home device) to always-evolving needs.

Mitigating risk

By adopting innovative tools and services, consumers can lower their risk or severity of claims, take better control of their risk, even improve their health.

Regulatory ease

For businesses that operate in several states, wide adoption of the changes will provide consistency and efficiency for programs.

These changes are another example of how the industry is evolving to better meet customer needs and expectations. Remember, please work with your attorney or advisor, or your department of insurance to understand the status of anti-rebating laws in your state.