Rebating: Why is Rebating Still Illegal in Many States?

[mrpink]

I generally understand the history of anti-rebating laws but are these laws still needed today?

I've heard insurance companies also "discourage" rebating in states where it is legal. How do they "discourage" rebating?

 

[Wtprice]

I absolutely believe they are necessary today. Offering financial incentives to buy insurance products takes the focus off of the needs of the consumer. Instead focusing it on what they will get if they buy X product.

For things like cell phones, cars and other products it's fine. For insurance products like Life and Health.. not so much.

 

[LGilmore]

rebating is illegal in most states because it creates an unfair playing field between consumers.

Companies discourage rebating simply because if I were a policyholder and someone else got a better deal for the same thing ( a rebate) I'd be suing their a ss in a heartbeat.

Rebating is a can of worms most companies steer clear of. More problems created than solved.

 

[bigfrie]

I absolutely believe they are necessary today. Offering financial incentives to buy insurance products takes the focus off of the needs of the consumer. Instead focusing it on what they will get if they buy X product.

For things like cell phones, cars and other products it's fine. For insurance products like Life and Health.. not so much.

I still don't see why rebating is wrong. Banks give away stuff all the time for using their financial products.

 

[FL P&C Broker]

There was a lot of agencies rebating flood commissions here in Florida because the premiums are high and so was the commission. They recently just made it illegal.

 

[Guest]

if you made a $2,000 commission on a commercial policy, would you give the client $500 back for getting the policy?


nuff said

 

[mrpink]

rebating is illegal in most states because it creates an unfair playing field between consumers.

Companies discourage rebating simply because if I were a policyholder and someone else got a better deal for the same thing ( a rebate) I'd be suing their a ss in a heartbeat.

Rebating is a can of worms most companies steer clear of. More problems created than solved.

Playing devil's advocate, what if the agent/insurer offered the same rebate to everyone and removed that perceived unfair advantage? If I think giving 75% of my commission back to the customer will make me more money in the long run, why not?
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if you made a $2,000 commission on a commercial policy, would you give the client $500 back for getting the policy?


nuff said

If it made me more money in the long run, absolutely yes. Every agent/insurer is going to have a different lifetime value calculation for the client. For some, you're flushing $500 down the toilet and it makes no sense.

For others, they could generate incremental revenue in excess of $500 by dramatically saving money on marketing expenses or cross selling on other products.

 

[Guest]

then why give rebates, just lower the rates if your going to give money back to the client.

This is a dumb thread......

WHy not just give a cop $100 cash instead of writing a $200 ticket?

 

[LGilmore]

"If I think giving 75% of my commission back to the customer will make me more money in the long run, why not?"

Really? excuse my typing as I am laughing pretty hard right now.

There is nothing stopping you from cutting a 75% check back to the consumer if you want. Somebody has to complain for your to get caught. You start doing that for a few months and let me know if you're still in the business OK?

​

 

[mrpink]

then why give rebates, just lower the rates if your going to give money back to the client.

This is a dumb thread......

WHy not just give a cop $100 cash instead of writing a $200 ticket?

Obviously the municipality needs the other $100

Lowering rates makes much more sense ,but (correct me if I'm wrong) the carrier is going to give you pretty much the same quote regardless of what commission structure you have in place.

If they didn't, direct pricing would be materially lower than agent quoted prices.
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"If I think giving 75% of my commission back to the customer will make me more money in the long run, why not?"

Really? excuse my typing as I am laughing pretty hard right now.

There is nothing stopping you from cutting a 75% check back to the consumer if you want. Somebody has to complain for your to get caught. You start doing that for a few months and let me know if you're still in the business OK?

​

Caught? No point giving across the board rebates in a state where it's illegal. Other agents would report you in a nanosecond.

Why this idea is so laughable? Consider it a thought experiment. If you're rebating certain products, you either have to make it up in volume or in up/crossing selling of other products (which might not even be an insurance product).

It's a pretty common business practice in other industries. Use one product as a loss leader to drive greater revenue and lifetime value opportunities over the long term.