Rebating: Why is Rebating Still Illegal in Many States?

[LGilmore]

That's what put the Ev----il in Evil insurance agent.

 

[mrpink]

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

And they would know how? Rebates happen all the time everywhere. It's just a matter if you get caught by the carrier, the OIC and the IRS, which has happened to many agents before you and I. Another agent? Who listens to another agent?
Try contacting your OIC and complain about another agent, see how far it goes....
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Good point. Only way to an agent gets caught is if a customer blabs (or gets too aggressive trying to shop a rebated quote) or they develop a reputation for having the lowest rates and knowledgeable agent knows the offered rates are highly unlikely without some level of rebating.

Once the rebating agent is identified, you can always secret shop them and try to get the rebate yourself to confirm.

"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). "

Have you been in this business long? How do you sell a volume of insurance? Do you resell life every year? There isn't a volume of insurance to be sold. There's insurance of a few different types and if you rebate one, why shouldn't I expect you to rebate all?
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Haven't been in the business very long (my pre-insurance background is in finance/investments and software development). Figure that was obvious since I keep asking dumb questions How else am I going to understand/learn if I don't ask (and I appreciate those who answer)

Why do you believe there isn't a volume of insurance to be sold?

Good point about customers expecting to get a rebate on everything. Let me marinate on that one.

If you're here suggesting cross selling other product besides insurance, which should capitvate all your time, you may have issues with carriers who do not like their products used as a door opener for another company​

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It actually wouldn't take much of my time to cross sell the other stuff, but would carriers cut me off if I used them as a door opener and/or customer retainer?

"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. "

Insurance is not another industry. It is not water heaters or hvac units, it's an intangible product that you can't bump extra inventory in somebody's back storage shed. ​

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Insurance is an intangible product but my concern is insurance is a commodity product and most coverage decisions are formulaic. (Yes there are those 5% of cases where the experience of a great agent is priceless and their commission is worth every penny)

What's to prevent the commissions in the insurance industry from suffering the same fate other financial services have experienced in the last 20+ years? (i.e. an implosion on commissions) If anti-rebating laws are the only thing preventing this, that's a problem imo. That said, agents won't go away. 75% of them will disappear but those that can differentiate will still thrive and probably make more money.

I just think anyone serious about being an agent (which I am) has to think about these things and consider what they need to do (whether it's cross selling or something else) if commissions implode over time.

Good luck to you and your 75% giveaway, if you are able to live and operate your practice on 25% of your normal commission, well I am impressed. You'd be a first ever in the business.

Good luck man.
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thanks.

 

[Guest]

I think this entire thread should be deleted and the OP banned.

Now he says his background is in financial services and cant understand the reasoning of why this is illegal?

dumbfounded,

 

[mrpink]

I'll go one further and ask, do you really want to be in a position where you have to negotiate over how much you are going to give the person to buy from you?

I'd probably wouldn't negotiate. Would this be an issue? Have people try to negotiate with you?

 

[Guest]

I'd probably wouldn't negotiate. Would this be an issue? Have people try to negotiate with you?

Man, you need to go be a car salesman........rebating is illegal, in probaly every state, so get this out of your mind.........

all it takes is for a client of yours talking to another agent and he says, my current guy gives me money back on my policy............and you are done.

Seriously, used cars sounds like a better career for you than insurance or financial products.

 

[mrpink]

I do not think this guy is even an agent. From what I can tell he may be a consumer shopping insurance.

Nope. Not shopping insurance. Is there even much value in shopping insurance? You request a quote and get 5 agents giving undifferentiated prices from the same carriers. .
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And how would you even handle chargeback? Tha would be a mess. Are you going to send your customer a bill for the commission you lost if they cancel the policy.

Yeah. Probably would have to pay as earned.

 

[tins]

I'd probably wouldn't negotiate. Would this be an issue? Have people try to negotiate with you?

How much are you offering to buy a policy through you?
I'm in the market to change?

 

[VolAgent]

What's to prevent the commissions in the insurance industry from suffering the same fate other financial services have experienced in the last 20+ years? (i.e. an implosion on commissions) If anti-rebating laws are the only thing preventing this, that's a problem imo. That said, agents won't go away. 75% of them will disappear but those that can differentiate will still thrive and probably make more money.

Commissions are where they are at because insurance companies want premium dollars. They have found that if the commission isn't high enough compared to the effort involved, agents stop sending in new business.

New York tried this a while ago. Look at how many companies refuse to do business there for that and other reasons?

 

[LGilmore]

mr. Pink,

I just want you to explain how you will "live" on 25% of your commission?

How will you pay for heat, phones, gas, employees on 25% of what you bring in? That means you've got to clear 100k in commissions to net 25,000. It also means that you will be paying taxes on 100k and since you've given 75k away, it pretty much seems like you'll end up owing uncle sam for the year.

How much do you think commission is? and how much do you expect to clear?

Son, I just don't think your theroy allows for you to eat. I mean I've seen everything you've mentioned done in some form or another and every time it's brief success, followed by either jail time or complete loss.

Insurance commissions are earned, wait till you make one, then see how easy it would be to cut a check. I'll bet you it will be pretty dam hard to give somebody else money that may have taken you a year to earn...

OH, and that's the other thing that you haven't thought of, turnaround...From start to finish of a life app takes almost 4 months for me, from the day I take the paperwork till the day the commission check shows up in my mailbox or account.

 

[mrpink]

I think this entire thread should be deleted and the OP banned.

Now he says his background is in financial services and cant understand the reasoning of why this is illegal?

dumbfounded,

Oh come on. The commissions in the insurance industry is a valid topic of discussion. Like I said before, I understand the history and reasons behind anti-rebating laws but was curious if reasons are relevant today. It's not like rebating is uniformly banned across the country.
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Commissions are where they are at because insurance companies want premium dollars. They have found that if the commission isn't high enough compared to the effort involved, agents stop sending in new business.

New York tried this a while ago. Look at how many companies refuse to do business there for that and other reasons?

Got it. Thanks. I was in NY the other day. I for the life of me can't understand why anyone would insure any car that drives in Manhattan. A mechanical bee swarm.