Staying Legal with Premium Rebating
- Thread starter riskwriter101
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- 2,455
I don't know about all that. Lead companies are in the business of selling leads. This friend is not. He then has to give a flat referral fee to others to make it fair. Rebating is giving monies back to the customer. A flat fee may work but I would be leery of this. If the flat fee changes then it is ultimately tied to the commission. Is he willing to accept a flat fee no matter what the case? He might not like the idea of a flat say $300 fee on a case that makes you several thousand as opposed to one that makes you several hundred. If it ever gets reported to the DOI then you may have a mess on your hands. That is why they are not very clear about it as it is handled on a case by case basis. All i can say is be very, very careful.
Don't you have your original study books. You can read all about this in those books. I know it was covered very well in my class I took back when but I have a memory like an elephant. My teacher specifically said "never Rebate". If you are unsure of what you are doing or thinking about then call the DOI. Get the answer from the horses mouth. I would bet that they don't even know regarding this specific situation because these types of things when they go south are handled on a case by case basis and ignorance of the law is no excuse.
You are correct, it can not be tied to a sale.
Do not take anyones word for this, it will get you in trouble. My view of this is it is okay to pay $300 per referral, but it has to be regardless of the outcome.
You could even add layers, say a company with revenue under $5M would be a $100 referral fee and over $5M would be $250 referral fee (totally made up numbers here). But again, you have to pay regardless of outcome. You can specify it gets to a certain point, as long as its reasonable. For instance, the fee only gets paid if there is a face to face meeting, or the audit occurs. It can not be tied to a sale.
Alternatively, and the easiest way, is to have your friend get their license, then you can do a revenue share tied to the outcome.
Dan
Do not take anyones word for this, it will get you in trouble. My view of this is it is okay to pay $300 per referral, but it has to be regardless of the outcome.
You could even add layers, say a company with revenue under $5M would be a $100 referral fee and over $5M would be $250 referral fee (totally made up numbers here). But again, you have to pay regardless of outcome. You can specify it gets to a certain point, as long as its reasonable. For instance, the fee only gets paid if there is a face to face meeting, or the audit occurs. It can not be tied to a sale.
Alternatively, and the easiest way, is to have your friend get their license, then you can do a revenue share tied to the outcome.
Dan
- 1,926
I told him he had to get licensed.
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In addition, can I pay an employee a bonus based on my revenue? Would they need to be licensed? Could I enter an agreement with a marketing firm and their revenue was based on my income from their marketing campaign?
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In addition, can I pay an employee a bonus based on my revenue? Would they need to be licensed? Could I enter an agreement with a marketing firm and their revenue was based on my income from their marketing campaign?
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- 2,455
I'm gonna be blunt. look, you keep trying to dance around the issue and find a loophole. There might be a loophole but that loophole is handled on a case by case basis if things were to go south. If you want to risk getting into some big trouble then go ahead. The best alternative is to have your friend get licensed. If you think that it is going to be a good relationship, then it might pay for you to get him his license.
I'm going to tell you, one mistake happens and somebody, the client or he gets pissed off or some unforceable thing arises and one of those two or even you are under oath to tell the truth in an investigation, you are screwed.
I forget what state you are in but I would call an insurance school as well where you go to get prepared to take your test. I had a real old timer and a guy who was in the business for around 15 years teaching my class. Not only do they still sell, they are usually pretty 'in-touch' with the law or the letter of the law.
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I would not pay any employee or private contractor a percentage of any sale and/or profit unless they were licensed. It makes no sense. If they are valuable enough for you to share your profit they should be able to take 2-3 days to cram for the license exam to cover all of your bases. It's not like you're asking them to become securities licensed.
On your first guy, anyone who wants to just be a "marketer" and get paid commission without a licensed is 99% of the time unable to secure a license, I don't care what type of BS excuse they tell you. If they are willing to knowingly break the law on the front end they will sell you out in a second when things go south.
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Simply put, referal fees are common, fully legal and not a problem at all. Commission splits are exclusively for Licensed Brokers. I've seen a million people give out incentives for people to give referals. $10 gas cards anyone? If its not tied to the sale its 100% Legit. I was a Securities Broker in a previous life and we paid people to refer business, Heck you can even lay it out as a yearly fee based on numbers of referrals, such as "If you get me 100 referrals this year I'll give you $2000, if you can get me 200 I'll give you $5000."
Then your just in the boat of do the numbers add up to your favor. Obviously we'd all rather say if I close it I'll give you 30% commission for all your introductions, that guy has to get licensed however. Its much better from an accounting standpoint to give up part of a commission that you actually get paid rather than giving up money to "maybe" get a commission. . . such is the trials and tribulations of commission based business . . .
Right on. Right now I have 3 sources to whom I pay referral fees to - all legally done.
It is worth mentioning that before I started offering fees I contacted the Florida (my state) Dept of Ins and got an answer in black and white that fees are ok.
Contact your Dept of Insurance and try to get it in writing (or at least an email) their "blessings" for what you are looking to do.
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