Referral Fee Question

[GreenSky]

I've been having a conversation with another agent as to the legality of what he is calling a referral fee paid to a client only if the referral generates a sale.

He is telling the cllient in wriiting that he will pay a referral fee of $25 if the person that is referred buys a policy.

I believe this is illegal as it becomes a commission. A thank you gift for the referral itself is okay but I don't think you can make this contingent upon a sale and certainly can't tell them in advance.

He says that of course it's legal. It's done all the time.

Per his email to me:

[FONT="Arial","sans-serif"]Agents have been doing this for as long as I can remember.[/FONT]
[FONT="Arial","sans-serif"]Many insurance companies even have something that you can givepeople for referrals.[/FONT]

Any comments?

Rick

 

[Crabcake Johnny]

It's as easy at this - you can pay anything to anyone as long as it's not contingent on the sale. If you want to pay $500 per lead, go have at it. But you have to pay for leads and referrals regardless of whether or not they become a client.

That "people have be doing otherwise..." Ok...I guess. People have been robbing banks for years also.

 

[carol369]

I thought it was allowed to give a "gift" for a referral on certain business such as life & annuities, but it can't be based on a sale. So if the agent got 10 referrals, he'd have to pay out $250 no matter how many sales he made. Correct?

 

[Norwayguy]

He is going to continue to believe this is all fine unless and until caught. A simple answer would be to forward the question to the DOI and show him thier response....

 

[GreenSky]

He is going to continue to believe this is all fine unless and until caught. A simple answer would be to forward the question to the DOI and show him thier response....

I already know what not to do. It's up to him to either believe us or not. Let him contact the DOI himself.

Rick

 

[Guest]

Wouldnt this vary by state?

In MY state, I can only give a client up to $10 for a policy written on them, Otherwise it is called REBATING, but I can give a referral anything....

I have heard some agents give realtors a trip to Hawaii for 20 referrals, I have to think THAT is illegal, but whatever.....I dont need to bribe the people I work with, I send them gift cards once in a while and take them to lunch....

 

[taterpeeler]

simple answer.... if it is a grey area why be put in a position to defend yourself in court or with DOI. Attys cost moola just tell client due to ambiguity of law on the subject i can give you a heartfelt thank you and thats it

i follow the same practice with other agents. if you give me a referral or i kick biz to you... you aint gettin nuttin and i aint wanting nuttin

 

[tlmarketing]

you can pay referral fees, but they can not be contingent on sale.

The amounts you can give vary by state.

 

[Josh]

From what I gather it can be paid based on an application, but not sale.

 

[JimmyUt]

In Utah (according to the DOI) it has to be a referral fee that is the same amount every time for every referral, and not dependent on a sale, or even an application.