Referral Fee for Submitting Application by Referred Person

[Pancur]

Hi,

Is it legal to pay a referral fee to a licensed or non-licensed person based on application submission? I'm talking stricktly about life and health insurance.

I googled it and according to a few online sources you may pay a referral fee if the fee is not conditioned on the purchase of insurance.

Now, is application submission a purchase? For sure it is a first step to purchase an insurance policy but each state may define purchase differently. I'm in IL but couldn't find any info what is purchase and what is not.

What makes me think that an application submission may not be a purchase is ehealth affiliate program which pays referral fee when referred person submits an application. You can see it at http : // signup.cj.com/member/brandedPublisherSignUp.do?air_refmerchantid=1409810

What do you think?

 

[briko3]

Hi,

Is it legal to pay a referral fee to a licensed or non-licensed person based on application submission? I'm talking stricktly about life and health insurance.

I googled it and according to a few online sources you may pay a referral fee if the fee is not conditioned on the purchase of insurance.

Now, is application submission a purchase? For sure it is a first step to purchase an insurance policy but each state may define purchase differently. I'm in IL but couldn't find any info what is purchase and what is not.

What makes me think that an application submission may not be a purchase is ehealth affiliate program which pays referral fee when referred person submits an application. You can see it at http : // signup.cj.com/member/brandedPublisherSignUp.do?air_refmerchantid=1409810

What do you think?

Would you risk your career based on what you're told here? Write the insurance commissioner and get a response in writing. Otherwise, don't do it.

 

[Josh]

I think you've lost your damn mind if you're going to pay a referral fee based on a sale. That's no a referral fee, that's commission splitting. That's not to say you can't pay per referral, but it can't be conditioned on the sale.

 

[Pancur]

I think you've lost your damn mind if you're going to pay a referral fee based on a sale. That's no a referral fee, that's commission splitting. That's not to say you can't pay per referral, but it can't be conditioned on the sale.

No I haven't lost my mind nor I'm going to pay any fee before I got a final answer from my DOI.

I'M ONLY ASKING.

I thought I had a good point on the EHEALTH referral fee based on application submission. They wouldn't do it if it would be illegal.

 

[xrac]

.......They wouldn't do it if it would be illegal.

A lot of companies bigger than these people have been known to do things that are illegal. It happens all the time. I wouldn't trust that line of reasoning. I have known companies to take action based upon the thought that it is easier to get forgiveness than to get permission.

 

[Josh]

I thought I had a good point on the EHEALTH referral fee based on application submission. They wouldn't do it if it would be illegal.

What I'm saying is that you're getting distracted from the main issue which is that when you pay someone based on a sale it's a commission split. There is no more consideration that needs to be made about it.

If you have a referral source that wants to get paid off then have them get licensed, pay them per referral, or just randomly give them money. Doing it on a per sale basis is simply asking for trouble.

As xrac stated, large companies get into trouble for doing things that are known to be illegal.

You are over thinking this one.

 

[borishar]

So how is it that companies still do that and get away with it?


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Life Insurance Fraud

 

[ChicagoProducer]

IMO, submitting an application is NOT a sale because monetary consideration has not yet been exchanged. Therefore, paying a referral fee upon that person completing the application would be allowed. I would certainly put in writing that the fee is NOT contingent upon the PI being approved, accepting, or placing the policy if force.

 

[GoCubsGo]

IMO, submitting an application is NOT a sale because monetary consideration has not yet been exchanged. Therefore, paying a referral fee upon that person completing the application would be allowed. I would certainly put in writing that the fee is NOT contingent upon the PI being approved, accepting, or placing the policy if force.

That's my understanding and I'm told some state insurance departments agreed. Don't know which ones though.

 

[celrod0708]

Does anyone know the answer for CA? What is the specific code section that allows/disallows this practice?