Gifts, referrals and rebating

New York Insurance Law 2324 prohibits an insurer or a licensed producer from offering a rebate from the premium, or any special favour, advantage or valuable consideration not specified in the policy, as an inducement to buy insurance. There is a narrow allowance for items of no more than $25 in value.

That covers considerably more than an envelope of cash. It covers the gift card for taking a quote, the tablet with the policy, the waived first month, and the cheque for referring a friend. These are marketed as generosity and they are the thing the statute is about.

Why the rule exists at all

Because a filed rate is supposed to apply equally to everybody presenting the same risk. Rebating breaks that: two identical households pay different effective prices depending on who negotiated harder or who was worth more to the producer. That is unfair discrimination, and it is the second half of the section's title.

There is a second reason and it is the more practical one. A producer competing on gifts is not competing on advice, and an inducement large enough to change your decision is large enough to distract you from the cover. The statute pushes the competition back toward the thing that actually matters.

Who ends up paying for it

You do. A gift is an expense, expenses are inside the filed rate, and a producer who is buying business with presents is recovering the cost from the premiums of the people who take them and the people who do not. There is no other source of money in the arrangement.

Which makes it a poor trade even leaving the statute aside. A $50 gift card against a policy that is $300 a year more than it needed to be, or $300 of cover short, is not a deal. It is an advertisement you were paid a small amount to accept.

Referral fees, which catch people out

Paying a fee or commission to an unlicensed person for referring insurance business is generally not permitted in New York. This catches ordinary commercial arrangements that people assume are fine: a car dealer paid per policy sold, a contractor paid for sending clients, a landlord paid for steering tenants to a particular renters policy.

There are narrow allowances for nominal thank-you gestures within the $25 ceiling and for genuine advertising arrangements that are not per-sale, and the details matter. If somebody has offered you money for sending them insurance business, or asked you for it, that is worth checking before agreeing rather than after.

For what it is worth: we are delighted when people send their neighbours and family here, and we will not pay you for it. We will say thank you.

What is legitimately allowed

Genuine loss-mitigation services provided by an insurer — a water leak sensor, a telematics device, a security discount — where they are properly part of the insurance programme rather than a sweetener. The Department has issued guidance on where that line falls, and it is a real distinction rather than a loophole.

Discounts and credits that are in the carrier's filed rating rules: multi-policy, claims-free, protective device, defensive driving, good student, paid-in-full. Those are not rebates. They are the filed rate applying correctly to your facts, and getting all of them is a large part of what we are for.

The distinction is worth holding on to: a credit inside the filed rate is available to everybody who qualifies and is applied by rule. A gift outside it is available to whoever is being persuaded, and is applied by negotiation. The first is the system working; the second is the thing 2324 forbids.