| 1. REBATING/INDUCEMENT |
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Sell means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of an insurance company.
Solicit means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.
Negotiate means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms, or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from insurers for purchasers. |
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May a producer offer a gift or service as an inducement to listen to a sales pitch or obtain information which could lead to a policy quote? |
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Is there a limit on the value of the gift or service offered as an inducement to listen to a sales pitch or obtain information which could lead to a policy quote? |
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May a producer offer a gift or service as an inducement to apply for a policy? |
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In selling personal lines insurance, may a producer reduce the amount of commission in order to reduce the cost of a policy? |
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Is a donation of commission to a charity considered an inducement to purchase a policy? |
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If a licensee receives a commission (as a producer) and a fee (as a counselor), may the licensee waive one of them and quote a policy at a lower rate? |
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May a producer pay a portion of a client's policy premium? |
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| 2. SPLITTING/ASSIGNING COMMISSIONS |
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May a licensed producer accept payment from a client for placing business? |
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May a licensed producer split a commission with another licensed producer who referred a client? |
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May a licensed producer split a commission with a solicitor who the producer sponsors? |
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May a travel insurance company assign commission to a travel agent or referral agency for business? |
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| 3. OVERRIDE COMMISSIONS |
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May a licensed producer receive an override, defined as a portion of a licensed producer's commission, for business sold by a subproducer? |
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May an unlicensed individual receive an override for business sold by a subproducer? |
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| 4. RESIDUAL/RENEWAL COMMISSIONS |
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May an individual receive residual commissions for policies written while formerly licensed and appointed as a producer? |
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| 5. DISCLOSURE OF PRODUCER COMMISSONS |
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Must a licensed producer disclose to the client any commission earned? |
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| 6. FEES |
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Must a licensed insurance counselor disclose to the client the fee charged? |
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May a producer charge a processing fee to collect payment of premium via credit card? |
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| 7. REFERRAL FEES |
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May an unlicensed individual provide a list of referrals to a licensed producer for a fee? |
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Is there a limit on the dollar amount or value of the gift or service offered as a referral fee? |
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May an attorney acting as a counselor that is not licensed as a counselor provide referrals to a licensed producer for a fee? |
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May a travel agent or agency receive referral fees from a travel insurance company if the travel agent or agency does not have a license as an insurance producer? |
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| 8. GIFTS |
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Is receipt of a gift from a current client permissible? |
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1. REBATING/INDUCEMENT - Sections
1207(5);
1236;
2017;
2024;
2024a;
2024b; 2066(1) |
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May a producer offer a gift or service as an inducement to listen to a sales pitch or obtain information which could lead to a policy quote? |
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Yes, so long as receipt of the gift or service is not contingent upon purchase of a policy. |
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Is there a limit on the value of the gift or service offered as an inducement to listen to a sales pitch or obtain information which could lead to a policy quote? |
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No. |
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May a producer offer a gift or service as an inducement to apply for a policy? |
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Generally, no. However, the rebating laws allow giving something of value where it is specified in the insurance contract. Also, a producer quoting life insurance may give an applicant an article of merchandise having an invoice value of $5.00 or less, and a producer may give an applicant or an insured under a property-casualty insurance policy an article of merchandise having an invoice value of $10.00 or less. |
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In selling personal lines insurance, may a producer reduce the amount of commission in order to reduce the cost of a policy? |
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No. |
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Is a donation of commission to a charity considered an inducement to purchase a policy? |
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It depends on the business model. The law allows an insurance producer to pay or assign commissions to a third party unless the payment violates Section 2024. The following may assist you when developing a business model:
A producer may donate money to a charitable organization as long as:
- The donation is offered uniformly to all applicants for insurance and not only for specific transactions.
- The individual insured does not have any control over which charitable organization receives the donation.
- The charitable organization does not provide any consideration in exchange for the donation.
- The charitable organization does not engage in any activity that would constitute selling, soliciting, or negotiating insurance in violation of the Code.
- The charitable organization is not an affiliate of the insured such that a donation to it would result in a direct or indirect benefit to the insured.
- The charitable organization is not a client of the producer.
We strongly recommend that you consult with your attorney when considering a charitable or community donation program to determine compliance with the law. Any program should be reviewed in accordance with sections 1240, 2024, 2066, 2070, 2024a, 2024b and 1207(3) of the Insurance Code. |
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If a licensee receives a commission (as a producer) and a fee (as a counselor), may the licensee waive one of them and quote a policy at a lower rate? |
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No. |
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May a producer pay a portion of a client's policy premium? |
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No. |
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2. SPLITTING/ASSIGNING COMMISSIONS - Sections
1207(4);
1212;
1240(1), (2), and (4)
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May a licensed producer accept payment from a client for placing business? |
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Producer license does not generally authorize brokering, defined as representing and receiving payment from a client for placing business. However, a producer who holds a surplus lines license is specifically authorized to broker surplus lines coverage. |
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May a licensed producer split a commission with another licensed producer who referred a client? |
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Yes. |
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May a licensed producer split a commission with a solicitor who the producer sponsors? |
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Yes. |
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May a travel insurance company assign commission to a travel agent or referral agency for business? |
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Yes, so long as the travel agent or agency does not actively sell, solicit or negotiate insurance. |
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3. OVERRIDE COMMISSIONS - Sections
1240(1) and (2);
1240(4)
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May a licensed producer receive an override, defined as a portion of a licensed producer's commission, for business sold by a subproducer? |
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Yes. |
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May an unlicensed individual receive an override for business sold by a subproducer? |
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Yes, so long as the unlicensed individual does not actively sell, solicit, or negotiate insurance. |
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4. RESIDUAL/RENEWAL COMMISSIONS - Section
1240(3)
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May an individual receive residual commissions for policies written while formerly licensed and appointed as a producer? |
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Yes. |
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5. DISCLOSURE OF PRODUCER COMMISSONS - Section
1239(i)(h)
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Must a licensed producer disclose to the client any commission earned? |
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No. |
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6. FEES - Section
1236; 2111 |
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Must a licensed insurance counselor disclose to the client the fee charged? |
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A counselor must state the fee in a written agreement signed by both the counselor and the client. Further, the counselor must disclose that the counselor receives a commission from the insurer on any insurance placed by the counselor acting as an insurance producer. |
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May a producer charge a processing fee to collect payment of premium via credit card? |
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No. Although a producer may collect premium via credit card if allowed by the insurer, an additional processing fee may not be charged. |
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7. REFERRAL FEES - Sections
1207(3);
1240(4)
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May an unlicensed individual provide a list of referrals to a licensed producer for a fee? |
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Yes, so long as payment of the referral fee is not contingent upon a referral applying for or purchasing a policy. |
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Is there a limit on the dollar amount or value of the gift or service offered as a referral fee? |
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No, so long as payment of the referral fee does not violate MCL 500.2024, which prohibits rebating or inducement. |
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May an attorney acting as a counselor that is not licensed as a counselor provide referrals to a licensed producer for a fee? |
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Yes. |
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May a travel agent or agency receive referral fees from a travel insurance company if the travel agent or agency does not have a license as an insurance producer? |
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Yes, so long as the travel agent or agency does not actively sell, solicit or negotiate insurance. |
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8. GIFTS |
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Is receipt of a gift from a current client permissible? |
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Yes. |
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The answers provided are not meant to be a substitute for legal advice. |
