Referrals are a great way to acquire business. Providing a monetary incentive to get those referrals can increase the number of those referrals. However, for the unsuspecting insurance agent or broker, this can be a potential minefield given that some jurisdictions have placed restrictions on who can collect these fees and the conditions surrounding these fees. Insurance agents and brokers need to be aware of these rules to avoid facing fines or, worse, losing their licenses.
Here are examples of the rules in three jurisdictions—New York, Pennsylvania, and Illinois. Determine the rules in the jurisdictions in which you are licensed, especially as it pertains to referral fees to non-licensees.
Related: Read July's Avoiding E&O column, “Bull's-Eye on Your Back“
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