Rebates, Nondiscrimination and Compensation. Alaska Division of Insurance Public Meeting November 13, 2008. Purpose of Meeting. Review of Alaska’s rebating and discrimination laws. Review division’s enforcement of these laws.
Alaska Division of Insurance
November 13, 2008
Paying, allowing, giving or offering to pay, allow or give anything of value to an applicant or insured as an inducement to insurance.
Two Key Phrases:
Public policy reasons to support these laws (cont.)
Public policy reasons to support these laws (cont.)
(a) A person may not make orpermit unfair discriminationbetween individuals of thesame class and equal expectation of life in therates charged for a contract oflife insurance or of life annuityor in the dividends or otherbenefits payable thereon or in any other of the terms and conditions of the contract.
(b) A person may not make or permit unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or ratescharged for a policy or contractof health insurance or in thebenefits payable, or in anyof the terms or conditions ofthe contract, or in any othermanner whatever.
a) A health care insurer that offers, issues for delivery, delivers, or renews a health care insurance plan in the group market may not establish rules for eligibility, including continued eligibility and waiting periods under the plan, for an individual or dependent of an individual based on [health status; medical condition, including physical and mental illnesses; claims experience; receipt of health care; medical history; genetic information; evidence of insurability, including conditions arising from acts of domestic violence; or disability].
(b) A health care insurer may not require an individual, as a condition of enrollment or continued enrollment under a health care insurance plan offered in the group market, to pay a premium, contribution, or policy fee greater than a premium, contribution, or policy fee for a similarly situated individual already enrolled in the plan on the basis of a health status factor for the individual or a dependent of the individual.
Except as otherwise expressly provided by law, a person may not knowingly permit or offer to make or make a contract of life insurance, life annuity or health insurance, or agreement under the contract other than as plainly expressed in the contract, or pay, allow, give or offer to pay, allow, or give, directly or indirectly, as inducement to the insurance, or annuity, a rebate of premiums payable on the contract, or a special favor or advantage in the dividends or other benefits, or paid employment or contract for services of any kind, or any valuable consideration or inducement whatever not specified in the contract; or
directly or indirectly give, sell, purchase or offer to agree to give, sell, purchase, or allow as inducement to the insurance or annuity or in connection therewith, whether or not to be specified in the policy or contract, an agreement of any form or nature promising returns, profits, stocks, bonds, or other securities, or interest present or contingent in the contract or as measured by the contract, of an insurance company or other corporation, association, or partnership, or dividends or profits accrued or to accrue under the contract; or offer, promise, or give anything of value that is not specified in the contract.
Nothing in AS 21.36.090 and 21.36.100 may be construed as including within the definition of discrimination or rebates any of the following practices:
(1) in the case of a contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, if the bonuses, or abatement of premiums are fair and equitable to policyholders and for the best interests of the insurer;
Examples: universal life paying premium with cash values, bonus interest
(2) in the case of life insurance policies issued on the industrial debit, preauthorized check, bank draft, or similar plans, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer or by preauthorized check, bank draft, or similar plan, in an amount that fairly represents the saving in collection expense;
Example: Industrial debit life of which little or no business is written anymore
(3) readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first or a subsequent policy year of insurance thereunder, which may be made retroactive only for that policy year;
Example: large group experience rated plans-reducing current premiums based on prior year loss experience
(4) issuance of life or health insurance policies or annuity contracts at rates less than the usual rates of premiums for the policies or contracts, or modification of premium or rate based on amount of insurance; but the issuance or modification shall not result in reduction in premium or rate in excess of savings in administration and issuance expenses reasonably attributable to the policies or contracts.
Examples: Lower premium for larger policy amounts (economy of scale), savings under payroll deduction plans, auto-pay plan savings
NOTE: The Division is considering legislation to specifically allow rewards or incentives for wellness programs consistent with federal HIPAA nondiscrimination laws.
is not prohibited
1) Sharing commission or compensation with another licensee.
2) Paying a referral fee to an unlicensed person.
3) Sharing a commission or compensation with an unlicensed person:
4) A producer offsetting or reimbursing a fee to a client (insured).
Identifies conditions in which compensation may be paid to licensed and unlicensed persons .
A licensee must be licensed forthe kind and class of insurancefor which the person isauthorized to transact.
Unlicensed Persons Referrals
A licensee may compensate an unlicensed person that refers a customer or potential customer to a licensee if the person does not discuss specific terms and conditions of a policy, does not give opinions or advice regarding insurance (AS 21.27.370) AND the referral is
A licensee may share a commission or compensation
with a business entity (firm) as long as the firm does
not sell, solicit, or negotiate insurance and the
payment does not violate our rebating laws.
A licensee may share an override commission with
a general agent for business produced by persons
the general agent supervises and the general agent has no involvement in the sale, solicitation, or negotiation of insurance.
AS 21.27.560 allows a client to appoint a broker through an executed contract. The contract must specifically set out the duties, functions, powers, authority, and producer’s compensation.
Under an executed broker contractexecuted under AS 21.27.560,a producer may offset or reimburse a client (insured) allor part of the commissionearned (disclosure required).
With full disclosure,
Other types of marketing inducements.
The Division has determined that the following are violations of the rebating and/or non-discrimination laws:
The Division has determined that the following are not violations of the non-discrimination and rebating laws:
Again, we will not be making decisions onspecific rebating or discrimination questions at this meeting