Titular de Insurance Insights
Volume 2, No. 8 - November 2013

Esquina de Cumplimiento

This section has been created to assist you in keeping your insurance business in compliance. The items are intended as reminders only and are not necessarily the exact text of the Estatutos de la Florida o Código Administrativo de la Florida. The legal cites have been provided for your further reference.

Guidelines for Illegal Inducements and Advertising Gifts

This is an area where there is apparently significant confusion. Hopefully, these guidelines will help to alleviate that confusion in the future.

What is an inducement?

An inducement is the promise by a licensee to give something of value to a prospect in exchange for the prospect doing something beneficial for the licensee that could or does result in the sale of an insurance product.

When is an inducement illegal?

  • When a portion of the licensee's commission is promised to the prospect in return for the purchase of an insurance product or service and it does not comply with the rebating statutes. Remember, rebating is legal as long as it is done properly, which is seldom the case. When it is not, it is a form of an illegal inducement. One of the conditions of a legal rebate is approval by the insurer, which rarely happens.
  • When the licensee promises to give the consumer anything of value in exchange for personal financial information or a one on one meeting where this type of information is secured for purposes of proposing an insurance product or service. This is not rebating, it is another form of an illegal inducement.
  • When a licensee picks up the expenses of a third party because that party refers business to the licensee that results in an insurance transaction. These expenses include, but are not limited to: gas cards, equipment leases, rental fees, advertising costs, providing food or refreshments at seminars or open houses of the third party, etc.

[See Sections 626.572 y 626.9541(1)(h), Estatutos de la Florida]

Advertising Gifts

The purpose of an advertising gift is to promote the licensee's business by placing the name of the licensee or their business name in front of customers or prospects by giving away articles of merchandise with their name on it without any conditions having to be met. Examples would be calendars, golf balls, coffee mugs, pens, shirts etc. as long as the value of the individual gift does not exceed $25.00. A gift card is not considered to be an article of merchandise and therefore not an acceptable advertising gift even if it does contain the licensee's name or business name on it. However, a gift meeting the definition of an advertising gift cannot be used to induce someone to provide detailed financial and other personal information.

[See Section 626.9541(1)(m), Estatutos de la Florida]

Referral Fees

A gift, gift card, or referral fee in any amount may be given by the licensee for a referral as long as the giving of the gift, gift card or referral fee is not conditioned upon the referral transforming into the sale of an insurance product or service.

[See Section 626.112(8), Estatutos de la Florida]

Reporting of Actions - Criminal, Administrative, and Other

Subsection 626.451(7), F.S., requires each licensee to advise the Department within 30 days after having been found guilty of or having pleaded guilty or nolo contendere to a felony or a crime punishable by imprisonment of one year or more under the laws of the United States, any state of the United States, or any other country, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases.

Section 626.536, F.S., requires each licensee (including insurance agencies) to submit to the Department a copy of the order, consent order, or other relevant legal documents within 30 days after the final disposition of any administrative action taken against the licensee by a governmental agency or other regulatory agency in this or any other state or jurisdiction relating to the business of insurance, the sale of securities, or activity involving fraud, dishonesty, trustworthiness, or breach of a fiduciary duty.

Subsection 626.6215(6), F.S., requires agencies and their officers to advise the Department within 30 days after an individual licensee's violation is known or should have been known by one or more of the partners, officers, or managers acting on behalf of the agency. Actions taken against a license or registration for violations of state or federal securities or commodities law, such as an action taken by FINRA, are an example. Failure to do so could result in administrative action against the license(s) of the agency and/or majority owner, officer, partner, manager, director, or other person who manages or controls the insurance agency.

Actions may be reported via the NIPR's Attachment Warehouse, which may also satisfy reporting requirements for other states you are licensed in. You may also mail the appropriate documents to us at:

Florida Department of Financial Services
Division of Agent and Agency Services
Bureau of Licensing
200 E. Gaines Street, Room 419
Tallahassee, FL 32399-0319

[See 626.451(7), 626.536, 626.621(13), y 626.6215(6), Estatutos de la Florida]