As an agent, networking with other business owners is essential to developing the kind of leads that help build your insurance agency. That is why agents are encouraged to become involved in their communities by joining various business associations like the chamber of commerce, sponsoring any number of community activities such as a local softball league, or involving themselves in charitable organizations like the United Way. By taking an active role in these and other community activities, an agent can build up his name brand and develop the types of relationships that can result in the kind of quality leads that will ensure the agent's success.

At the Florida Association of Insurance Agents (FAIA), agents ask us how they can legally reward individuals who help them develop quality leads. You know, of course, that as an agent you can never share a commission with anyone who doesn't have a 2-20 license. Life and health commissions also can only be paid or shared with other agents with life and health licenses. But what if you have a relationship with another business, say the accounting firm down the street or mortgage broker that sends you 10 great leads a month and you write about half of them? How can you say thank you?

There are two ways under the law that an agent can show his appreciation to another business owner for providing leads. The first is to give the owner what is considered an advertising gift, which must be limited to something valued at $25 or less. As spelled out in Chapter 626.9541(m), Florida Statutes, “Advertising gifts permitted. No provision of paragraph (f), paragraph (g), or paragraph (h), shall be deemed to prohibit a licensed insurer or its agents from giving to insureds, prospective insureds, and others, for the purpose of advertising, any article of merchandise having a value of not more than $25.”

The law is designed to prevent unfair competitive practices whereby agencies or insurers promise substantial financial considerations in order to obtain business. For example, as referenced in the above paragraph, Chapter 626.9541(h), Florida Statutes, prevents agencies and insurers from, “paying, allowing, or giving, or offering to pay, allow, or give, directly or indirectly, as an inducement to such insurance contract, any unlawful rebate of premiums on the contract, or any special favor or advantage in the dividends or other benefits within.”

Advertising gifts are usually pen and pencil sets, candy jars, coffee mugs, or other goodies that have the agency's name, telephone number, and web site on them. You probably have several of those items scattered around your desk right now. Come to FAIA's 103rd Annual Convention and Educational Symposium from June 21 to June 23 at the Gaylord Palms Resort and Convention Center, and you will collect a wide sample of gifts from trade show vendors.

Lead Reward Programs

In addition to providing businesses and business owners with a $25 advertising gift, an agency can create a leads reward program to thank friends for referrals. Back in 2001, the legislature approved Chapter 626.112(8), Florida Statutes. The provision reads, “No insurance agent, insurance agency, or other person licensed under the insurance code may pay any fee or other consideration to an unlicensed person other than an insurance agency for the referral of prospective purchasers to an insurance agent that is in any way dependent upon whether the referral results in the purchase of an insurance product.”

FAIA conferred with the Department of Financial Services, and they agreed that the amount of the lead fee is not limited as long as it was a true leads-reward program and is not just an advertising gift to someone because they happened to send a lot of business. Therefore, if it's a per-lead fee for anyone who sends an agent a lead, there isn't a limit on the reward. Practically speaking, however, most agents would probably keep the fee fairly low if it is properly given to all who send leads. You can require that they are “qualified” leads submitted on a certain form to earn the payment for the lead, and the amount of the reward could vary by line of business.

The key point here is that there can be no connection between the fee for the lead and whether or not the prospective consumer actually purchases a policy. Otherwise, that would be akin to sharing the commission with an unlicensed person. To be a true lead fee it must be connected to the referral and not the sale. FAIA advises that agents define the lead program very carefully. It can be defined by line of business and other factors, but it cannot be discriminatory. Although the statute doesn't specifically state that the program cannot be discriminatory, it is prudent to not engage in a business practice that could lead to problems down the road. Also, there is no need to advertise the lead program or tell anyone about it except for those individuals you would like to participate in it.

The lead-fee examples below illustrate situations where an agent is complying or not complying with the law. Read them carefully and then go out there and use your network of friends and business associates to make your agency more productive.

Example One: ABC Insurance Company pays Quality Cars $1,000 a year to place desktop holders on the desks of the auto salespersons. Agency brochures are in the desktop holders, available for customers of Quality Cars to read with the hope that they will contact ABC Agency for auto coverage at a later date.

Example Two: Chris Agent goes to visit Pat the Salesperson at Quality Cars and gives Pat 100 business cards, marked to identify them as coming from Pat. Chris tells Pat, “Every time someone gives me my business card and tells me they got it from you, I'll pay you $5.00. I'll pay you for every card whether the customer buys from me or not.”

Example Three: Chris Agent goes to visit Pat the Salesperson at Quality Cars and gives Pat 100 business cards, marked to identify them as coming from Pat. Chris tells Pat, “Every time someone gives me my business card and tells me they got it from you, I'll pay you $5.00. If I sell a policy to him, I'll pay you $10.00.”

Example Four: Chris Agent goes to visit Pat Salesperson at Quality Cars and gives Pat 100 business cards, marked to identify them as coming from Pat. Chris tells Pat, “Every time someone gives me my business card and tells me they got it from you, I'll pay you $5.00 if I sell them a policy. If I don't sell them a policy, I won't pay you anything.”

Looking at the four examples, only examples one and two comply with the law since the referral fee was paid to someone without regard to writing a policy and without the fee being dependent upon, or in any way tied to, the purchase of an insurance policy. Remember, a referral fee that is contingent upon an individual purchasing a policy is the same as sharing a fee, which under the law can only be shared with another licensed agent.

Special Reports /

Leads, Fees, and Gifts: Rewarding Referrals

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