Referrals involve two different categories – compensation and fees.
See RCW 48.30.133 and WAC 284-17-825.
Referral compensation:
- Can be prizes, goods, wares, gift cards, gift certificates, or merchandise, but cannot be cash in any form, such as currency, bills, coins, check, or money order.
- Is limited to $100 in value in the aggregate in any consecutive 12-month period.
- Can be given to any individual whether insureds, prospective insureds, or neither.
- Cannot be conditioned upon the referred person applying for or obtaining insurance.
See RCW 48.30.133(1), (2) and (3).
Referral fees:
- Can be paid to an unlicensed individual (not an insurance producer) who refers a person to the insurance producer.
- Paid to the unlicensed individual must be conditioned upon the submission of an application for insurance by the referred person.
- Can be cash or other valuable consideration.
- May be paid without a limitation as to amount.
- Cannot be given to any unlicensed person who sells, solicits or negotiates insurance.
- Cannot be given to any insured or prospective insured.
Guidelines
The insurance producer should implement record-keeping processes to be able to provide evidence that the requirements have been met, particularly that the value of the referral compensation given did not exceed $100 for any consecutive 12-month period and that the referring individuals receiving referral fees were not insured clients or prospective clients at the time of payment.
Examples
An insurance producer pays a real estate agent $50 for each name given as a referral.
This is not permitted. Referral compensation cannot be paid in cash and it is not permissible as a referral fee since payment is not conditioned upon submission of an application.
See RCW 48.30.133(2) and (4). Please compare this with example No. 4 below.
An insurance producer gave an individual for referrals three gift cards in the amount of $50 each, but they only cost him/her $25 apiece.
This is not permitted. Even though the gift card cost $25, each is valued at $50. The maximum referral compensation value is $100 in the aggregate per referring individual for a consecutive 12-month period.
See RCW 48.30.133(1) and WAC 284-17-825(2).
An insurance producer gives $10 gas cards for every referral made and once each month holds a drawing for a $50 gift card.
The giving of the $10 gas cards is permitted as long as each referring individual’s compensation does not exceed $100 in value in the aggregate for any consecutive 12-month period. It is not permissible as a referral fee since giving of the gift card is not conditioned upon submission of an application.
If eligible participants in the monthly drawing for the $50 gift card are limited to those who made referrals to the producer, the drawing is not permitted.
See WAC 284-17-835(2).
If the drawing were open to the general public, a winner’s prize must not result in compensation for the winner that would exceed $100 in value in the aggregate for any consecutive 12-month period.
See WAC 284-17-835(5).
A referral leads to an application being submitted and the insurance producer gives the referring individual $200. The referring individual is not a licensed producer, is not selling, soliciting or negotiating insurance and is neither an insured nor a prospective insured of the producer.
This is permitted. An insurance producer may pay a referral fee to an unlicensed individual when an application is submitted as a result of a referral but the referring individual must not be engaged in activities requiring an insurance producer license and must not be an insured client or prospective insured client of the producer.
See RCW 48.30.133(4); RCW 48.17.490(4); and WAC 284-17-825.