Advertising Gifts vs. Lead Fees

Lisa H. Harrington, CPCU, CAE, AAM, AAI, AIP
Vice President of Education
Florida Association of Insurance Agents

Occasionally, an agent asks us when they can reward someone for helping them find qualified leads and how that can be done legally.

You know of course that you can never share commissions with anyone who doesn't have a 2-20 license. Life & Health (L&H) commissions can also only be paid to or shared with L&H licensees.

But what if you have a relationship with another business, say the accounting firm down the street or a 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. You can give your friend an advertising gift, but you'll be limited to something valued at $25 or less.

FS 626.9541(m) Advertising gifts permitted.--No provision of paragraph (f), paragraph (g), or paragraph (h) shall be deemed to prohibit a licensed insurer or its agent 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.

Advertising gifts are usually pen & pencil sets, candy jars, or other goodies that have the agency's name and number or website on them. You probably have one on your desk right now. (Come to our Convention and collect bags full from the trade show hall vendors!)

The second way you can thank your friends for referrals is to create a true leads reward program.

Back in 2001 the Legislature approved the following language:

FS 626.112(8) - 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 which is in any way dependent upon whether the referral results in the purchase of an insurance product. [emphasis added]

We conferred with the DFS and they agree that the amount of the lead fee is not limited as long as it was a true LEAD PROGRAM and not just a gift to someone because they happened to send a lot of business. (That would be an advertising gift, limited to $25—if it's random.)

If it's a "per lead" fee for anyone who sends leads, there isn't a limit. Practically, though, any sane agent would have to keep it 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/paperwork to earn the payment of the lead. And, the amount can be different by different lines of business.

The key is that there can be NO connection between whether or not the sale is made—that would be akin to sharing commissions with an unlicensed person. It has to be a true LEAD fee—connected to the lead(s), but not the sale.

We advise that you define it very carefully: one lead equals $X, no matter who sent the lead, etc. It can be defined by line of business, etc., but cannot be discriminatory. While that's not in the statutory language, it's prudent to prevent any problems. And there's no need to advertise the lead program or tell anyone about it except those you would like to participate in it.

The lead fee examples (with thanks to David Thompson) below will illustrate compliance or non-compliance. Read them carefully—then go out there and sell some more insurance!

Example #1: ABC Insurance Agency 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 and then hopefully contact ABC Agency for coverage at a later date.

Example #2: 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. I'll pay you for every card, whether the customer buys from me or not."

Example #3: 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. But if I sell a policy to that person I'll pay you $10.00."

Example #4: 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, but if I don't sell a policy I won't pay you anything."

Only examples #1 and #2 comply with the statute 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 product. In order to pay a "referral fee" (or any other consideration) that is contingent upon the purchase of insurance, the person/entity receiving the "fee" must be a licensed and appointed per Florida Statutes 624.10, 624.11, and 626.112.