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Compliance For Referral Fees, Inducements & Gifts

By October 14, 2017Uncategorized

Referral Fees, Inducements & Gifts: Do you know the differences and how you should and should not use them in your business practices?

When marketing your business, referral fees, gifts and inducements are all forms of advertising that are regulated by state insurance laws?

These three topics are often confused so you’re not alone if you don’t. In this post, we’ve provided a general high-level definition of each and some examples of lawful and unlawful practices. Being in the know is the first step in helping to protect your business.


  • Referral fees are either cash or an item given to the source of a referral for the referral of a prospective insurance customer.
  • The fees are lawful provided they are given for every referral.
  • The fees are not lawful if they are only given to those referrals that result in insurance sales.


  • These are items of merchandise given to prospective or current policyholders or to the public that market or advertise an agent or agency.
  • Acceptable items may include coffee mugs, golf balls, golf towels, mouse pads, calendars, etc., and generally, include the name of the agent or agency.
  • Unacceptable advertising gifts include cash, gift cards, lottery tickets, etc. The value of the merchandise given to each person is dependent on your state inducement laws. Please be sure to review and abide by your specific state laws.


  • An inducement is defined as giving a prospective customer, existing customer or any entity a “thing of value” in exchange for something of value to the agent, such as the ability to produce an insurance quote or sell an insurance product.
  • Inducements are unlawful as a consumer may choose to work with one agent over another agent even though they sell the same product for the same price solely because one is offering an inducement. The law was created in part to deter unfair competition among licensees.
  • Examples include but are not limited to cash, gift cards, merchandise, lottery tickets, tickets to sporting events, concerts, etc.


It’s important to know the differences so you fully understand the limitations if you offer any of these types of incentives to your clients or prospective clients. Being informed and understanding your state specific requirements could help protect you from future fines and violations.


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