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Iowa Overhauls Anti-Rebate Rule

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The Iowa Insurance Department Friday substantially loosened its ban on providing gifts to policyholders or prospects.

The department’s original anti-rebate policy had drawn heavy criticism from the insurance industry.

Industry lawyers say that they are still studying the new policy, and caution that it signals that the state’s regulators are taking a hard look at how insurers and producers interpret anti-rebate laws.

And Iowa is not the only state dealing with the issue.

Under Iowa’s revised policy, issued as Bulletin 08-13, agents or insurers “may give inexpensive gifts to prospective or existing customers so long as such gifts are provided on a nondiscriminatory basis and so long as the giving of the gift is not conditioned upon the purchase of a policy of insurance.”

It replaces a bulletin issued June 30 but since rescinded that would have prohibited the offer of any goods or services to a policyholder or prospect that are not specifically included in the policy contract.

Earlier in August, the state’s insurance department backed off the more restrictive policy to allow insurers to continue the long-held tradition of providing giveaway trinkets at the Iowa State Fair, which was held August 7-17.

Industry representatives met Aug. 15 with state Commissioner Susan Voss and department staffers to air their problems with the former rule.

Ann Weber, vice president and regional manager for the Property Casualty Insurers Association of America, said PCI is still studying the new policy but finds it “definitely more reasonable.”

By contrast, the original policy “would have really prohibited everything that wasn’t spelled out in the [insurance] policy,” she said.

This would have included, for example, calendars, pens, smoke detectors, driver safety CDs to new drivers in the household, maps, documents providing tips for winterizing a home and boating safety tips, “problems that are really big in the Midwest,” Weber said.

Earlier, the Council of Insurance Agents and Brokers sent a comment letter to the agency urging development of clear, flexible standards based on a recently enacted law in New Hampshire that generally prohibits rebating but does permit producers to offer 5 types of services free of charge: risk assessments, risk control tools, claims assistance, legislative updates and administration consulting.

“These standards would permit the offer of value-added services that consumers have come to expect while providing producers with the ability to adapt as the marketplace changes in the future,” a CIAB official said in the letter.

The CIAB cautions its own members that the state bulletin also expressed concern about an apparent trend whereby insurers are including “items other than insurance” in their policy filings. The department expressed concern that this is an attempt to get around rebating laws, CIAB noted.

Nicole Allen, the CIAB’s vice president, industry affairs, pointed out that Texas is dealing with the same issue over sales of some health insurance policies.

She notes that Texas issued a bulletin in January about agents providing administrative services, such as for COBRA, flexible spending accounts and other human resources assistance, in conjunction with the sale of health insurance. Such “inducements” are prohibited unless included in the insurance contract, Texas reminded agents.