Massachusetts Issues Insurance Bulletin Discussing Inducements, Rebates and Affiliated ‎Entities

On May 24, 2024, the Massachusetts Division of Insurance (the “Division”) issued Insurance Bulletin 2024-06, “inducements, rebates and affiliated entities” (the “Bulletin”). The Bulletin is addressed to “all licensed insurance companies and insurance producers.” The Division issued the Bulletin to “remind insurance companies, officers thereof, and insurance producers authorized to operate in Massachusetts” that Massachusetts law[1] prohibits, as an unfair or deceptive act or practice in connection with the transaction of insurance business, insurance companies, officers, and producers from “paying, giving, or allowing to pay or give, directly or indirectly, ‘anything of value’ or ‘any valuable consideration’, not specified in the insurance contract, as an inducement to the purchase of insurance or a rebate of insurance premium.” The Bulletin further reminds insurance producers that Massachusetts law[2] also prohibits any “special favor or advantage” to accrue to an such producer that is not specified in the policy. Unlawful rebates or inducements are not solely limited to “reductions on insurance premiums”, but rather such rebates or inducements “include payments, reductions or discounts, not specified in the insurance contract, that would bestow anything of value, valuable consideration, special favor or advantage on the insurance producer.”

The Bulletin also addresses activities that would “indirectly provide the insurance purchaser with a ‘special favor or advantage’ or ‘valuable consideration or inducement’ not specified in the insurance contract….” In particular, the Bulletin makes clear that an insurance producer, “or its common parent, may not allow an affiliated non-insurance entity to pay ‘anything of value’ or ‘any valuable consideration’, including offering a discounted price or rate on goods and services, to a customer of that affiliate where the consideration is intended to induce that customer to purchase insurance from the producer or where it is contingent upon the customer purchasing insurance from the producer” as doing so would trip Mass. Gen. Laws ch. 176D, § 3(8), thus constituting an unfair or deceptive act or practice in the business of insurance.

Read the full text of the Bulletin.

[1] See Mass. Gen. Laws ch. 176D, § 3(8); see also Mass. Gen. Laws ch. 175, §§ 182-183.

[2] See Mass. Gen. Laws ch. 176D, § 3(8).