December 16, 2019

NAIC and NCOIL Reconsidering Anti-Rebating Laws and Regulations

The National Association of Insurance Commissioners and the National Council of Insurance Legislators, alongside some states, are providing guidance and model laws on the regulatory compliance of offering rebates for the sale of insurance.

At the Fall 2020 National Meeting of the National Association of Insurance Commissioners (“NAIC”), the Innovation and Technology (EX) Task Force (the “Task Force”) agreed to review and revise the NAIC’s Unfair Trade Practice Model Law (Model 880) to clarify what constitutes regulatory compliance with respect to the prohibitions on offering rebates for the sale of insurance. The Task Force will form a drafting group to undertake the task of evaluating potential revisions to Model 880. State insurance law prohibitions against rebating and inducements have frequently been cited as impediments to innovation in the sale of insurance products.

In parallel to the Task Force’s activities, some states are choosing to provide administrative guidance which is intended to advise the industry regarding the regulation of rebating. For example, the North Dakota Insurance Department has a drafted bulletin (which has yet to be formally published) which carves-out value added services from its anti-rebating laws. The North Dakota draft bulletin may be found here. Several other states have offered such regulatory guidance over the past few years.

Additionally, the Financial Services & Multi-Lines Issues Committee of the National Council of Insurance Legislators (“NCOIL”) has developed a Rebate Reform Model Act (the “NCOIL Model Act”, available here) which clarifies when the provisions of certain gifts and prizes, value added services, and free or below market value services constitute an impermissible rebate under state insurance laws and regulations. If adopted by NCOIL, the NCOIL Model Act should add momentum to the NAIC’s efforts and potentially spur more states to reform the regulation of rebating in insurance, whether through the adoption of legislation, regulations or through administrative guidance.