Iowa: Insurance Division Announces New Rebating Bulletin, Conducts Hearing on Model Audit Rule

NAMIC’s trade association partner, the Iowa Insurance Institute, reports that the Iowa Insurance Division published Bulletin 08-15 on Sept. 20 dealing with rebating. The III also stated that the division conducted a hearing that same day on its proposed version of the NAIC’s Sarbanes-Oxley-based Model Audit Rule.

The newest bulletin upholds part of Bulletin 08-13 that had repealed an earlier bulletin banning rebates as well as part of another bulletin on the subject.

The major effect of Bulletin 08-15 is to provide generalized guidance as to what is and is not a rebate. The bulletin recognizes that social relationships with existing clients involving meals, attendance at sporting events, and other activities are customary. As these occur after the sale, the division does not consider them rebates. The division also states that giving items of minimal value, such as pens or atlases, that are often provided to the public at large are not seen as rebates, nor are sponsorships of events or educational seminars where no selling occurs.

The bulletin confirms that reducing commissions or premiums at the time of sale is rebating, and states that providing “unrelated products” such as memberships or services provided “solely” upon the purchase or renewal of a policy, will be determined to be rebating. However, the division also says that services connected with a policy, such as newsletters and loss prevention services, are not rebates.

The division further adds that it has observed a trend where companies are including items that are not insurance in their new policy filings. The division believes that such acts violate the “spirit of the law” and that it will disapprove the filings when the additional items appear to not be related to the insurance product being marketed.

The bulletin closes with the division remarking that it will evaluate issues as they arise regarding rebates.

On the same day the bulletin was released, the division took testimony on the MAR proposed rule. No objections were made at the hearing as no substantive changes were made from the version of the proposal that had been circulated. It is expected that the division will officially adopt the proposal shortly.

Direct questions to NAMIC State Affairs Manager Mark Johnston.

Posted: Tuesday, October 07, 2008 12:00:00 AM. Modified: Tuesday, October 07, 2008 12:46:45 PM.

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