Recently, we were asked what the definition of rebating is in Massachusetts. The International Risk Management Institute (IRMI) has a general definition in their Glossary of Insurance and Risk Management Terms. As far as I know there isn't an exact definition in the Massachusetts code. There are guidelines to help determine whether something is rebating. For example, the law doesn't address allowing customers to pay their premium via credit card although they may get airline miles or other incentives from their credit card company by doing so. As the incentive is not being offered by the agent, but by the credit card company, this may well not be considered rebating. The law doesn't specifically say that you can't offer Red Sox tickets to customers who go with a particular insurance company, but you can't. It's considered a special inducement which is prohibited. If a specific issue arises in this context, an opinion can be requested from the Massachusetts Division of Insurance.
Chapter 176D entitled: UNFAIR METHODS OF COMPETITION AND UNFAIR AND DECEPTIVE ACTS AND PRACTICES IN THE BUSINESS OF INSURANCE covers this topic. Specifically section 3 subsection 8:
Rebates: Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any insurance contract, including but not limited to a contract for life insurance, life annuity or accident and health insurance, or agreement as to such contract other than as plainly expressed in the insurance contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance or annuity any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchase as inducement to such insurance contract, or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract.
Massachusetts was the first state to enact an anti-rebating law (it was promulgated in 1887, coincidentally the same year our library started). The current Massachusetts law is based on the National Association of Insurance Commissioners model "Unfair Trade Practices Act." Massachusetts is not the only state to have adopted an anti-rebating stance. At one point, every state had an anti-rebating law (according to the 1946 NAIC Proceedings). Currently, most states still have insurance anti-rebating laws.
Some states have looked at the constitutionality and effect of the laws, especially since a number of consumer groups have questioned their use. Thus far, the only two states that I can find without anti-rebating laws are California (in 1988 a vote for proposition 103 repealed the anti-rebating law they had previously) and Florida repealed theirs in the 1980's when their courts ruled it unconstitutional.
Back in 2006 Massachusetts had an informational Hearing on "marketing practices" but doesn't appear to have followed up with a bulletin or significant change to their law. More recently, New York felt that their anti-rebating law was not descriptive enough and in 2009 they issued a circular letter "to provide guidance and clarification to licensed insurance agents and brokers (collectively, “insurance producers”) as to what kinds of services (often referred to as “value-added” services) may be provided to insureds or potential insureds without running afoul of the rebating and inducement provisions set forth in the New York Insurance Law." Insurance anti-rebating laws continue to be a topic of interest and if anything groundbreaking happens regarding them, we'll try and post an updated blog post on them.
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