Businesses from many industries use contests, giveaways and sweepstakes to promote products and services. Agents should be aware that the insurance code bars insurance agencies from offering inducements to purchase insurance; however, it is permissible for a licensed agent to pay a referral fee or other consideration to another person, if the unlicensed person does not discuss "specific insurance policy terms or conditions with the customer or potential customer" and the referral fee or other consideration is not "based upon the purchase of insurance" by the customer. Licensed agents are free to pay for leads furnished by real estate agents, car dealers and others.
Is it permissible to reward referral sources with an entry in a drawing for a more substantial prize? There is no mention in the insurance code relating to the nature of referral payments; however, in Texas, contests, giveaways and sweepstakes are regulated by Title 13 of the Texas Business and Commerce Code. Among the aspects regulated are extensive disclosures regarding participation requirements, odds of winning, nature and value of prizes, dates, drawing location and other representations. There also are extensive record keeping requirements. Agents should be aware that violation of the regulations is a deceptive trade practice and subject to criminal penalties. Because of the complexity of regulations and the severity of punishment for violations, IIAT recommends seeking advice from an attorney familiar with the applicable code before proceeding.