by John Darer CLU CHFC CSSC RSP
Today's Insurance Journal ("IJ") carries the story of how how farmers and insurance agents who sell them federal crop insurance policies may soon be required to certify that they are not participating any rebating or incentive schemes related to the purchase of those policies.
IJ says that the 2008 federal farm bill prohibits the practice of rebating in conjunction with the federal crop insurance program, but apparently not all agents have gotten the message.
The Federal Risk Management Agency is looking at ways to curb the practice, including the possibility of putting in a certification statement in some of the policies,” he said.
The document would be signed by both the agent and the farmer, wherein the agent would be certifying to the fact that he did not provide any type of inducement to the producer (farmer) and the producer signing that they did not receive one from the agent.
National Association of Insurance Commissioners’ Crop Insurance Working Group heard testimony about what happens to the signed certificates and whether there are any consequences when rebating occurs even after the documents are signed. The chilling response was that under the standard reinsurance agreement (SRA), reinsurance for those policies that were placed in conjunction with a rebate or incentive from the agent can be revoked.
The structured settlement industry's early years were fraught with allegations of direct or indirect rebating of commissions to casualty insurers or adjusters and in later years allegedly, directly or indirectly to plaintiffs or plaintiff attorneys. While allegations of those alleged practices have largely disappeared, the threat that a transaction could be revoked would certainly be a major deterrent against recurrence of those practices.
4structures.com, LLC was one of the first companies in the structured settlement industry to voluntarily offer a structured settlement broker's affidavit or declaration that provided representations and warranties to its customers that its consultants do not participate in such practices. In recent years the affidavit has been updated to address the controversy of factoring commissions that are offered to settlement consultants in connection with consulting they may provide to selling structured settlement annuitants.
Read the insurance rebating story here
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