The Insurance Council of British Columbia published guidelines for insurance licensees engaging the practice of rebating. “While this practice is allowed, licensees who engage in rebating often have varying interpretations of what is permitted,” the council writes. “The Rebating Guidelines outline when rebating is permitted and when it is not allowed.” 

The council states that insurance licensees are permitted to rebate a portion of a consumer’s premiums to induce the purchase of insurance. The guidelines clarify the council’s interpretation of the allowable amount, including how to calculate a rebate. “The guidelines also outline the insurance council’s expectations for licensees engaged in the practice of rebating.” 

In short, they say a rebate of premium must be less than 25 per cent of the premium paid. In the first year only, a licensee can pay a rebate to the client in advance of the client paying the first-year premium. In all other cases, the rebate can only be paid after the client pays the premium. 

Before deciding to engage in the practice of rebating, the council adds that agents – the guidance applies to all general, life and accident and sickness insurance agents in the province – should confirm with their insurers that rebates are permitted under their contracts. They add that licensees must not use the rebate to induce the sale of insurance that the client does not want, need or cannot afford.

For example, the council says licensees must not use the savings from the rebate to induce the client to purchase additional insurance. “The best interests of the client must be considered first, and licensees must only offer the client the appropriate insurance that meets their needs or is specifically requested by the client.” 

The guidance also states that licensees should not promise to pay future rebates. “The ability to pay a future rebate is dependent on a number of factors that are outside of an agent or salesperson’s control,” they write, pointing out that the licensee might not be the agent of record in the future, they may not have the ability to pay, and insurers could also change their policies to prohibit rebating in the future. “Promising a rebate on future premiums may not be something that the licensee can control and therefore should not be promised to a client.” 

Insurance licensees following the guidance are also encouraged to keep accurate and detailed file notes and advise clients that there may be tax implications for those receiving rebates. “As the client may not be aware, it is expected that the licensee draw this to the client’s attention and suggest the client consult an income tax professional on the potential tax implications of the rebate.”