Eye on the Law NO RAFFLE FOR YOU!

In the world of insurance marketing, nothing seems to be easy. One question that came to us was whether an agency could hold a “raffle” at a golf hole that it was sponsoring where there would be no charge to enter, anyone could enter, and there would be no obligation to entertain a quote, to buy a policy, or to terminate an existing policy to win a prize. The prize would be something of nominal value like a box of golf balls. The only requirement to enter was that the person must provide a business card or contact information so that the agent could develop a list of prospects.

Technically, the proposed giveaway is not a “raffle.” Wisconsin’s law strictly regulates raffles. A “raffle” is a game of chance where tickets are sold and drawings for prizes are held. Raffles are regulated as gambling, and licenses can only be granted to local religious, charitable, service, fraternal, veterans, or 501(c)(3) organizations. As a general matter, insurance agents and agencies cannot conduct raffles.

Free contests like the above-described drawing, however, are different. Free contests are generally permissible and largely unregulated under Wisconsin law, provided there are no hidden costs to enter and no entry requirements beyond filling out a form. A standard “golf course drawing” that is open to all participants without charge, in which participants need only fill out a form to receive an opportunity to win a prize, is permissible for many businesses due to a lack of consideration—the person does not have to pay or give other consideration to enter the contest.

Insurance agents, however, are not most businesses. Enter Wisconsin Administrative Code ch. Ins 20 – Insurance Marketing. This administrative rule governs “the solicitation or the offering for sale of insurance where the solicitation or sale is either personally solicited or consummated by the agent at the residence or place of business or employment of the buyer or away from the agent’s regular place of business.” Under chapter Ins 20, an insurance agent soliciting or selling insurance away from the agent’s regular place of business (like on a golf course) shall not engage in a “contest or other venture to win a cash award, scholarship, vacation or similar prize, when in fact the principal objective is to make an insurance sale or obtain information to help identify sales prospects.” Accordingly, if the point of the contest is to sell insurance or identify sales prospects and the drawing takes place away from the agent’s place of business, it likely violates the insurance marketing rules.

There may be some circumstance where an agent could possibly do a free contest without running afoul of the rules regarding raffles and insurance marketing. In such cases, there are other rules prohibiting agents from influencing another person to buy an insurance policy or to terminate an existing policy by offering benefits (e.g., the law on unfair inducements and rebating) that may also come into play. In this case, however, if the purpose of the drawing at the sponsored golf hole is to identify sales prospects, the insurance agent should not conduct the drawing.

In other words: No raffle or contest for you!

7 TIPS TO REMEMBER WHEN MOVING A CLIENT’S COVERAGE TO A NEW CARRIER

Failure to mirror coverage when moving a client, whether new business or a renewal, to a new carrier is one of the most significant reasons for an E&O claim. A common scenario is when the insured suffers a loss that would have been covered by the prior carrier, but is not by the new carrier. This turns into an E&O claim against the insurance agent.

WHAT CAN YOU DO?

The actions you take during the quoting process can help or hurt you. The following tips can help:

1. Do not assume the current coverage is still sufficient to meet the client’s needs. Conduct an exposure analysis to capture any new coverage needs.

2. Review the current coverage carefully for sub-limits and any coverages granted by endorsement. Request coverage that matches or expands these coverages.

3. Note differences in coverage, limits/sub-limits, and endorsements to the client in writing when you receive the quote. If this is discussed verbally, memorialize it back to the client in writing to protect your agency from accusations that this wasn’t discussed.

4. Provide clear proposals and specimen policy forms/endorsements. Indicate to the client that they should review them and contact you if they have questions or concerns about coverage levels.

5. Highlight any changes to how payments are handled that could impact the client receiving a payment in a timely manner.

6. Thoroughly review what you receive from the carrier. There may be changes to coverage from one year to the next even if you are renewing coverage with the same carrier. E&S placements can make changes to coverage without communicating this to the insured or the agent.

7. Get the client’s written approval of the terms to be bound. This is particularly important when a client chooses to reduce coverage in the interest of premium savings.