New Mexico Superintendent of Insurance Russell Toal recently issued a bulletin clarifying that common and ordinary marketing practices are not regarded as consideration or inducement when there is no quid pro quo arrangement, and that donations to non-profit, charitable or educational organizations that are not insured by the company, agency or individual making the donation are not prohibited.
A release announcing the bulletin noted that on Oct. 9, 2019, the Office of the Superintendent of Insurance (OSI) issued a bulletin providing guidance on an amendment to the Insurance Code which became effective July 1, 2019. The amendment allows property and casualty insurers, producers and representatives thereof to provide customers or prospective customers “prizes and gifts, including goods, gift cards, gift certificates, charitable donations, raffle entries, meals, event tickets and other items not exceeding one hundred dollars ($100.00) in the aggregate in value per customer or prospective customer in any one calendars year.”
It is been brought to the attention of OSI that some insurers, producers and agencies have been advised that the new statutory language and/or the October bulletin prohibits those individuals and entities from making donations in their customary manner.
Toal stated: “It remains critical that we, as insurance regulators, protect consumers from discriminatory pricing and preserve competitive markets through prohibitions on unfair acts that distort regulated insurance rates. But it also is critical that insurance companies, agencies and producers are free to conduct common and routine business and marketing practices that don’t undermine the laws of the state. This bulletin serves to protect the public, support the industry in a balanced and fair way, and ensures that charitable and educational entities can continue to receive support from the insurance industry.”
Bulletin 2020-002 rescinds Bulletin 2019-016 and provides guidance regarding Sections 59A-16-17(A) and 59A-16-17(F) NMSA 1978.
The law “prohibits any insurer, producer or other representative from paying or giving, as an inducement to insurance or coverage, or after insurance or coverage has been effected, any rebate, discount, abatement, credit or reduction of the premium named in a policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified for in the policy, except to the extent provided for in an applicable filing with the superintendent as provided by law.”
The amendment allows property and casualty insurers, producers and representatives thereof to provide customers and prospective customers prizes and gifts in an amount not to exceed $100.
The bulletin states: “Insurers, producers and other persons engaged in the business of insurance are advised that common and ordinary marketing practices are not regarded as ‘consideration’ or ‘inducement’ for the purposes of Section 59A-16-17(A) NMSA 1978 when there is no quid pro quo arrangement, so long as the value of the gift or prize does not exceed $100 in the aggregate in value per customer or prospective customer in any one calendar year. Common and ordinary marketing practices include, but are not limited to, the giving of tangible goods (such as T-shirts, caps, pens, calendars, etc.), the giving or purchase of consumables (such as food and beverages, etc.), the provision of continuing education course materials or instruction, and the giving of tickets to sporting, cultural or other events.”
It further states: “Sections 59A-16-17(F) NMSA 1978, should not be interpreted as prohibiting an insurer, producer or other person engaged in the business of insurance from giving things of value outside of a contractual arrangement or prospective contractual arrangement. Examples of such giving include insurers or producers who donate to non-profit, charitable or educational organizations. Such a broad interpretation would result in prohibiting common and ordinary business activities where the prohibition bears no reasonable relation to the discriminatory or predatory activities sought to be cured by the Unfair Trade Practices Act. Some of the factors that OSI will evaluate in determining whether a donation violates the general prohibition on rebating will be the timing of the alleged inducement, the prior relationship between the parties, the type of benefit, and the recipient of the benefit. Additionally, OSI will consider whether the insurer, producer or other person engaged in the business of insurance has a history of donating to non-profit, charitable or educational organizations.”
The bulletin noted that issues will come to the office’s attention that are not addressed in the bulletin and that it reserves the right to evaluate any given circumstance independently to determine whether the offer or gift of something of value would constitute an inducement or rebate.