Insurance agents might be tempted to offer a rebate in order to get business in a highly competitive market. Insurance agents might use this method to attract business when survival is at risk.
Some might argue that rebate is an acquisition cost that insurance agents are willing and able to pay. Customers may actually see some savings through the rebate practice and the insurers are not hindered in their interest.
However, rebate is against the law and prohibited by most state constitutions. Most insurance companies do not allow rebate. If an insurance agent is found offering rebate, they could face suspension, termination or disciplinary action depending on the severity.
What makes a rebate unethical? Customers may purchase insurance in order to receive a rebate, but they might lose sight of the fact the plans are suitable for their needs.
Unhealthy competition can result from rebates Agents take shortcuts to increase their business instead of focusing on improving the quality of their service. They compete with each other until one is unable to survive and forced from business.
An insurance agent going out of business is not a good sign. Customers may have a different perception of the agent’s business and might question their commitment.
Every dollar that insurance agents work hard for is theirs. Insurance agents who are unable to collect their commissions will not be able to provide the same level of service as other agents.
What happens if a prospect asks you for a rebate What if your prospect says that he won’t give a discount if you don’t offer it? What should you do in this situation?
This situation can be handled in a variety of ways.
(a) Educate customers
If a customer insists that you offer a rebate, you can inform the customer that it is against the law. It is illegal for an insurance agent to give up commission in order to gain business.
(b) Make customers feel better about your situation
Ask the prospect asking for a rebate whether he is willing and able to work as hard as his boss after he deducts x percent from his salary. He would expect good service from an agent who offers him a rebate.
If we receive discounted pay, it is our natural instinct to offer discounted services.
(c) Service duration versus remuneration
If you decide that disclosure of your commission is not an issue, you can do a simple mathematic to show your customers how much you earn each year by dividing your commission by the number years you will be servicing them.
The commission drops to negligible once your commission has been divided by the years of service. Your customers might even think you are underpaid.
(d) Analogy
A medical doctor selling medical certificates can be compared to an insurance agent offering a rebate. Would you be willing to consult with a doctor who suggests you buy a medical card from him?
Most likely you won’t because the doctor will compromise professionalism to get a monetary reward. You can only imagine the kind of advice he will give you if he is willing to sell a medical certificate.
(e) Offer customers options
Ask your customers if they have a choice between service and fee. Most customers will choose service. Agents are generally paid for their services.
(f) Dramatize the situation
If the customer asks for a rebate, tell him that you may be able to offer a discount if he speaks with your family members. If he convinces your family members that they don’t need to bring money home to pay the household bills, then you will give him a discount.
Insurance agents are entitled to every dollar they make by providing valuable services to customers. Insurance agents must stay in business for as long as possible to be able to serve their customers. If they lose their commission, this is impossible.