NAIC Adopts Rebating Changes to Unfair Trade Practices Model

The National Association of Insurance Commissioners’ (NAIC) Executive Committee has adopted language that would allow for some types of “rebates” to be offered to consumers, unanimously approving amendments to Section 4(H) (“Rebating”) of the NAIC Unfair Trade Practices Act (Model #880) (UTPA). The revised language permits insurers or producers to “[o]ffer or give non-cash gifts, items, or services, including meals to or charitable donations on behalf of a customer, in connection with the marketing, sale, purchase, or retention of contracts of insurance …” The revisions leave open the possibility of a cap on gift amounts to be established by the state insurance commissioner.

PIA served on the Task Force’s drafting group and recommended edits to multiple drafts throughout and beyond the drafting process. Many, but not all, of our suggestions were adopted; still, we support the new version. The newly revised UTPA still limits rebating, just not as dramatically as it did before. As with all NAIC models, the UTPA serves as a guide for states, which are free to choose how much, if any, of the new language to integrate into their existing laws.

Currently, states have a patchwork of rebating rules and laws, only some of which emanate from the UTPA. Each state’s existing regulatory and statutory authorities on rebating will influence the degree to which—and the manner in which—it adopts these changes.

The NAIC’s Innovation and Technology Task Force began considering the rebating issue in 2018. In late 2019, the NAIC’s Executive Committee voted to develop revisions to the UTPA to address the rebating inconsistencies that had been revealed by the Task Force’s examination of the issue.