If you buy life insurance in the US why is it illegal for companies/brokers to give rebates(legal in Ireland)?

I'm thinking of getting a life assurance policy for say 10 or 20 years cover, just incase I kick it my spouse will have a little nestegg. Found a broker who offers ok prices, cheapest I could find, and the broker offers a 75% cash rebate by cheque in year one once you pay in full for the year or in the 13th month if you pay monthly. Some companies - aside from brokers - also offer rebates, although not as generous.

Now how can this broker afford to do that? Does he get a commision from the company we get our policy through, like an affiliate bonus for signing up new clients and is he then using part or all of this bonus to cover the rebate to us? Works out well for us regardless but wondering why it's illegal in the US? Thanks.

Update:

http://www.cheaperlifeassurance.ie/ This is the brokerage company.

Update 2:

But doesn't not allowing rebates mean the free market system is being corrupted? I mean, isn't it like telling supermarkets they can't have sales because another supermarket or shop may not be able to compete? Personally I'm a Socialist anyway, lol, but looking at it from a capitalist perspective that is simply government interference.

Those who can provide the consumer with the best price will survive, those who cannot, well, will not. No rebates while good for the broker or insurance firm is bad for the consumer. Just as no supermarket sales would also be bad bad for the consumer. Yet, we have supermarket sales but don't apply the same logic to the financial products sector. Odd. Thanks.

5 Answers

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  • 8 years ago

    The broker does get commission for the sale of the policy to you. This broker may be able to afford such a generous rebate(of the commission they earn) because they are well established and counting on the fact that by offering such a rebate, why you would buy this same policy through another broker? This rebate easily influences you to buy the policy from them over any other broker! Yes they'll have to sell more to make the same profit but they won't have a problem selling more policies to make up the difference. Plus they're not offering the rebate for 1 year. Imagine with this one year rebate how many policies they'll sell and the income they'll generate before they even have to pay out rebates. They'll more than likely invest the portion that is meant to be rebated to you and 750 rebated to you will be even less to them.

    This is illegal in the US because it is unfair to other agents/brokers(who may not be able to afford to offer such a rebate especially if they are new. What chance would they have in selling any insurance against a broker offering such large rebates). Here government wants a level playing field. Otherwise, in a sense a monopoly can develop. A well established broker here who can afford to give large rebates, will drive down sales of other brokers or out of business all together!

    Source(s): I'm an insurance agent.
  • 8 years ago

    The practice is illegal to protect the consumer.

    Agents/Brokers get commission from the insurance carrier. On individual term life plans, most of the commission are paid in the first year. As much as 100% of the premuim you pay. Years 2 through the term, pay in the 3% - 5% range.

    The regulations are intended to keep agents from rolling clients every few years for higher commissions. Because as you get older your rates go up and your health conditions may become an issue and increase rates for you, also.

  • 8 years ago

    First year commission on that type of policy is typically darned close to the FULL PRICE you pay.

    Worse, rebating IS illegal in the USA, pretty much across the board, to protect the AGENTS, and to keep the playing field level.

    Agents/brokers ONLY make their money via commission, from selling policies.

  • Anonymous
    5 years ago

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    RE If you buy life insurance in the US why is it illegal for companies/brokers to give rebates(legal in Ireland)?

    I'm thinking of getting a life assurance policy for say 10 or 20 years cover, just incase I kick it my spouse will have a little nestegg. Found a broker who offers ok prices, cheapest I could find, and the broker offers a 75% cash rebate by cheque in year one once you pay in full for the year or in the 13th month if you pay monthly. Some companies - aside from brokers - also offer rebates, although not as generous.

    Now how can this broker afford to do that? Does he get a commision from the company we get our policy through, like an affiliate bonus for signing up new clients and is he then using part or all of this bonus to cover the rebate to us? Works out well for us regardless but wondering why it's illegal in the US? Thanks.

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  • Anonymous
    5 years ago

    For free insurance quotes

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