Utah should modernize anti-rebating regulations, R Street policy brief finds
SALT LAKE CITY (Feb. 6, 2015) – Utah should bring its anti-rebating regulations in line with the rest of the country, according to a policy brief published today by the R Street Institute.
Anti-rebating laws initially were passed to prohibit sharing the proceeds of an insurance commission with the insured, notes author Ian Adams, R Street’s western region director. Rules against rebates are usually justified on grounds they could provide an inducement to a consumer to purchase a product from a specific retailer or retailer’s representative.
In Utah, an over-zealous interpretation of the statute, at odds with the model promulgated by the National Association of Insurance Commissioners, has led to the determination that an insurance broker could not make available to its commercial clients a free online human resources portal, deeming the service “an illegal inducement” under the statute. This is in spite of the fact that the software is offered to businesses for free independent of the purchase of insurance.
“Utah’s application of its anti-rebating law fails the first test of regulation,” Adams wrote. “It does not identify any consumer who could feasibly be harmed by the market conduct in question, while many consumers could potentially benefit.”
Adams writes that Utah should move toward a more flexible understanding of the law, based upon the purposes that it believes its anti-rebating statute should and can achieve. This would require lawmakers to define a more limited conception of what constitutes a rebate, so that genuine innovations to better serve consumers are not precluded.
“As would be expected, the statute did not anticipate some of the innovations brought to market by the Internet and how e-commerce would affect the business of insurance producers,” Adams wrote. “A modernization of the law would be in consumers’ best interests as they harness the power of the Internet to work for them.”
Utah’s anti-rebating laws will be the subject of a Feb. 9 hearing of the state House Business and Labor Committee.
