Insurance Agents Kick Back

Kickbacks are one way for insurers to drum up business. An all-expenses-paid trip to Hawaii is another.

It has become routine in some corners of the industry for insurers to shower expensive gifts on supposedly independent agents and brokers as a reward for steering business to them. Such incentives are sometimes handed out as prizes in sales contests, in which brokers compete to sell the most policies.

One of the more aggressive gift-givers in the insurance business is Infinity Property & Casualty(IPCC Quote), the nation's second-largest insurer of so-called high-risk drivers. The Alabama-based insurer routinely doles out jet skis, gift certificates, Caribbean vacations and Alaskan cruises to independent agents who meet specified production goals.

Infinity refers to the giveaways as "incentives," designed to get agents to sign up more Infinity customers. All of the 14,000 agents whom Infinity relies on to sell its insurance policies are independent dealers, free to peddle the products of rival insurers.

To critics, the incentive programs are really no different than the hidden payments that state regulators are targeting in their highly publicized investigation of tawdry insurance industry business practices. They say sales contests and incentive programs encourage independent agents to put their own interests ahead of ordinary consumers shopping for the best car, home or life insurance coverage.

"I find these things very offensive and questionable," says Robert Hunter, director of insurance with the Consumer Federation of America. "Some of them go way over the top."

J.D. Howard, executive director with the Insurance Consumer Advocate Network, says the problem with sales contests is that agents rarely disclose these hidden incentives to sell a particular company's insurance policies to their customers.

"It's sad that the agent [who] a consumer will turn to for expertise will in fact put their own consideration ahead of the consumers," says Howard.