FEMA Halts Agents’ Use of Rebates

Federal emergency officials are calling on insurance agents to stop offering clients a cut of their commission if a customer agrees to purchase a flood policy.

The Federal Emergency Management Agency is taking aim at so-called “commission rebating” where an insurance agency returns a portion of its commission or some other source of value to clients who purchase a flood insurance policy.

FEMA Deputy Administrator for Federal Insurance Edward L. Connor said that the government has received numerous complaints about the costs of the National Flood Insurance Program.

Flood policies are written by private insurers through the Write Your Own (WYO) program. The insurers market the policies through their agents and administer any claims and are reimbursed by the NFIP.

In a recent memo, Connor said WYOs will no longer be authorized to sign-off on any agreement with agents that allows them to rebate part of their commission to a client in order to solicit business.

The new policy takes effect Oct. 1, 2012.