Offering Value-Added Products or Services in South Dakota
The South Dakota Division of Insurance has updated guidelines related to the offering of value-added products or services in connection with the marketing and purchase of insurance.
Companies or producers may offer value-added products or services not specified in the policy at no or reduced cost when these products/services relate to the insurance coverage and are designed to satisfy one or more of the following:
- Provide loss mitigation or loss control;
- Reduce claim or claim settlement costs;
- Provide education or develop strategies for eliminating or reducing risk of loss to persons or property;
- Enhance health or financial wellness through education or financial planning services;
- Provide post-loss services;
- Encourage behavioral changes to improve the health or reduce the risk of death or disability;
- Aid in the administration of an employee or retiree benefit insurance coverage
The cost of the product/service must be reasonable in comparison to that customer’s premiums or insurance coverage for the policy class and includes contact information regarding the value-added product or service to assist the consumer with questions.
The availability of the value-added product or service must be based on documented objective criteria; and cannot be offered in a way that is not unfairly discriminatory.
If the company or producer does not have sufficient evidence but has a good-faith belief that the product/service meets the criteria set out above, the company/producer can provide the product or service as part of a pilot or testing program for no more than one year. The company/producer must notify the Division of the pilot program and can proceed with the program unless the Division objects within 21 days.
Companies or producers can conduct raffles or drawings to the extent permitted by South Dakota law, if the drawing or raffle is open to the public, there is no financial cost to participate, there is no obligation to purchase insurance and the prizes are not valued in excess of a reasonable amount as determined by the Division of Insurance.
A producer may not offer or provide insurance as an inducement to the purchase of another policy or otherwise use the word “free,” or the phrase, “no cost,” or words and phrases of a similar meaning, in any advertisement.
If you have a hierarchy of producers, you must share this e-mail with any producers who may not have received it.
If you have questions regarding this compliance update, please contact the South Dakota Division of Insurance at (605) 773-3563 or email at sdinsurance@state.sd.us.