Updates Pertaining to Unfair Discrimination and Rebates in Kansas

The Kansas Insurance Department has updated its guidelines to include language from the NAIC Unfair Trade Practices Model Law, to exempt certain practices considered as unfair and deceptive acts or practices pertaining to unfair discrimination and rebates.

In addition to the practices allowed under current law, the following practices are not unfair methods of competition and unfair or deceptive acts or practices in the business of insurance:

• Engaging in an arrangement that would not violate Section 106 of the bank holding company act amendments of 1972, or Section 5(q) of the home owners’ loan act (Section 106 broadly prohibits banks from requiring a customer to purchase products or services in order to qualify to purchase or receive a discount on some other product or service, a practice often called “tying”).
• The offer or provision by the company or producers, of value-added products or services at no or reduced cost when such products or services are not specified in the policy of insurance. The products or services offered must relate to the insurance coverage and be designed to satisfy one or more of the following:

1. provide loss mitigation or loss control;
2. reduce claim costs or claim settlement costs;
3. provide education about liability risks or risk of loss to persons or property;
4. monitor or assess risk, identify sources of risk or develop strategies for eliminating or reducing risk;
5. enhance health;
6. enhance financial wellness through education or financial planning services;
7. provide post-loss services;
8. incentivize behavioral changes to improve the health or reduce the risk of death or disability of an insured, potential insured or applicant; or
9. assist in the administration of the employee or retiree benefit insurance coverage.

The cost to the insurer or producer offering the product or service to the customer must be reasonable in comparison to the customer’s premiums or insurance coverage.

If the company or producer does not have sufficient evidence but has a good-faith belief that the product or service meets the criteria above, the company or producer may provide the product or service in a manner that is not unfairly discriminatory as part of a pilot or testing program for not more than one year. The company or producer must notify the Commissioner of such a pilot or testing program offered to consumers in Kansas prior to launching and may proceed with the program unless the Commissioner objects within 21 days of notice.

• The company or a producer may offer or give non-cash gifts, items or services, including meals to or charitable donations on behalf of a customer, in connection with the marketing, sale, purchase or retention of insurance policies, as long as the cost does not exceed an amount determined to be reasonable by the Kansas Department of Insurance and does not require the customer to purchase, continue to purchase or renew a policy

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 Kansas Department of Insurance at 785-296-3071 or email at kid.commissioner@ks.gov