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“Free Lunch” Seminar – Courteous offer or sales inducement?

I’m sure you’ve seen them…the invitations and mailers offering a free meal, often times at a gourmet restaurant, during an informational seminar about investments, retirement, and various insurance products. Right?

These are so commonplace, in fact, that when you enter the phrase “free lunch seminars” into an online search engine, the entire first page of results consists of articles written to warn pre-retirees and retirees to be wary of such events. Often times the insurance producer or financial professional hosting the event is less than clear on the fact that the ultimate purpose of the event is to attract prospective clients.

Regulators and compliance departments, too, have become aware of the “bait and switch” type scenarios and it is suggested, if not required in some states, to be clear that such events are indeed “insurance sales presentations” and not the alternatively vague and misleading description as “educational.”

The potential issues surrounding advertising these types of events as educational are rather straightforward, but are there any other areas of regulatory concern to be aware of? Are there any guidelines to follow when providing a free meal? Is it considered an inducement or rebate? Are there limitations or exceptions? Or is it simply a courteous offer?

As with many other activities that might be considered as a gift, rebate, or inducement, the answer is, “It depends.” It varies on a state-by-state, and perhaps even case-by-case, basis. There are many states that make no mention of their stance on providing meals and/or refreshments in their regulations. However, there are also quite a few states that do provide clear guidance on the practice and among those states the guidance is wide-ranging.

In some states, such as Georgia, as long as there is no offer or accepting of insurance applications or contracts at the event, it is not considered a rebate or inducement to pay for food or refreshments for current or prospective clients during sales presentations or seminars. Additionally, there is no cap on the amount spent on the meal. Indiana and Iowa are two states that have similar rules, but limit the meals value to be no more than $25 per person.

In the examples above, one common thread is that meals are acceptable as long as they are not dependent on the purchase or offering of a product. This may not always be the case, though, as Utah is a state that allows meals to be considered on receipt of a quote up to $10 per person.

One thing that does remain consistent among many states is the process for determining how much is spent per attendee. Typically, the practice is to calculate the cost of the food and refreshments offered and then divide it by the number of attendees, or expected attendees, to determine if the amount spent is in line with the state’s regulations. Being familiar with such rules and staying current with each states position on gifting and rebating where business is conducted is not only important, but can help to avoid potentially costly violations.