The rules that apply to insurance affinity arrangements and commissions differ from state to state, and therefore it is important to review applicable law before proceding with such an arrangement. Before making a payment to a person or organization to endorse an insurance product, carefully check applicable law.

This structure can be help to avoid claims that commissions are paid to an unlicensed entity. If an insurance company wants to work with an association to market insurance products to association members, have the association form an affiliate insurance agency to market and sell coverage to association members.If a royalty payment is made related to the use of IP in connection with the sale of insurance, make the payment a flat fee not tied to insurance sales or premium volume.Before making payments based on insurance sales or premium volume to an organization not licensed as an insurance agency, carefully check applicable law.Steps Companies Can Take To Avoid the Issues Presented in the Friedman and Dane CasesĪlthough UHC and AARP won a dismissal of the Friedman case, companies can avoid the problems that led to the case by following certain guidelines: The court in Dane also concluded that Plaintiffs did not have standing, because the amount was not actually inducing insurance, and the amount was included in a regulator-approved premium. In Dane, the Plaintiffs allege the same claims: that the arrangement involving royalties were “illegal commissions” and such arrangement is a kickback. Most similar to the Friedman case is the case Dane v. There are several other cases regarding the AARP royalty throughout the country. Absent allegations that Plaintiffs paid more than they would have paid without the fee, measured by a non-hypothetical theory, Plaintiffs did not plausibly allege economic harm. Thus, the AARP royalty fee was considered an expense paid out of the DOI mandated rate, not a charge that raised Plaintiffs’ premium. Importantly, the premium rate charged to Plaintiffs had been approved by the state department of insurance (DOI), and there was no evidence the premium rate would have been any lower had AARP not received the fee. In its Decision, the Court noted that the royalty fee could be considered a commission, but the Court dismissed Plaintiffs’ claims because Plaintiffs did not show they were harmed by the fee. Plaintiffs alleged the payments were unlawful commissions which harmed Plaintiffs by raising the cost of insurance. UHC characterized the payment as a royalty in exchange for UHC’s use of ARRP’s intellectual property (IP) in marketing and selling the coverage. AARP endorsed the policy and, for every AARP policy sold, UHC paid AARP an amount equal to 4.9% of premium. AARP, Inc., UHC issued a group Medigap policy to AARP and Plaintiffs purchased Medigap coverage as members in AARP. The case demonstrates that insurance companies need to be careful in establishing affinity arrangements with associations.

AARP, a federal court considered whether an affinity arrangement between United HealthCare (“UHC”) and AARP harmed AARP members because AARP received compensation related to insurance sales. An affinity program is an arrangement in which a business offers discounts on products or services to an organization’s membership. Affinity programs involving insurance companies and associations are on the rise as to all lines of insurance business.

Affinity insurance