Yes. Insurance agents in the United States can give gifts for referrals; however, note that it will most often depend on your location in the United States. In some states, a gift given by an insurer, agent, or broker goes against anti-rebating laws.
Nevertheless, a good number of states make exceptions for referrals using referral fees as long as the gift and its value stay in line with the state legislature and do not discount or impact a client’s policy. You will find that some agents offer referral gifts like gift cards, cash, and event tickets.
In the United States, insurance agencies are known to leverage certain gifts to help motivate their clients to refer them to friends and family. According to reports, the most prevalent gift choice would be gift cards.
Howbeit, since the regulations that cover gifts and referrals can be tricky depending on the agency’s state of residency, a good number of agents will choose to inspire clients by incorporating them into an insurance referral program. This is a common amendment in state anti-rebating laws.
This amendment makes it feasible for agents to pay a fee to a non-licensee or non-employee as long as the non-licensee does not discuss the precise terms and conditions of the policy or that the fee paid is not dependent upon whether the referral ends in the sale of insurance.
Aside from that, this payment will need to be labeled as a bonus or finder’s fee when made available by an insured company, and the amount can differ depending on the agency and the state’s regulations.
While gift cards may not be the only form of gift-giving for referrals, they are the most acceptable and widely used option by insurance agencies.
A good number of agencies have put in place result-oriented tactics to incentivize referrals where they provide customers with an initial gift, perhaps a $5 gift card per referral, and then provide an additional bonus, such as a $25 gift card, immediately the referral purchases a policy with the agency.
Things to Note Before Designing an Insurance Referral Program
Understand the laws regulating insurance referrals in your area
Just as it was noted above, what is acceptable and what is not will depend on the laws in your area. You have to understand that these laws vary from state to state.
As such, take your time to carry out extensive research to ensure you understand the basics. You will also not go wrong by consulting legal experts.
Work on your customer service
Customer service is very vital for insurance sales especially since most insurance products in the same space (i.e., automobile, home) are relatively similar.
As such, what differentiates you from other businesses offering the same package is customer experience. Owing to that, put in the right efforts to ensure you provide a stellar experience to convince a customer to buy and stay with your business.
Also, note that cultivating and maintaining a strong base of customers is vital to referral program success. For insurance agents, customer experience is indeed the most notable push your customers need to recommend you.
Know your customers
Understanding the exact demographic you cater to will go a long way to guarantee you get more new referrals. You would want to carry out a comprehensive market research and answer the following questions about your clients:
- How does your intended demographic get information regarding your insurance agency? What source do your current customers get insight regarding your agency and services? This will help you know the right channels to leverage to boost the visibility of your referral program.
- How do your current clients communicate with friends? You will want to understand their preferred channels and utilize the same channels for sharing in your referral program. This makes it more convenient for them to refer others to those same channels.
- What inspired them to obtain insurance from you vs. a competitor? This is what is commonly known as your USP (Unique Selling Point). Your USP simply refers to an advantage that’s unique to you and ensures that you are a step ahead of your competition
- What rewards would inspire your current clients to share with peers, friends, or family members? These tiny details can help you put in place referral rewards your current clients would be motivated to earn.
Understand how much it costs to acquire a new customer
Whether you already know it or not, it costs a significant amount to acquire a new client. Understanding this as well as the exact costs will be very insightful especially when it comes to understanding the difference between how much you’re earning from your customer vs. how much you’re spending to get the customer. Aside from that, this cost will help you find out the exact amount you have to reward for referrals.
You might think this is irrelevant, but one thing you wouldn’t want is for your referral rewards to eat so much into your budget that the program is no longer profitable. Your customer acquisition cost must not be more than the profit you’re getting from the client.
Understand the right customers to promote your program to
You would want to know the right customers who are likely to be eager to try out your program.
- Who has been a loyal customer the longest? If you are well informed regarding the customers and have a long-standing relationship to fall back on, then they are the ideal options to pick first
- Leverage NPS (Net Promoter Score) surveys to understand who is most likely to promote you. Note that this survey is utilized to evaluate customer satisfaction by finding out the possibility of a customer referring clients to your insurance agency. Ensure to focus on the customers who appreciate you the most. Note that they are your “promoters,” or those who receive a score of 9 or 10 on the NPS scale.
- Also discover the customers that have already referred friends to your agency, without being asked. These are without your brightest assets. They’re satisfied customers who are willing to share the news with others in their circle.