Some may argue that rebate is a business acquisition cost that the insurance agents are willing to bear. In fact, customers appear to have some savings from the practice of rebate and the insurers' interest is not hampered.
Rebate however is illegal by law and banned by most of state constitutions. Most insurers don't allow rebate. Insurance agents who are found to offer rebate may face disciplinary actions, suspension or even termination depending on the severity of the offence.
Why rebate is unethical or a bad business practice? This is because the customers may buy insurance with the intention to get the rebate and lose sight of the fact that they should look at whether the plans meet their needs.
Rebate leads to unhealthy competition. Instead of focusing on increasing the quality of the service, agents take shortcuts to get business. They undercut each other until someone is not able to survive and forced out of business.
It is not a good sign for an insurance agent to be out of business, the agent's customers may form certain perception on insurance business and question the level of commitment by the agent.
Insurance agents deserve every dollar of the commission they work hard for. Insurance agents who deprive themselves of their commission are not going to give their customers the same kind of service like what other agents give.
What if your prospect asks for a rebate? What if a prospect tells you if you don't give any discount, the prospect will get insurance from someone else? How do you handle this situation?
There are a number of ways to handle this situation as follows:
(a) Educate the customers
If a customer insists on a rebate, then you can tell the customer it is illegal for you to do so. In fact, it is unlawful for any insurance agent to forgo commission to get business.
(b) Help the customers empathize with your situation
You can also ask the prospect who asks for a rebate if he is willing to work as hard if not harder after his boss deducts his pay by x percent. Would he expect good service from the agent offering him a rebate?
It is human nature to give discounted service if we get discounted pay.
(c) Remuneration versus duration of service
If you find that it is not an issue for you to disclose your commission, you can perform a simple mathematic to demonstrate to your customers how much commission you earn a year if you divide your commission by the number of years you are going to service them.
Once your commission is divided by the number of years of your service, the commission becomes negligible. In fact, your customers may even find you are underpaid.
(d) Analogy
You can also equate an insurance agent who offers rebate to a medical doctor who sells medical certificates to people who want to get a day off. If a medical doctor hints to you that you can buy a medical certificate from him, would you go back to him for consultation in future?
Probably you won't, because the medical doctor is willing to compromise professionalism for monetary reward. He is willing to sell medical certificate for a fee, can you imagine what kind of advice you are going to get from him?
(e) Give customers options
Ask your customers, if they can choose only one in between fee and service, which one they would go for. Majority of them may go for service. Essentially, agents are paid for rendering their services.
(f) Dramatize the situation
Tell the customer who asks for rebate that you can consider offering discount if he talks to your family members. Tell him if he can convince your family members that they don't need you bring home any money to pay for the household bills then you will offer discount without hesitation.
Essentially insurance agents deserve every dollar they earn by rendering valuable services to their customers. For insurance agents to continue servicing the policyholders, they need to stay long in the business. This is not possible if they are deprived of their commission.
