Honest Selling and Fair Pay: Washington Rules for Casualty Producers

Honest Selling and Fair Pay: Washington Rules for Casualty Producers

Washington treats insurance as a business that affects the public. Everyone involved, including insurers, producers and customers, must act in good faith, avoid deception and deal honestly and fairly. This lesson shows what that duty means when you advertise, compete for business, give gifts, set prices and get paid.

By the end of this lesson, you should be able to:

• Recognize advertising and sales statements that Washington treats as false, misleading or unfair.
• Tell a lawful promotion or referral gift from an unlawful rebate, and recognize twisting.
• Decide whether a difference in price or terms is fair or unfair discrimination.
• Apply Washington's fee-disclosure, extra-service and licensing rules to how a producer is paid.
• Explain what a certificate of insurance can and cannot do.

Before starting, you should know that a producer is the licensed person who sells, solicits or negotiates insurance.

Words You Need First

• Premium: the price the customer pays for coverage.
• Commission: the producer's pay from the insurer, usually a share of the premium.
• Fee: a charge the customer pays the producer directly.
• Rebate: giving the customer back part of the premium or commission. The policy itself does not provide this money back.
• Inducement: anything of value offered to get someone to buy, keep or change insurance.
• Material fact: a fact that would matter to the decision, such as whether the insurer would accept the application or what it would charge.

The Core Duty: Honesty and Fair Dealing

Washington's public-interest rule requires good faith, honesty and equity in all insurance matters. It places that duty on insurers, insureds, providers and their representatives. A separate law says no one in the insurance business may use unfair methods of competition or unfair or deceptive acts. The insurance code names many of these practices. The insurance commissioner may define more by regulation.

Every specific rule below applies that one idea. A customer should be able to trust what you say and know what they are paying for.

Honest Marketing

The basic rule: You may not knowingly make or spread a false, deceptive or misleading statement or advertisement about insurance or about anyone in the insurance business.

Washington adds specific requirements:

• Name and location. An advertisement by or for an insurer must show the insurer's full name and the location of its home office. An alien insurer is one organized outside the United States. Its ads must show its principal office in the United States, if it has one.
• No fake insurers. A business that is not an insurer may not use a name that deceptively suggests it is one.
• Financial claims. An ad about an insurer's finances may be shortened. Its substance must still match the last verified statement the insurer filed with the commissioner. It may list only assets the insurer actually owns and can use to pay losses and claims.
• Guaranty associations. Washington has guaranty associations, which are safety-net funds for certain insurer failures. You may not use their existence to sell insurance. "Don't worry, the state backs this" is not a sales pitch you may use.
• Policy terms. You may not misrepresent a policy's terms, benefits, dividends or share of surplus. You may not use a policy name that misrepresents what the policy is.
• No guaranteed dividends. No one may guarantee future dividends, future refunds of unused premium or future savings in a specific or approximate amount.

Comparison or defamation? Defamation of an insurer means a statement that is false or maliciously critical and designed to damage an authorized insurer's reputation or business. An unfavorable comparison is not automatically defamation.

Compare two statements a producer might make about a competitor:

• "Their auto policy doesn't include rental reimbursement; ours does." If true, this is a fair comparison.
• "That company is about to collapse." Suppose this is false and is said to drive customers away. It is both false and designed to injure, which is defamation.

The second statement fails because of its falsity or malice combined with intent to harm. Criticism alone does not make a statement unlawful.

Applications and premium money. Suppose someone knowingly makes a false or misleading statement in an insurance application, or impersonates someone. Or suppose they willfully leave out a material fact. That person commits a gross misdemeanor, and their license may be revoked. Separately, no one may willfully collect premium for insurance that is not and will not be provided. No one may willfully collect more premium than is, or in due course will be, spent on the coverage. Excess premium must be returned within a reasonable time. The law states no fixed number of days.

A customer tells Jordan, a producer, about an at-fault accident last year. Jordan leaves it off the auto application "to get a better price." Which rule is involved?

Answer: Misrepresentation in an application

Jordan willfully left out a material fact, because a recent at-fault accident affects acceptance and price. That is a gross misdemeanor, and Jordan's license may be revoked. A better price for the customer does not excuse it. Honesty toward the insurer is part of the duty.

Twisting: Misleading Someone About Their Policy

Twisting means using misrepresentations or misleading comparisons to get an insured to lapse, terminate, forfeit, surrender, retain or convert a policy. The law also covers statements that only tend to produce one of those actions.

Two common mistakes:

• Replacing a policy is not automatically twisting. Suppose a producer gives an accurate comparison and the customer decides to switch. That is ordinary competition. Twisting requires misrepresentation or a misleading comparison.
• Twisting does not require a cancellation. The word "retain" means misleading someone into keeping a policy also counts. So does misleading statements that tend to cause the change, even if the customer never acts.

A customer asks Jordan about moving their auto policy to another insurer. Jordan wants to keep the business and says, "If you leave, your open claim with us will be denied." That is false. The customer stays. Is this twisting?

Answer: Yes, twisting aimed at retention

Jordan used a misrepresentation to get the insured to retain the policy. The customer did not cancel anything, but that does not matter. Twisting covers keeping a policy as well as dropping one. If Jordan had accurately compared both policies and the customer stayed, there would be no violation.

Rebates, Promotions and Gifts

The general rule: Unless a filing with the commissioner provides for it, insurers and producers may not offer or give an insured anything of value that the policy does not expressly provide. This covers a premium discount, part of the commission, or any other valuable inducement. The rule applies before the sale and after it.

The customer is also responsible. An insured may not accept an unlawful rebate. For coverage other than life or disability, the amount of insurance is reduced in proportion to the rebate. The insured can also be fined up to $200. For example, a fictional policy has a $100,000 limit and an $800 premium. The insured accepts an $80 rebate. That rebate is 10% of the premium, so the limit drops 10%, to $90,000.

Not every gift is prohibited. Washington allows several specific exceptions, each with its own conditions:

• Promotional programs. An insurer or producer may give prizes, goods, gift cards, gift certificates or merchandise. The total value per person is limited to $100 in any twelve-month period. The program must be open to all insureds or prospects under similar qualifying circumstances. The limit is per person, added up across the year, not per policy or per gift. Cash is not among the listed items. This exception does not apply to title insurers or title agents.
• Referral gifts. A producer may thank someone for a referral with a gift. The limit is $100 per person in any consecutive twelve months. The gift may not be cash, a check or a money order. It may not depend on the referred person applying for or buying insurance. A separate, narrow rule lets a producer pay a referral fee tied to an application submission. That fee may go only to an unlicensed person who is neither an insured nor a prospect, and who does not sell, solicit or negotiate insurance.
• Charity. A producer may sponsor events for, or donate to, a genuine charitable or nonprofit organization. The sponsorship or donation may not depend on the organization applying for or obtaining insurance through that producer.
• Your own insurance. A licensed producer may receive commission on insurance for their own property or risks.
• Fee offsets. A producer may credit or refund all or part of their fee under the compensation rules covered below.

Other narrow exceptions exist, including a marine-insurance custom and special programs in health, life and group insurance. They are outside this lesson's casualty focus.

Separately, offering stock, securities, or a contract promising special profits or dividends as an inducement is generally barred. Only specific statutory exceptions apply. The $100 promotional allowance does not permit stock.

A producer runs a promotion open to everyone who requests a quote. Sam gets a $60 gift card at a spring event. Later in the same twelve-month period, Sam attends a second event and is offered $50 of merchandise. May the producer give it?

Answer: Not the full $50

The limit is $100 per person in total over twelve months, not per event. $60 + $50 = $110, which exceeds the limit. The producer could give Sam up to $40 more. A common mistake is treating each gift or each policy as getting its own $100.

Fair and Unfair Discrimination

"Discrimination" in insurance means treating customers differently. Washington allows some differences and forbids others.

The basic rule: An insurer may not unfairly treat customers differently when they have substantially similar insuring, risk, exposure and expense factors. This applies to rates, terms, benefits or other rights. Charging the same premium to everyone is not required. Different premiums are fair when they reflect real differences in risk, such as driving records or property characteristics.

Protected characteristics: No one in the insurance business may refuse to issue, cancel or decline to renew coverage because of sex, marital status, sexual orientation or disability. Benefits, rates, terms, conditions and type of coverage also may not be restricted, modified, excluded, increased or reduced because of sex, marital status or sexual orientation. For disability, the law bars restricting, modifying, excluding or reducing them.

There is one limited exception. Differences based on sex, marital status or disability are allowed only when bona fide statistical differences in risk or exposure have been substantiated. Certain health-insurance laws limit this exception further. Sexual orientation is not included in this exception.

An auto insurer charges two drivers different rates. One has two recent at-fault accidents; the other has none. Separately, the insurer proposes a surcharge based on sexual orientation and cites "industry data." Which, if either, is allowed?

Answer: The accident-based difference only

The two drivers do not have similar risk factors, so pricing them differently can be fair discrimination. The sexual-orientation surcharge is prohibited. The statistical exception covers sex, marital status and disability only. Data cannot open an exception the law does not provide.

Getting Paid: Commissions, Fees and Disclosure

When a producer is appointed by an insurer, the producer acts as that insurer's agent for transactions during the appointment. Unless the agency agreement says otherwise, the producer may be paid:

• a commission from the insurer;
• a fee from the insured; or
• both, with the option to offset or refund all or part of the fee.

Offsetting a fee this way is not an unlawful rebate.

When disclosure is required: The disclosure rule applies when the producer deals directly with the insured and the producer's pay includes a fee. A commission-only sale does not trigger it. For each policy, the producer must disclose in writing:

• the full fee;
• the full commission, if any;
• how any offset or refund works;
• if the producer may receive additional commission, a notice explaining it. The notice must say the producer may receive future incentive compensation from the insurer, such as contingent commissions, awards and bonuses. These are typically based on factors such as total sales volume, growth, profitability and retention of business placed with that insurer. The notice must also say this compensation is paid only if the producer, or the business entity the producer is affiliated with, meets the performance criteria in the agency-insurer agreement. It must say the producer will provide specific information about this additional commission on request; and
• the full name of the insurer that may pay commission.

Timing and records: The disclosure must be given before the sale. It must be signed by both the producer and the insured, and the producer must keep it for five years. For sales by telephone or electronic means where written consent cannot reasonably be obtained, consent documented by the producer is acceptable.

Licensing and pay: No one may pay or accept a commission or fee for selling, soliciting or negotiating insurance if the person needs a license and does not have one. Renewal or other deferred commissions may be paid to a person who was properly licensed when they did the original selling, soliciting or negotiating, if a license was required for it then. The test looks at licensing at the time of that activity. Payments to an agency or to people who do not sell, solicit or negotiate are possible, but they may not break the anti-rebate rules.

Extra services: The commissioner may permit reasonable arrangements for a reduced fee when a producer provides services beyond normal selling and placing of insurance. The total charge must be reasonable in light of both commissions and fees compared with the work performed. This rule does not permit undisclosed charges.

Jordan places a commercial liability policy and will receive a commission plus a $200 service fee from the client. Jordan plans to send the disclosure after the policy is issued. Is that acceptable? What changes if Jordan takes commission only?

Answer: No; disclose before the sale

Jordan's pay includes a fee and Jordan deals directly with the client, so a signed written disclosure is required before the sale. Jordan must keep it for five years. If the pay were commission only, this fee-disclosure requirement would not apply.

Priya, a fictional producer, is about to place a business client's commercial liability policy and will earn a commission on it. The client also wants Priya to review each of its vendor contracts every quarter and report which ones require insurance the client does not have. That review is not part of finding and placing the policy. Priya proposes a reduced fee for the contract reviews. What must be true for this arrangement to be allowed?

Answer: Only with permission and a reasonable total

Three conditions matter. First, the arrangement must be one the commissioner permits; the producer cannot simply declare it allowed. Second, the services must go beyond those customarily provided in soliciting and procuring insurance. The quarterly contract reviews fit that description on these facts; ordinary quoting and placing would not. Third, Priya's overall charge must be reasonable when her commission and fee are considered together against the value of all the work she performs. A tempting mistake is to think any extra work justifies any added fee. The test looks at the total charge, not the fee alone. Because Priya's pay would now include a fee and she deals directly with the client, the fee-disclosure rules above also apply.

Receipts and Certificates

Receipts: When a producer or other insurer representative receives a premium or other contract payment from or for an insured or applicant for certain personal coverages, the receipt rule applies. The listed coverages are homeowners, dwelling fire, private passenger auto, motorcycle, individual life and individual disability. The producer must give a signed, dated receipt as promptly as possible, generally by the next business day. The receipt must identify:

• the producer and their address;
• who paid;
• the amount;
• the insurer's full legal name, or the premium finance company or Washington auto insurance plan if payment is meant for one of them; and
• the policy, with a short description of the coverage.

The receipt may be part of an application or binder. The rule does not apply to a check made out directly to the insurer or one of those entities. It also does not apply to some non-cash payments received after the policy is delivered, under a financing arrangement or billing from the producer. This is not a general rule for all commercial insurance.

Certificates of insurance: A certificate is evidence of coverage. It does not create, change or extend coverage. The policy's terms, exclusions and conditions control. No one may knowingly issue, or demand, a certificate that contains false or misleading information or claims to change coverage. A contract with a third party does not rewrite the policy.

A certificate holder has a right to notice of cancellation, nonrenewal or material change only if two conditions are both met:

• the holder is named in the policy or an endorsement; and
• that policy or endorsement requires the notice.

The policy then sets the notice terms, including timing.

A building owner tells a contractor's producer: "Issue a certificate saying we get 30 days' notice of cancellation, or no contract." The policy and endorsements do not mention the owner or any notice. What should the producer do?

Answer: Refuse to put the false promise on the certificate

Adding that statement would knowingly misstate the policy and claim to extend coverage, and the producer may not do that. The certificate would not create the notice right anyway. The owner would get a notice right only if the policy or an endorsement named them and required notice. The lawful route is to ask whether the insurer will issue such an endorsement, not to rewrite the certificate.

What to Remember

• Washington requires good faith, honesty and fairness. Specific rules on advertising, policy statements, applications and premium handling put that duty into practice.
• Fair comparison is allowed. False or maliciously critical statements designed to injure an insurer are not.
• Twisting means using misrepresentation or misleading comparison to change or keep a policy. An actual cancellation is not required.
• Rebates are generally prohibited, and the customer who accepts one is also at risk. Promotions and referral gifts are allowed within a $100 per-person yearly total and their other conditions.
• Price differences are fine when risk truly differs. The protected-class exception requires substantiated statistics and never covers sexual orientation.
• A fee triggers signed written disclosure before the sale, kept for five years. A reduced fee for extra services needs commissioner permission and a reasonable total charge. Deferred commissions depend on licensing at the time of the original sale, solicitation or negotiation.
• A certificate is evidence of coverage. The policy decides coverage and notice rights.

Sources

• RCW 48.01.030
• RCW 48.30.010
• RCW 48.30.040, .050, .060, .070, .075, .080, .090, .100
• RCW 48.30.133, .135, .140, .150, .157, .170
• RCW 48.30.180, .190, .210
• RCW 48.18.480, RCW 48.30.300
• RCW 48.17.270, RCW 48.17.490
• WAC 284-30-550
• WAC 284-30-355 (version effective October 18, 2026)