Yes, these referral fees would be prohibited kickbacks, because your institution is not licensed as an insurance producer under Illinois law.

The Illinois Insurance Code law prohibits the payment of referral fees or commissions for selling, soliciting or negotiating insurance, unless the recipient is licensed as an insurance producer. “Solicit” is defined as “attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company.” We believe that mentioning a company that sells mortgage insurance after the loan closes would qualify as “soliciting” if your bank would be receiving referral fees from that company. Your institution and at least one officer or director must obtain insurance producer licenses before accepting any referral fees from the insurance company.

For resources related to our guidance, please see below:

• Illinois Department of Insurance Bulletin 2012-11 (“If a producer chooses to pay a referral fee to a non-licensed person, the payment may not be conditioned on the purchase of insurance nor may the purchase or insurance be a factor in determining the amount of the referral fee”)

• 215 ILCS 5/500-80(a) (an insurer or insurance producer may not pay valuable consideration to a person for selling, soliciting, or negotiating insurance if that person is required to be licensed and is not so licensed)

• 215 ILCS 5/500-10 (defines “solicit” as “attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular company”)