New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following opinion on February 28, 2000.

Propriety of Advertisement Language Alluding to Potential Cost Savings For Insurance Purchased Directly From the Company

Questions Presented:

1. Is a RED advertisement which has been disseminated in New York State that contains a statement that if you buy direct from RED you could save as much as XX% or more on car insurance, but which does not specify the underwriting criteria to qualify for a lower rate, untrue or misleading in violation of the New York Insurance Law?

2. Is the use of "RED" and "RED Direct" in such an advertisement untrue or misleading in violation of the New York Insurance Law?

Conclusions:

1. No, the advertisement is neither untrue nor misleading in violation of the Insurance Law. The RED advertisement makes it clear that there is only a potential for savings over the rates charged by other insurers and that a XX%, or any other percentage savings, is not guaranteed.

2. No, "RED" and "RED Direct" are used as service marks and trade names and, although these marks and names are not licensed for use in New York by this Department, the use of these terms in this advertisement is not misleading especially since the full licensed names of the four New York licensed insurers being advertised are specified therein. Further, the reference to "RED Direct" in connection with the potential savings is not misleading since the text used in the advertisement clearly conveys to the public that it relates to cost savings that accrue when an insured deals with the insurer directly and not through an insurance agent or broker.

Facts:

The RED advertisement states that: "you could save XX% or more on car insurance," "You might be overpaying $200, $300, even $600 every year", and "RED Direct. A better way to buy car insurance." It does not contain any information as to who or what type of risk would qualify for such savings.

In addition, the company identifier "RED Direct" appears therein, not the licensed name of an insurer. RED contends that RED Direct is a service mark and a trade name that the company uses. The advertisement, in small print, contains the names of the RED Group insurers who are licensed in New York.

Analysis:

A previous opinion of this Office addressed an advertisement which contained percentage premium discounts. This opinion is inapplicable to the RED advertisement because the facts are not the same.

In prior instances, this Office concluded that by quoting percentage premium discounts available, the BLUE company had, in effect, specified the premium for the insurance. Because the BLUE company had failed to state the underwriting standards and requirements of the insurer, the advertisement was misleading to the public. In concluding that the BLUE advertisement was misleading to the public, this Office found that it failed to indicate the make-up of an applicant risk which would qualify for the package policy and percentage discounts in rates specified therein. Furthermore, this Office found that the advertisement might also be untrue and misleading in violation of N.Y. Penal Law § 190.20 (Mc Kinney 1999) and as a defined violation under Article 24 of the N.Y. Insurance Law (Mc Kinney 1985 and Supp. 1999-2000) since it did not provide a complete statement of the insurance premium to enable a complete comparison to be made.

In contrast, although the RED advertisement refers to a percentage savings, it is only identified as a potential savings and it is not specific as to a savings over the rates of a particular insurer. Moreover, it does not refer to a percentage discount available to certain persons from RED's member companies' premium rates. Rather, the percentage in the RED advertisement refers to a potential premium savings over the rates of other unspecified insurers, as a general matter of comparison, if a person were to obtain their car insurance from RED.

The actual savings will vary from one applicant to another and some people would not save any money by placing their insurance coverage with a RED company. No direct comparison between a particular car insurance policy written by one of its member insurers is being made as against another particular insurer. Therefore, the general statement in the advertisement concerning XX% savings does not refer to a particular insurer. Rather, the advertisement invites a complete comparison of the premium rates of other insurers as against the rates of those four New York licensed member companies of the RED Group identified in the advertisement upon obtaining a quotation from one of these companies. This fact is evidenced by the inclusion of a premium comparison chart to be filled out when the RED quotation is obtained that is contained on the second page of the advertisement.

The use of the terms "RED" and "RED Direct," service marks and trade names used by the RED companies, although they are not licensed for use in New York by this Department, is not misleading. Neither of the foregoing is the name of a corporate entity and the full names of the four New York licensed insurers within the RED Group are contained in the advertisement. Moreover, the text used in the advertisement clearly conveys to the public that the references to "RED Direct" relate to cost savings that accrue when an insured deals with the insurer directly and not through an insurance agent or broker. It does not seem possible that a consumer could be confused by the use of these terms in the advertisement. The use of these terms is not misleading in violation of the New York Insurance Law.

For further information you may contact Associate Attorney Barbara Kluger at the Department’s New York Office.