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.

Rebating and Not-for-Profit Organizations

Question Presented:

May an entity that is licensed as an agent or broker return money to a not-for-profit organization in order to make a contribution for a special event?

Conclusion:

The above arrangement would not be permissible under the New York Insurance Law if it could be shown that the "contribution" was the quid pro quo for the placement of insurance through the agent or broker. Specifically, it would violate N.Y. Ins. Law §4224(c)(McKinney 1985), which prohibits the use of inducements to foster the sale of life and accident and health insurance products.

With regard to property and casualty insurance, N.Y. Ins. Law §2324(a) (McKinney 1985), similarly prohibits inducements to foster the sale of insurance products.

Facts:

A licensee of the Department could arrange to return money to a not-for-profit organization in the way of a contribution for a special event. An example of such an arrangement could include sponsoring a golf outing, placing an advertisement in an organization-sponsored journal, or buying a table for a costly dinner. Any of these could involve an outlay of perhaps thousands of dollars.

Analysis:

N.Y. Ins. Law §4224(c) reads, in relevant part, as follows:

"(c) No such life insurance company and no such savings and insurance bank and no officer, agent, solicitor or representative thereof and no such insurer doing in this state the business of accident and health insurance and no officer, agent, solicitor or representative thereof, and no licensed insurance broker and no employee or other representative of any such insurer, agent or broker, shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of life insurance or annuity contract or policy of accident and health insurance, any stocks, bonds, or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract."

In order to determine whether an illegal rebate has been made to the not-for-profit organization more detailed facts about the relationship between the Department licensee and the not-for-profit organization would be needed.

For further information you may contact Associate Attorney Sam Wachtel of the Department’s New York Office.