The Office of General Counsel issued the following informal opinion on July 14, 2000, representing the position of the New York State Insurance Department.
RE: Internet Solicitation and Agent Licensing
1) Does the presence of a New York licensed agents hypertext link on another companys Web site constitute "solicitation", within the meaning of N.Y. Ins. Law § 2101 (McKinney 1985 & Supp. 2000), by the Web site owner, thus requiring the Web site owner to be licensed as an agent pursuant to N.Y. Ins. Law § 2102 (McKinney 1985 & Supp. 2000)?
2) Does the Insurance Law prohibit a New York licensed agent from paying a percentage-of-revenue to the Web site owner as compensation for advertising fees?
1) Whether the presence of a New York licensed agents hypertext link on another companys Web site constitutes "solicitation", within the meaning of N.Y. Ins. Law § 2101 (McKinney 1985 & Supp. 2000), by the Web site owner, depends upon the wording and character of the link. If the link is an advertisement by the licensed agent, as it is in the facts presented in your inquiry, rather than a recommendation or endorsement by the Web site owner, the links presence will not constitute solicitation and the Web site owner will not need to be licensed as an agent under N.Y. Ins. Law § 2102 (McKinney 1985 & Supp. 2000).
2) The Insurance Law does not prohibit a New York licensed agent from paying a Web site owner a percentage-of-revenue as compensation for advertising fees.
Upon becoming licensed as an agent in New York and other states, John Doe plans on operating a Web Site where applicants may purchase insurance. John Doe intends to become electronically linked to an unaffiliated companys Web site, whereby browsers, after keying-in residency information, can click on a hypertext link and be electronically transported to John Does Web site. The link will have wording to the effect of "insurance", or "interested in insurance?" John Doe questioned whether the presence of this hypertext link would constitute "solicitation" within the meaning of the New York Insurance Law and, thus, require the unaffiliated Web site owner to be licensed as an agent. John Doe further questioned whether the Insurance Law prohibits him from paying a "percentage-of-revenue" as compensation for placing the hypertext link on the unaffiliated companys Web site.
The term "insurance agent" is defined, in relevant part, in N.Y. Ins. Law § 2101 (a) (McKinney 1985 & Supp. 2000) as:
any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such agent, who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker
N.Y. Ins. Law § 2102 (a)(1) (McKinney 1985 & Supp. 2000) further states that: "No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter." Thus, it would be impermissible under the New York Insurance Law for a Web site owner, who is not licensed as an agent, to solicit insurance over the internet.
The term solicitation is not defined by the Insurance Law. However, the Department has, in previous opinions, referred to the definition provided in Blacks Law Dictionary (5th Ed. 1979): "to ask for the purpose of receiving though the word implies a serious request, it requires no particular degree of importunity, entreaty, imploration or supplication." See OGC Op. 96-70 (11/1/96); OGC Op. 95-5 (1/13/95); OGC Op. 85-32 (4/4/85); OGC Op. 84-14 (10/21/84).
The term solicitation has also been defined by case law. In Wood v. International Broad. Corp., 143 Misc. 122, 255 N.Y.S. 349 (Magis. Ct.1931), the Insurance Department brought an action against a radio station for, inter alia, soliciting insurance. (Wood makes reference to Ins. Law §50, which is now §2117.) The station played a disk recorded by its broadcaster, which stated that a particular insurer was issuing policies cheaper than other insurers. The broadcaster gave a comparison of rates and told listeners to write to the insurer for more information, including in their letters their birthdates so that sample policies could be sent. The broadcaster also told listeners that they could send their requests for policies to the radio stations address. The radio station was to receive one-third of the first premiums paid on all new policies as compensation for airing the broadcast. The court held that the announcement was an advertisement and did not constitute solicitation:
The mere placing of a disc so that a comparison of rates can be given, or the request for a persons age, cannot be construed as the procurement of insurance. It cannot be construed as soliciting insurance. Solicitation requires the asking to buy. There is not a scintilla of proof that there was any solicitation of insurance. The Voice merely gave information, the same as any newspaper advertisement does. Surely, an advertisement in the newspapers cannot be construed as an agency wherein the newspaper is the agent for the advertiser. The dictionary defines solicitation as asking for earnestly, seeking to obtain by persuasion or entreaty. The testimony does not indicate any entreaty on the part of The Voice to seek by persuasion, or obtain by entreaty, insurance. It merely compared rates and asked for the hearers nearest birthday.
Id. at 125, 255 N.Y.S. 352.
Similarly, a Web site that displays a hypertext link that is readily identifiable as an advertisement does not constitute solicitation by the Web site owner. This is essentially the same distinction as applies for print publication, between advertisements that appear within the pages of the publication and a recommendation by the publication in its editorial text.
A publisher who is paid for printing an insurer, broker or agents advertisement in its publication is exempted from New Yorks licensing requirements because the publisher is merely providing an information-carrying media. "The one placing the advertisement uses the media as an instrument or a device, and it is the user who is the party to be licensed." 1 Bertram Harnett, Responsibilities of Insurance Agents and Brokers § 5.05 (Matthew Bender & Co., 1999). "However, when a writer or performer departs from the relatively objective role of information transmitter and introduces his own credibility or reputation to promote a sale, a different and affirmative consideration of licensability is injected. This same point occurs when a newspaper or radio or television station as an institution endorses an insurance product." Id.
The Department is of the opinion that the presence of John Does proposed hypertext link on an unaffiliated entitys Web site, with the notation "Insurance" or "Interested in Insurance?", would not constitute solicitation, but instead constitutes advertising. Therefore, under these circumstances, the Web site owner does not need to be licensed as an agent under the New York Insurance Law.
Furthermore, while N.Y. Ins. Law §§ 2114 and 2115 (McKinney 1985 & Supp. 2000) prohibit the payment of commission or other compensation to non-licensees for soliciting insurance, neither statute prohibits such payment that is made for advertising fees. Thus, it is permissible under the Insurance Law to pay advertising fees that are based upon a percentage of advertising-generated sales. See also OGC Op. 96-70 (11/1/96) (approving percentage-of-commission based payments for the provision of insurance leads); OGC Op. 95-28 (5/17/95) (approving premium-percentage based payments for advertising and mail insert fees); OGC Op. 85-32 (4/4/85) (opining that there is no difference between percentage-of-commission based compensation and flat fees when payment is made contingent upon actual policy issuance).
For further information you may contact Attorney Sally Geisel at the New York City Office.