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 informal opinion on October 31, 2000, representing the position of the New York State Insurance Department.

Re: Advertising Gift Certificate by Agent

Question Presented:

May an insurance agent give a $5 gift certificate to Blockbuster, local gym, movie theater, etc., upon giving a free quote to new residents who move into the insurance agent’s area as part of a "Welcome Wagon" packet which includes a directory of businesses in the area?

Conclusion:

No. The certificate would constitute an improper inducement in violation of N.Y. Ins. Law Sections 2324 and/or 4224 (McKinney 1985).

Facts:

An insurance agency would like to advertise through a company called "Welcome Wagon," which sends packets to new residents who move into the area that includes a directory of businesses for the area.

The agency would like to include a $5 gift certificate to Blockbuster, local gym, movie theater, etc., which is redeemable by new residents as part of the "Welcome Wagon" packet, upon receiving a free quote.

Analysis:

With respect to property/casualty insurance, N.Y. Ins. Law Section 2324(a) (McKinney 1985) provides in relevant part:

No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding five [15] dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker. . . . (emphasis added)

With respect to life and accident and health insurance, the prohibition is contained in N.Y. Ins. Law Section 4224(c) (McKinney 1985), and states:

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. (emphasis added).

According to the express language of N.Y. Ins. Law Section 2324, insurance agents and brokers are prohibited from directly or indirectly offering rebates or inducements other than an article of merchandise not exceeding $15 in value, in connection with the sale of insurance, when such rebates or inducements are not specified in the policy or contract of insurance. N.Y. Ins. Law Section 4224 prohibits an agent or broker from offering any inducement directly or indirectly not specified in the policy or contract.

In this instance, the prospective insured would receive a direct benefit, the $5 gift certificate, for the purpose of inducing him to place his insurance business through your company. With respect to life and accident and health insurance, this action would violate the prohibition contained in N.Y. Ins. Law Section 4224(c) (McKinney 1985), that no 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, any valuable consideration or inducement whatever not specified in such policy or contract.

With respect to property/casualty insurance, N.Y. Ins. Law Section 2324(a) (McKinney 1985), the Insurance Law allows for the presentation of a "keepsake" which costs less than $15 and is designed to keep the name of the insurer or producer before the customer through the embossing of the insurer’s or producer’s name. A $5 gift certificate, which is redeemable upon receiving a free quote, is not equivalent to a pen or other item of merchandise, as contemplated under this section.

In this case, the inclusion of a $5 gift certificate to Blockbuster, local gym, movie theater, etc., which is redeemable upon receiving a free quote to the new residents as part of the "Welcome Wagon" packet, would be violative of the Insurance Law. However, the Department would have no objection if there were no requirement of a rate request. If the gift certificate is available to everyone and receipt of the gift certificate is not contingent upon a request for a quote, it would not constitute an improper inducement in violation of the Insurance Law.

Thus, if the gift certificate was included in the "Welcome Wagon", without requesting a rate quotation, there would be no violation of Section 2324 or Section 4224 of the Insurance Law.

For further information, you may contact Attorney Meredith S. Kaufer at the New York City Office.