The Office of General Counsel issued the following informal opinion on November 20, 2000, representing the position of the New York State Insurance Department.
RE: Activities of Employees of Banks and Bank Agencies
1. Must an employee of a licensed insurance agency owned by a bank be licensed as an insurance agent if the employee receives and collects application information via telephone and does not actively solicit insurance?
2. Must a teller in a bank be licensed as an insurance agent or broker in order to respond to an inquiry from a customer as to where the customer may purchase insurance?
1. Merely receiving and collecting application information is a ministerial or clerical act that does not require licensing as an insurance agent. However, an employee of a licensed insurance agency that, by telephone or otherwise, solicits or accepts from the public applications or orders, or otherwise acts as an agent, would have to be licensed as an insurance agent unless the activity is done from within the agencys office and the employee does not receive a commission or other compensation for the services, which commission or other compensation is directly dependent upon the amount of business done.
2. A teller in a bank that merely responds to an inquiry from a customer asking where the customer may purchase insurance does not have to be licensed as an insurance agent unless the teller is compensated based upon the actual sale of such insurance.
Employee of Insurance Agent
N.Y. Ins. Law § 2101(a) (McKinney 2000) provides, in relevant part:
In this article, "insurance agent" means 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 an 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, except that such term shall not include:
(1) any regular salaried officer or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance agent, who does not solicit or accept from the public, outside of an office of such insurer, health maintenance organization or agent, applications or orders for any such contract, if such officer or employee does not receive a commission or other compensation for his services which commission or other compensation is directly dependent upon the amount of business done;
Based upon the above definition, merely receiving and collecting application information via telephone is a ministerial or clerical function that does not require licensing as an agent. However, a specific fact situation would be needed to conclude whether the activity was in fact ministerial or clerical. For example, if the employee initiated the contact with the potential insured, such activity may constitute solicitation.
However, an employee of an insurance agent is not limited to engaging in merely ministerial or clerical activities under certain conditions. An employee may even solicit so long as the activity is done within the agencys office and the employee does not receive a commission or other compensation for services, which commission or other compensation is directly dependent upon the amount of business done. It should be noted that if the agency utilizes regular space within a bank, then that area would be considered to be an office.
Additionally, N.Y. Ins. Law § 2129 (McKinney 2000) provides that every separate office of an agency must be supervised by one or more persons licensed to do the kinds of business transacted in that office. N.Y. Comp. Codes R. & Regs. tit. 11 § 34.2(d) (1995) (Regulation 125) requires a licensee to be present in the office for which he or she is responsible during all or a substantial part of its business hours each day.
N.Y. Ins. Law § 2115 (McKinney 2000, as amended by Section 5 of Chapter 418 of the Laws of 2000) provides, in relevant part:
(a) (1) No insurer doing business in this state, and no agent or other representative thereof, except as provided in subsection (b) hereof, shall pay any commission or other compensation to any person, firm, association or corporation for acting as insurance agent in this state, except to a licensed insurance agent of such insurer or to a person described in paragraph two or four of subsection (a) of section two thousand one hundred one of this article or except as provided in subsection (c) of this section. For the purposes of this section, "acting as insurance agent" shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.
Section 2115 applies to property/casualty insurance agents. However, N.Y. Ins. Law § 2114 (McKinney 2000, as amended by Section 4 of Chapter 418 of the Laws of 2000) in regard to life and accident and health insurance agents, and N.Y. Ins. Law § 2116 (McKinney 2000, as amended by Section 6 of Chapter 418 of the Laws of 2000) in regard to insurance brokers, contain similar provisions.
In addition, Section 305 of the Gramm-Leach-Bliley Act ("GLBA") (12 USCS § 1831x(d)(2)(B)) provides that any person accepting deposits from the public in an area where such transactions are routinely conducted in a depository institution, who refers a customer seeking to purchase any insurance product to a qualified person who sells such product, may not receive more than a one-time nominal fee of a fixed dollar amount for each referral that does not depend on whether the referral results in a transaction.
In the particular instance in which a teller does nothing more than direct a customer to an insurance agency after the customer inquires about insurance, the teller would not be required to be licensed as an insurance agent unless the teller is compensated based upon the actual sale of insurance.
For further information you may contact Supervising Attorney Paul A. Zuckerman at the New York City Office.