The Office of General Counsel issued the following informal opinion on December 28, 2000, representing the position of the New York State Insurance Department.
RE: Activities in New York on Behalf of an Unauthorized Insurer
May an entity that is not a licensed insurer (either in New York or any other jurisdiction) conduct "back office" activities in New York on behalf of an unauthorized insurer?
The above arrangement would not be prohibited by the New York Insurance Law, so long as the activities performed in New York on behalf of the unauthorized insurer are limited as specified herein.
An unlicensed entity wishes to perform certain activities in New York for an unauthorized alien insurer as follows:
The activities to be conducted involve internal administrative services on behalf of the insurer. The insurers name is not displayed at the New York office. There is no contact between the New York service provider and any insured, broker or claimant. Services are rendered by the New York entity directly to the insurer. The New York entity will engage in no advertising or marketing, will not solicit, negotiate or procure insurance contracts and will not be involved in the collection of premiums.
The insurance involved is lawfully written either (1) by an unauthorized insurer outside of the state or (2) on an excess lines basis in New York.
N.Y. Ins. Law § 1102 (McKinney 2000) prohibits any person, firm, etc. from doing an insurance business in this state without a license. N.Y. Ins. Law § 1101 (McKinney 2000) defines what constitutes the doing of an insurance business.
Over the years, the Department has determined that a variety of activities engaged in by an unauthorized insurer, or someone acting on its behalf in this state, would not constitute a violation of N.Y. Ins. Law § 1102 (McKinney 2000). These activities include the following:
Gathering information about the insurance industry.
Assembling policies on non-New York risks and mailing completed policies to the placing agent out of state.
Bookkeeping and accounting services.
Making student loans.
Recruiting agents in other states.
By and large, what is permitted are back office functions and communications by an insurer with its agency force. What it does not include, however, are communications directly with insureds in connection with the placement of insurance or collection of premiums or other fees.
There are a number of provisions of the Insurance Law that could impact on activities engaged in by a non-insurance entity on behalf of an unauthorized insurer. Based upon these specific facts, these provisions would not prohibit the unlicensed entity from engaging in the proposed activities. Some statutory provisions that should be kept in mind are as follows:
N.Y. Ins. Law § 2102 (McKinney 2000) prohibits any person from acting as an agent or broker without a license and N.Y. Ins. Law § 2117 (McKinney 2000) broadly prohibits any person from acting as an agent on behalf of an unauthorized insurer, or broker, in soliciting, negotiating or otherwise effectuating or placing risks with an unauthorized insurer, or in any way or manner aiding an unauthorized insurer in effecting any insurance or contract. What is prohibited for an insurer under N.Y. Ins. Law § 1102 (McKinney 2000) is prohibited for any person acting on behalf of the insurer under N.Y. Ins. Law § 2117 (McKinney 2000).
N.Y. Ins. Law § 2122 (McKinney 2000) prohibits any person from calling attention to an unauthorized insurer by advertisement or public announcement in this state.
N.Y. Ins. Law § 2101(g)(1) (McKinney 2000) broadly defines "independent adjuster" as any person acting in this state on behalf of an insurer in investigating and adjusting claims arising under insurance contracts issued by the insurer, subject to certain exceptions. Independent adjusters acting on behalf of authorized insurers, as well as those acting on behalf of unauthorized insurers, must be licensed. Claims adjusting has been broadly interpreted, and encompasses any sort of negotiation with the insured or any participation in the claims resolution process that involves discretion.
For further information, you may contact Associate Attorney Sam Wachtel at the New York City Office.