The Office of General Counsel issued the following informal opinion on January 25, 2001, representing the position of the New York State Insurance Department.
RE: Referral Fees
1) May an insurance agency pay a fee to its non-licensed employee for referring a person to another employee, who is a licensed agent, based upon:
a) a fixed fee for each referral?
b) the purchase of insurance?
2) May the fee be based upon:
a) a percentage of commission?
b) the premium amount?
c) the type of policy?
3) May an insurance agency pay a fee to a non-licensee who is not an employee including, but not limited to, a telemarketer hired to solicit leads, a financial planner, an attorney, and an accountant for making a referral?
4) May an insurance agency pay a fee to a non-employee agent for making a referral when that agent is licensed to solicit the type of business it has referred?
1) If an unlicensed employee merely refers a person to another employee, who is a licensed insurance agent, and does not discuss the specific insurance policy terms and conditions with the person being referred, the insurance agency-employer may pay a fee to the referring employee provided that the fee paid is not based upon the purchase of insurance.
2) Because the fee paid for making a referral may not be based upon the purchase of insurance, the fee may not be based upon a percentage of commission, the premium amount, or the type of policy purchased.
3) An insurance agency may pay a fee to a non-licensee, non-employee for making a referral provided that the non-licensee does not discuss the specific terms and conditions of the policy, and the fee paid is not dependent upon whether the referral results in the sale of insurance.
4) An insurance agency may pay commission or other compensation to a non-employee, licensed insurance agent for referring business if the agent is a licensed agent of the insurer for such business as specified in N.Y. Ins. Law §§ 2114(a) and 2115(a) (McKinney 2000). Otherwise, the agent must be treated as any other non-licensed, non-employee.
Chapter 418 of the Laws of New York (2000), which became effective September 8, 2000, amends, among other things, N.Y. Ins. Law §§ 2114, 2115 and 2116 (McKinney 2000). The amendments permit the payment of a fee by an authorized insurer, its agent, or licensed insurance broker, to a non-licensee for referring a person to a licensed insurance agent or broker provided that the non-licensee does not discuss the specific insurance policy terms and conditions with the person being referred, and the fee paid is not based upon the purchase of insurance by the person referred.
For further information you may contact Attorney Sally Geisel at the New York City Office.