The Office of General Counsel issued the following opinion on March 1, 2001, representing the position of the New York State Insurance Department.
Re: Solicitation by a Non-licensee & N.Y. Ins. Law §§ 2101(a) & (c), 2102, 2115, & 2116
(1) Is a non-licensee that is working as a marketing consultant for a company, and who is responsible for expanding property/casualty insurance business, permitted to advertise in magazines and on a Web site, make presentations at trade shows and before associations and organizations, and otherwise promote the type of insurance program that a licensee intends to sell?
(2) Would it make a difference if the presentations included a disclaimer that the consultant is not licensed and that sales would be made through the companys licensees?
(3) May the promotional literature provide information about how to purchase insurance through the licensees office?
(1) Based on the general facts provided in the licensees letter, the unlicensed marketing consultant may secure advertising space in national magazines and establish a Web site for e-commerce advertising and sales, provided that the activity conforms to the restrictions described in Circular Letter No. 5 (2001), dated February 1, 2001, available on the Departments web site www.ins.state.ny.us. Concerning more active functions, which were indicated to be presentations and promotions at trade shows and organizational meetings, it would appear that the non-licensee would be involved in the discussion of the policy or program and other forms of solicitation by a non-licensee, which the Insurance Law prohibits.
(2) No. A non-licensee may not evade the statutory prohibitions merely by advising prospective insureds that the unlawful solicitation is being made by a non-licensee.
(3) Yes, as long as N.Y. Ins. Law §§ 2115 and 2116, as amended (ch. 418 of the Laws of 2000), are followed.
According to Department records, the subject company is licensed through sublicensees pursuant to N.Y. Ins. Law §§ 2103(a) and (b) and 2104 (McKinney 2000). The inquirer is also licensed individually as an agent and broker. The inquirer indicated that the marketing consultant that the company is using "will be responsible for basic promotion of this national program by securing advertising space in national magazines, establishing a Web site for E-Commerce advertising and sales, promote the program to associated clubs and organizations, making trade show appearances, promotions to industry associations, and direct mail promotions." In the course of promoting and marketing the program, the consultant will periodically be at a trade show exhibit booth accompanied by a licensed broker. The consultant will not make any sales.
The nature of the proposed activities were described very broadly; thus, only a general response may be provided. To determine whether the unlicensed consultant would be acting as an agent or broker and require licensing, it is important to first understand the definition of an agent and broker.
N.Y. Ins. Law § 2101(a)(1) (McKinney 2000) defines an insurance agent as one "who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance . . . contract. . ."
N.Y. Ins. Law § 2101(c)(1) (McKinney 2000) defines an insurance broker as one who "acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance . . . contract or in placing risks or taking out insurance, on behalf of an insured . . . or on behalf of any licensed insurance broker. . ."
There are certain exceptions to licensing in those statutes and in N.Y. Ins. Law § 2102 (b)(4) (McKinney 2000) but they are inapplicable to someone with the kind of job duties described above.
Acting without a license generally violates N.Y. Ins. Law § 2102(a)(1) (McKinney 2000). Making any presentation of the specific terms and conditions of the insurance policy to people and organizations to promote an insurance program would seem to constitute unlawful solicitation. In addition, it is possible that the consultant would become engaged in "examining, appraising, reviewing or evaluating any insurance policy. . . , plan or program or shall make recommendations or give advice with regard to any of the above." Such activity, as quoted, violates N.Y. Ins. Law § 2102(b)(3) (McKinney 2000).
For a non-licensee, there is a difference between unlawful solicitation and permissible referrals. See the amended N.Y. Ins. §§ 2115 and 2116 (ch. 418 of Laws of 2000, effective September 8, 2000), which indicate the extent of referral possible in property/casualty insurance transactions.
N.Y. Ins. Law § 2115(a) (1) (McKinney 2000 as amended by ch. 418, eff. 9/8/00) states in pertinent part:
No insurer doing business in this state, and no agent or other representative thereof. . . 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 [§2101(a)(2) or (4)] 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.
N.Y. Ins. Law § 2116 (McKinney 2000 as amended by ch. 418, eff. 9/8/00) states:
No insurer authorized to do business in this state, and no officer, agent or other representative thereof, shall pay any money or give any other thing of value to any person, firm, association or corporation for or because of his or its acting in this state as an insurance broker, unless such person, firm, association or corporation is authorized so to act by virtue of a license issued or renewed pursuant to the provisions of section two thousand one hundred four of this article. FOR THE PURPOSES OF THIS SECTION, "ACTING AS INSURANCE BROKER" 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.
In addition, as previously mentioned, the Department has issued Circular Letter No. 5 (2001) that pertains to advertisements, referrals, and solicitations on the Internet.
For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office