The Office of General Counsel issued the following informal opinion on March 5, 2001, representing the position of the New York State Insurance Department.
Re: Life Insurance Forms Filing License
1. Does the Insurance Law, and regulations promulgated thereunder, specifically authorize a service organization to file with the Department life insurance forms, including applications, on behalf of a number of insurers?
2. If no, may a service organization file with the Department life insurance forms, including applications, on behalf of a number of insurers?
1. No, the Insurance Law, and regulations promulgated thereunder, do not specifically address or permit a service organization to file with the Department life insurance forms on behalf of a number of insurers.
2. Yes, a service organization may file with the Department life insurance forms, including applications, on behalf of a number of insurers, provided that the insurers have authorized it, and in doing so, no violations of antitrust laws occur.
A service organization is in the process of developing database standards for the life insurance industry. It is currently investigating the development of standard forms to include standard life insurance forms, beginning with applications. Since life insurance applications become part of the policy, they would require filing with this Department. The service organization would like to file these forms on behalf of life insurers who authorize it to make such filings.
N.Y. Ins. Law § 2313 (McKinney 2000) defines a "rate service organization." However, Article 23 of the Insurance Law only pertains to property/casualty insurance. There does not exist any provision in the Insurance Law, or the regulations promulgated thereunder, regarding life insurance rate or service organizations. The question of whether an entity can function as a service organization that prepares and files life insurance forms on behalf of a number of insurers, however, is one of first impression. As such, it is instructive to look to Article 23 and review its history for guidance concerning life insurance service organizations.
N.Y. Ins. Law §2313 (McKinney 2000) states, in relevant part:
(a) In this article, "rate service organization" means a person or any other entity which makes or files rates as permitted by this article, or which assists insurers in rate making or filing by collecting, compiling and furnishing loss or expense statistics, or by recommending rates or rate information, or which inspects risks, tests appliances, formulates rules or establishes standards, as such activities relate to rate making or to administration of rates. It shall include a person or entity which prepares and files policy forms and endorsements on behalf of insurers . . . . (emphasis added).
(b) Except as provided in subsection (j) hereof, no insurer shall utilize the services of a rate service organization unless the organization has obtained a license as provided by this section.
. . .
(d) A rate service organization applying for a license as required by subsection (b) hereof shall include with its application:
a copy of its constitution, charter, articles of organization, agreement, association or corporation, and a copy of its by-laws, plan of operation and any other rules or regulations governing the conduct of its business;
a list of its members and its subscribers;
the name and address of one or more residents of this state upon whom notices, process affecting it or orders of the superintendent may be served;
where appropriate a statement indicating one or more kinds of insurance, or classes of risks, or any part or combination of the foregoing, for which it seeks to obtain a license;
a statement showing its technical, qualifications for acting in the capacity for which it seeks a license; and
any other relevant information and documents that the superintendent may require.
. . .
(j) A rate service organization which does not make or file rates, as permitted by this article, is not required to obtain a license under this section but no insurer shall utilize the services of such a rate service organization unless the organization has filed with the superintendent the information and documents prescribed in subsection (d) hereof and shall thereafter promptly notify the superintendent of every material change in the information or documents. The superintendent may order any insurer or rate service organization found to be in violation of this subsection to discontinue such violation.
Public Law 15, known as the McCarran-Ferguson Act, enacted by the 79th Congress, as amended by Public Law 238, enacted by the 80th Congress, made the Sherman Anti-Trust Act ("Sherman Act") and related acts "applicable to the business of insurance to the extent that such business is not regulated by State Law," effective June 30, 1948. The purpose of the Sherman Act of 1890, as amended, is to afford protection against price manipulations through the prohibition of monopolies and combinations in restraint of trade.
Since the above and related acts became applicable to the insurance industry after June 30, 1948 to the extent not regulated by the states, New York State formed a Committee to consider the impact of the antitrust acts upon the New York insurance industry. This Committee issued its report, entitled Report of the Joint Legislative Committee on Insurance Rates and Regulation, in 1948.
The Committee investigated activities in insurance where concert in action was practiced which may have violated the Sherman Act. On the other hand, it also investigated certain activities that were necessary and proper and in the public interest, which should be exempt from the federal acts. The Committee determined that, "[w]ithout a doubt, by Public Law 15 Congress intended to permit New York State to continue to authorize rate fixing in the insurance business, provided that New York regulates that subject matter. New York has for some time regulated price or rate fixing by rating organizations."
The Committee discussed concerted activities other than rating, which included, "Agreements in the life insurance fields as alleged by the T.N.E.C." Its entire discussion that related to the life insurance field is stated as follows:
In 1941 there was prepared and printed a Study of Legal Reserve Life Insurance Companies (Monograph No. 28) by the Securities and Exchange Commission for the use of the Temporary National Economic Committee, which set forth certain concerted activities in that field of insurance. The document charged that certain life insurance companies by unwritten agreement decided upon rates, policy terms, surrender values and charges, option settlement provisions, and a host of other matters of mutual concern.
While the life insurance companies did not admit the existence of these activities to the extent alleged, they now take the position that the activities have now been discontinued in their entirety.
After the above discussions, the Committee stated that "knowing of the foregoing concerted activities, it is only fair to ask next what statutes do we have on our books at the present time and what statutes should we have to permit but control what is in the public interest, even though it be by agreement among competitors, and to prohibit what is contrary to the public interest."
Directly relevant to our issue is this statement made by the Committee: "Rating organizations, pools, syndicates and other group activities will be permitted within limitations . . . . Any other field of concerted activity which is reasonable, but which may still involve some restraint of trade within the meaning of the Sherman and Donnelly Acts, may be the subject of regulatory legislation."
The present N.Y. Ins. Law § 2313(o) (McKinney 2000), was derived from the old § 181 (10), and was added to that section by the Laws of 1948, c. 618, § § 3, 4, and discusses cooperation among rate service organizations and insurers. It states:
Cooperation among rate service organizations or among rate service organizations and insurers in rate making or in other matters within the scope of this article is hereby authorized, provided the filing resulting from such cooperation is subject to all the provisions of this article which are applicable to filings generally. The superintendent may review such cooperative activities and practices and if, after a hearing, he finds that any such activity or practice is unfair or unreasonable or otherwise inconsistent with this article, he may issue an order specifying in what respects such activity or practice is unfair or unreasonable or otherwise inconsistent with this article, and requiring the discontinuance of such activity or practice.
In light of the above, it is clear that the Legislature did not enact any provisions to regulate life insurance rating organizations or service organizations. Therefore, the action of the filing of forms (not rates) on behalf of life insurers by a service organization, does not require licensing with the Department as long as it provides evidence that it is authorized to act on behalf of each insurer and only to the extent that its actions are not in violation of the Sherman Act or any other related acts.
For further information, you may contact Attorney Meredith S. Kaufer at the New York City Office.