New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on March 21, 2001, representing the opinion of the New York State Insurance Department.

Re: Payment of Insurance Premiums through the Internet

Questions Presented:

1) Is it permissible under the New York Insurance Law for a business-to-business ("B2B") web site to post the hypertext link of a licensed insurance agent when the B2B is not a licensee of the Insurance Department?

2) Is it permissible under the New York Insurance Law for an insured to pay insurance premiums through the Internet (via an electronic transmission of funds) to a licensed insurance agent’s premium account, either by the insured’s transference of funds from a bank or other institution, or by credit card?

Conclusions:

1) It is permissible under the New York Insurance Law for a B2B web site to post the hypertext link of a licensed insurance agent when the B2B is not a licensee of the Insurance Department subject to the limitations described in Circular Letter No. 5 (2001).

2) It is permissible under the New York Insurance Law for an insured to pay insurance premiums through the Internet (via an electronic transmission of funds) to a licensed insurance agent’s premium account, either by the insured’s transference of funds from a bank or other institution, or by credit card, provided that a valid electronic signature accompanies the transaction where the Insurance Law, or regulations promulgated thereunder, requires an insured’s signature to effectuate the policy. (See N.Y. Comp. Codes R. & Regs., tit. 11, § 20.3 (b)(1) (1996) (Regulation 29) for the definition of "premium account".)

Facts:

A technology provider for the insurance industry made certain inquiries regarding the payment of insurance premiums over the internet and the use of a licensed insurance agent’s hypertext link that is posted on a B2B web site, the owner of which is not a licensee of the Insurance Department. The inquiries were based on the following scenario: a B2B web site user buys or sells a product from that web site. The user determines that transit, or credit, or some other authorized kind of insurance is needed in relation to that purchased or sold product. The B2B web site posts the hypertext link of a licensed insurance agent, which, when clicked on, transfers the user to the agent’s web site, where the needed insurance can be purchased. The user wishes to pay the insurance premium by electronically transferring funds from a bank or other institution, or by credit card, directly to the licensed insurance agent’s premium account.

Analysis:

The Department considers the posting by a non-licensee web site owner of a licensed insurer, agent or broker’s hypertext link to be a permissible act under the Insurance Law provided that such posting constitutes either an advertisement or a referral, but not a solicitation. In Circular Letter No. 5 (2001), the terms "advertisements", "referrals", and "solicitations" are defined and distinguished.

An insurance licensee’s hypertext link that is posted on a non-licensee’s web site is considered an advertisement where the wording of the link, and that which frames it, does not include recommendations, endorsements or promotions from the non-licensee concerning the insurance products sold by the licensee. Examples of the type of link that the Department would consider to be an advertisement is one that contains the name of the insurance company, or states "Insurance" or "Interested in Insurance?"

Where the wording of the link, or that which frames it, does recommend, endorse or promote a New York State licensed insurance agent or broker, but does not discuss specific insurance policy terms and conditions (and the web site owner is not compensated for posting the link based on a user’s purchase of insurance) such act is considered a referral, as provided by the recently enacted Chapter 418 of the Laws of 2000, and is permissible under the New York Insurance Law. (Subsection (a) of section 2114 of the Insurance Law was amended by adding a new paragraph 4 to read as follows: "Services of the kind specified in this subsection shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussing of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.")

With respect to the inquiry regarding the payment of premiums through the Internet (via electronic transmission of funds), insurance transactions may be effectuated electronically to the same extent that they may be effectuated by other means. Effectuating an insurance transaction over the Internet does not add any additional requirements not otherwise required under the Insurance Law. The insured that purchases a policy and pays the premium through the Internet (whether transferring funds from a bank or other institution, or charging the amount to a credit card) must also provide a valid electronic signature where the Insurance Law requires an insured’s signature to effectuate coverage.

New York State enacted the Electronic Signatures and Records Act ("ESRA") as part of Chapter 4 of the Laws of 1999, adding the State Technology Law as new Chapter 57-A of the Consolidated Laws, N.Y. State Tech. Law §§ 101-109 (McKinney Pamphlet 2000). ESRA establishes a legal framework in New York for the conduct of electronic commerce. The recently enacted federal "Electronic Signatures in Global and National Commerce Act," 15 U.S.C. § § 7001-7031 (2000), may preempt, in whole or in part, ESRA. The New York Office for Technology ("OFT’), which is the electronic facilitator under ESRA, has been examining the issue of preemption. Recent OFT guidelines state that ESRA is applicable to the use and acceptance of electronic signatures and records by or with government entities and by others who elect to voluntarily comply with ESRA. The Department suggests that counsel be conferred to determine whether a particular technology or procedure complies with the governing law.

For further information you may contact Attorney Sally Geisel at the New York City Office.