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 November 29, 2001, representing the position of the New York State Insurance Department.

RE: Sharing of Commissions.

Questions Presented:

1. May a life insurance agent appointed by an insurer to sell annuity contracts to fund structured settlements in personal injury lawsuits pay an insurance broker licensed pursuant to N.Y. Ins. Law § 2104(b)(1)(A) (McKinney 2000 & Pamphlet A 2001) a share of the commission for services performed in obtaining a structured settlement annuity contract, pursuant to an agreement between the agent and the broker?

2. May an insurer that issues an annuity to fund a structured settlement in a personal injury lawsuit recognize both (i) a life insurance agent appointed by the insurer to sell structured settlement annuities, and (ii) an insurance broker licensed pursuant to N.Y. Ins. Law § 2104(b)(1)(A) (McKinney 2000 & Pamphlet A 2001) as being the producer of record on the annuity contract, with each entitled to be paid by the insurer, for services performed in obtaining the annuity contract, the percentage of the commission set forth for each person in the annuity application, pursuant to an agreement between the agent and the broker?

Conclusions:

1. Yes.

2. Yes.

Facts:

The plaintiff in a personal injury lawsuit is contemplating settling with the defendant. The proposed settlement provides that the claim be paid by means of a structured settlement funded by defendant’s insurer purchasing an annuity contract from a life insurance company, with the plaintiff as annuitant, to fund the series of future payments.

The annuitant would retain an insurance broker licensed under N. Y. Ins. Law § 2104(b)(1)(A) (McKinney 2000 & Pamphlet A 2001) to help purchase the annuity contract. The defendant’s insurer would select a life insurance agent to arrange for purchasing the annuity contract from a life insurance company with which the agent has an agency relationship. The broker would not be an appointed agent of the insurer.

In relation to question 1 above, the written agreement between the agent and broker would provide that only the agent would be designated as the producer of record in the annuity application, that the agent would receive the whole commission, and would then pay the broker an agreed portion of the commission.

In relation to question 2 above, the written agreement between the agent and broker would provide that both be designated producers of record in the annuity application and agree to set forth in the application the percentage of the commission to be paid to each by the insurer.

Analysis:

This office agrees with the inquirer’s legal analysis, provided there is no rebate of any commissions or any other valuable consideration given to the plaintiff annuitant in these transactions.

N. Y. Ins. Law § 2116 (McKinney 2000) provides that an insurer and an insurance agent may pay a commission to an insurance broker licensed under N. Y. Ins. Law § 2104 (McKinney 2000 & Pamphlet A 2001).

N. Y. Ins. Law § 2114(a)(1) (McKinney 2000 & Pamphlet A 2001) provides in part that a life insurer may pay commissions to an insurance broker licensed under N. Y. Ins. Law § 2104(b)(1)(A) (McKinney 2000 & Pamphlet A 2001) on any new annuity contract.

The details of the commission sharing would be a matter of contract between such licensed parties.

For further information, you may contact Associate Attorney Jeffrey A. Stonehill at the New York City office.