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

George E. Pataki
Governor

Gregory V. Serio
Superintendent

The Office of General Counsel issued the following informal opinion on September 20, 2002, representing the position of the New York State Insurance Department.

Re: Sale of insurance with assistance of non-licensed person

Question Presented:

Under what circumstances may a person not licensed as an insurance agent receive compensation from a licensed insurance agent for referring potential customers to that licensed insurance agent.

Conclusion:

Within the guidelines of N.Y. Ins. Law § 2114 and § 2115 (McKinney Supp. 2001-2002), compensation for referrals is allowed.

Facts:

The inquirer is a licensed insurance agent who would like to establish a relationship with a friend who is not a licensed insurance agent, but instead is a commissioned sales person for the New York State Restaurant Association on a part-time basis. This friend’s part-time job is to sell memberships in the New York State Restaurant Association. The inquirer would like this friend to distribute business cards and informational brochures that promote the inquirer’s health and life, and property/casualty insurance business to people when the friend speaks to them about the New York State Restaurant Association.

The inquirer stated that the friend knows nothing about the insurance business and would only be distributing informational brochures and business cards for the inquirer. If any appointments resulted from this distribution, the inquirer would pay the friend for each such appointment, even if no sale resulted from such meeting. The inquirer wanted to know if this plan would violate the New York Insurance Law.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney 2001), concerning the licensing of agents, brokers, reinsurance intermediaries and adjusters, states:

No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.

N.Y. Ins. Law § 2114(a) (McKinney Supp. 2001-2002) prohibits payment of commissions or other compensation by an insurer to a person not licensed to sell life or health (long term care) insurance. However, referrals to a licensed insurance agent or broker may be allowed if such referral complies with N.Y. Ins. Law § 2114(a) (McKinney Supp. 2001-2002). N.Y. Ins. Law §§ 2114 (McKinney Supp. 2001-2002) states in the relevant part:

(a)(1) No insurer . . . doing business in this state shall pay any commission or other compensation to any person, firm or corporation, for any services in obtaining in this state any new contract of life insurance or any new annuity contract, except to a licensed life insurance agent of such insurer . . . or to an insurance broker licensed under subparagraph (A) of paragraph one of subsection (b) of section two thousand one hundred and four of this article, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.

. . . .

(4) 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 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. (Historic and statutory notes omitted.)

N.Y. Ins. Law § 2115(a) (McKinney Supp. 2001-2002) prohibits payment of commissions or other compensation by an insurer to person not licensed to sell property/casualty insurance. However, referrals to a licensed insurance agent or broker may be allowed if such referral complies with N.Y. Ins. Law § 2115(a) (McKinney Supp. 2001-2002). N.Y. Ins. Law §§ 2115(a)(1) (McKinney Supp. 2001-2002) states:

No insurer doing business in this state, and no agent or other representative thereof, except as provided in subsection (b) hereof, 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 paragraph two or four of subsection (a) of section two thousand one hundred one of this article 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. (Historic and statutory notes omitted.)

Accordingly, the friend may distribute business cards and informational brochures and receive compensation for appointments that result from this distribution, if the referral does not include a discussion of specific insurance policy terms and conditions, and where the compensation for the referral is not dependent upon the sale of a policy.

For further information you may contact Senior Attorney Susan A. Dess at the New York City Office.