The Office of General Counsel issued the following informal opinion on June 12, 2002, representing the position of the New York State Insurance Department.
Re: Credit Union Agent Licensing
May a credit union be licensed as an insurance agent in New York State, and, if so, what is the process for licensure?
A credit union may obtain a license as an insurance agency. Information regarding the licensing procedure is provided below.
The inquirers firm represents a number of credit unions and their subsidiary credit union service organizations (CUSOs). These subsidiary CUSOs are often used by credit unions to administer any of the credit unions insurance or investment activities.1
The inquirer has learned that the federal Securities and Exchange Commission ("SEC") is considering the adoption of a regulation that would require federally chartered credit unions to move their investment programs from the CUSO to the parent credit union. In light of this possible restructuring, the inquirer is asking whether any CUSO administered insurance sales programs may be moved directly to the credit union.
The licensing of insurance agents in New York State is governed by N. Y. Ins. Law § 2103 (McKinney 2000). With respect to the issue of who may become licensed, that section provides, in pertinent part, as follows:
(a) The superintendent may issue a license to any person, firm or corporation who or which has complied with the requirements of this chapter, authorizing such licensee to act as an insurance agent with respect to life insurance, including for this purpose annuity contracts and supplemental contracts of non-cancellable disability insurance, or with respect to accident and health insurance, including for this purpose, health maintenance organization contracts, legal services insurance or with respect to any combination of the above, as specified in such license, on behalf of any insurer, fraternal benefit society or health maintenance organization, which is authorized to do such kind or kinds of insurance or health maintenance organization business in this state.
(b) The superintendent may issue a license to any person, firm, association or corporation who or which has complied with the requirements of this chapter, authorizing the licensee to act as agent of any authorized insurer, other than an insurer specified in subsection (b) of section two thousand one hundred fifteen of this article, with reference to any kind or kinds of insurance business, as specified in the application for such license, which such insurer is authorized to do in this state.
(c) Any such license issued to a firm or association shall authorize only the members thereof, named in such license as sub-licensees, to act individually as agents thereunder, and any such license issued to a corporation shall authorize only the officers and directors thereof, named in such license as sub-licensees, to act individually as agents thereunder. Every sub-licensee, acting as insurance agent pursuant to such a license shall be authorized so to act only in the name of the licensee.
As evidenced by the above-quoted provision, the New York Insurance Law does not forbid a credit union from becoming an insurance agent. Additional requirements for becoming and remaining an agent are contained in the balance of N.Y. Ins. Law § 2103 as well as the other provisions of Article 21 of the N.Y. Insurance Law.
However, the analysis of the question of whether a credit union may become an insurance agent (and thus a licensee subject to examination and discipline by the New York Insurance Department) also depends upon the rules of the credit unions primary regulator, the National Credit Union Administration ("NCUA"). In the event that NCUA rules or other federal statute or rule prohibited the examination of a credit union except as provided by federal law, the Department would be hesitant to license the credit union absent assurance that the Departments regulatory oversight powers were not in any way circumscribed. It appears, however, that there are no federal restrictions limiting examination by state insurance regulators. Furthermore, the federal regulation enumerating the incidental powers of national credit unions can be interpreted as including therein a credit union acting as an insurance agent or broker. That regulation specifically provides as follows:
(f) Finder activities. Finder activities are activities in which you introduce or otherwise bring together outside vendors with your members so that the two parties may negotiate and consummate transactions. Finder activities may include offering third party products and services to members through the sale of advertising space on your web site, account statements and receipts, or selling statistical or consumer financial information to outside vendors to facilitate the sale of their products to your members.
[12 C.F.R. 721.3(f) (2000)]
The General Counsels Office of the NCUA, in Opinion 01-0869 (November 14, 2001) has interpreted the above provision as allowing a national credit union to act as an insurance agent, provided that it comply with all applicable federal and local laws and state insurance laws.
In consideration of the foregoing, a national credit union may become an insurance agent. Application forms and instructions may be obtained from the Departments web site at www.ins.state.ny.us.
For further information you may contact Supervising Attorney, Michael Campanelli, at the New York City Office.
1 The role of CUSOs in the operation of insurance programs was addressed by the Department in Office of General Counsel Opinion 01-02-16 (February 26, 2001).