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 August 5, 2002, representing the position of the New York State Insurance Department.

RE: Promotional Discounts

Questions Presented:

1) May an insurer that issues motor vehicle insurance policies offer its insureds contractually arranged discounts from other businesses?

2) How may a copy of an insurer’s filed policy forms be obtained?

Conclusion:

1) Such insurer is prohibited from offering the discounts unless they are specified in the motor vehicle insurance policy pursuant to N.Y. Ins. Law § 2324(a) (McKinney 2002 Pocket Part), which applies to property/casualty insurance.

2) Copies of filed policy forms, if subject to public disclosure, may be obtained by making a Freedom of Information Law request for such copies.

Facts:

Copies of web site content, marketing brochures, and other correspondence relating to an insurer-provided discount program were provided to the Department. The insurer is an authorized insurer in New York that issues motor vehicle insurance policies. The program offers insureds discounts on travel, automotive service and repair, long distance phone service, vision care, dental care, prescription drugs, vitamins and herbal supplements, and other products and services. The program also offers insureds low-cost emergency road service coverage.

Analysis:

An insurer is prohibited from offering inducements or other valuable consideration (other than an article of merchandise inscribed with the insurer’s name and not exceeding $15 in value) in connection with the sale of property/casualty insurance unless such offering is specified in the policy or contract pursuant to N.Y. Ins. Law § 2324(a), which states:

(a) No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding fifteen dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker, or shall give, sell or purchase, or offer to give, sell or purchase, as an inducement to the making of such insurance or in connection therewith, any stock, bond or other securities or any dividends or profits accrued thereon, nor shall the insured, his agent or representative knowingly receive directly or indirectly, any such rebate or special favor or advantage, provided, however, a licensed insurance agent or a licensed insurance broker may retain the usual commission or underwriting fee on insurance placed on his own property or risks, if the aggregate of such commissions or underwriting fees will not exceed five percent of the total net commissions or underwriting fees received by such licensed insurance agent or insurance broker during the calendar year. (emphasis added)

The insurer-provided discount program is made available only to insureds, and is referred to, in the insurer’s brochure, as an "added incentive" for insuring with them. The discount program is clearly not merchandise with a value of not more than $15. If the discount program is not specified in the insurance policy, it constitutes an unlawful consideration or inducement under N.Y. Ins. Law § 2324(a).

With respect to obtaining copies of an insurer’s filed policy forms, such filings are records of the Insurance Department and are subject to the public disclosure provisions contained in N.Y. Pub. Off. Law Art. 6 (McKinney), which is commonly known as the Freedom of Information Law ("FOIL"). Any member of the public may make a FOIL request for records by submitting a written request to the Office of General Counsel at the Department, to the attention of the Records Access Officer, via postal service, e-mail, or fax. Based on FOIL, or other state or federal statutes, the records requested may or may not be subject to public disclosure. If the requested records are subject to public disclosure, the requestor may view the records and/or obtain copies of the records. There is a charge for the provision of copies, which varies depending upon the type of copy provided (ex. photocopy or fax).

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