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 opinion on January 6, 2003, representing the position of the New York State Insurance Department.

RE: Commission Sharing

Question Presented:

May a New York licensed insurance agent pay commission or other compensation on the placement of a Workers’ Compensation insurance policy to another New York licensed insurance agent for referring business?

Conclusion:

A New York licensed insurance agent may pay commission or other compensation on the placement of a Workers’ Compensation insurance policy to another New York licensed insurance agent for referring business if the referring agent is a licensed agent of the insurer that wrote the Workers’ Compensation insurance policy, pursuant to N.Y. Ins. Law § 2115(a) (McKinney 2003 Pocket Part). Otherwise, such referring agent must be treated as any other non-licensed, non-employee under N.Y. Ins. Law § 2115(a) (McKinney 2003 Pocket Part).

Facts:

An insurance agency ("ABC") that is licensed in New York presented the following scenario: ABC enters into an agreement with another licensed insurance agency, whereby such agency will provide ABC with a list of referrals for potential payroll customers. ABC will solicit Workers’ Compensation insurance to the referred customers, and if successful in placing insurance, will share the commission with the referring agency. ABC inquired whether it is permissible under these circumstances to share commission.

Analysis:

N.Y. Ins. Law § 2115(a) (McKinney 2003 Pocket Part) 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.

Thus, ABC may share commission on the placement of a Workers’ Compensation insurance policy with another New York licensed insurance agent for referring business if the referring agent is a licensed agent of the insurer that wrote the Workers’ Compensation insurance policy. However, please note that N.Y. Comp. Codes R. & Regs. tit. 11, Part 29 (2002) (Regulation 87) prohibits a licensee from receiving a fee and/or commission in connection with insurance services rendered to, and/or insurance coverages placed or renewed for, any government agency in this state where such licensee did not actually render services to the government agency, and/or did not place or renew the insurance coverage for the government agency.

Where the referring insurance agency is not a licensed agent of the insurer that wrote the Workers’ Compensation insurance policy, ABC may not share its commission. However, ABC may pay a fee to the non-licensee for the referral list provided that the fee is not based upon the placement of insurance and the referral did not include a discussion of specific insurance policy terms and conditions.

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