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 February 13, 2003, representing the position of the New York State Insurance Department.

Re: Referral Fee to Websites

Question Presented:

May a brokerage firm pay a referral fee to websites on the internet that link to the brokerage firm’s website, from which a user was referred, based on per lead and on per sale of an insurance policy? If yes, is there a monetary limitation to the amount of the referral fee?

Conclusion:

A brokerage firm may pay a referral fee to websites on the internet that link to the brokerage firm’s website, from which a customer was referred, based on the referral lead only, not on the user’s purchase of an insurance policy. There is no monetary limitation stated in the Insurance Law or regulations promulgated thereunder regarding the amount of the referral fee.

Facts:

No additional facts were given.

Analysis:

Circular Letter No. 5 (2001) provides guidance as to what constitutes an "advertisement," "referral," or "solicitation" in the context of a website.

An insurance licensee’s hypertext link that is posted on a non-licensee’s website is considered an advertisement where the wording of the link, and that which frames it, does not include recommendations, endorsements or promotions from the non-licensee concerning the insurance products sold by the licensee. Examples of the type of link that the Department would consider to be an advertisement is one that just contains the name of the insurance company, or states "Insurance" or "Interested in Insurance?" If the link is an advertisement, compensation to the non-licensee can be based on per lead or per sale of an insurance policy.

Where the wording of the link, or that which frames it, recommends, endorses or promotes a New York State licensed insurance agent or broker, but does not discuss specific insurance policy terms and conditions, and the website owner is not compensated for posting the link based on a user’s purchase of insurance, such act is considered a referral, as provided in N.Y. Ins. Law § § 2114, 2115 and 2116 (McKinney Supp. 2003).1 There is no monetary limitation stated in the Insurance Law or regulations promulgated thereunder regarding the amount of the referral fee.

However, if the website owner discusses terms and conditions of the policy or is compensated on a per policy basis, then the website owner would be soliciting insurance and acting as an insurance agent or broker without a license, in violation of N.Y. Ins. Law § 2102(a) (McKinney 2000). Furthermore, referrals may not direct New York residents to the products or services of unlicensed agents or brokers. Such referrals would constitute solicitation and compensation may not be paid for such referrals. Such referrals would also violate N.Y. Ins. Law § 2102(a) (McKinney 2000) (acting without a license).

For further information, you may contact Senior Attorney Meredith S. Kaufer at the New York City Office.


1 Subsection (a) of section 2114 of the Insurance Law was amended by adding a new paragraph 4 to read as follows: "(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 discussing of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person."

Section 2114 applies to life and accident and health insurance agents and brokers. Section 2115 applies to property/casualty agents, and Section 2116 applies to insurance brokers.