The Office of General Counsel issued the following opinion on April 8,2003, representing the position of the New York State Insurance Department.
Re: Gifts and Prizes In Connection With Agency Open House Celebration
Question
Would the proposed raffle violate the "anti-rebating" rule contained in N.Y. Ins. Law § 2324 (McKinney Supp. 2003)?
Conclusion
No, the proposed raffle would not violate the "anti-rebating" rule contained in N.Y. Ins. Law § 2324 (McKinney Supp. 2003).
Facts
The inquirers agency is moving to a new location in May 2003. Shortly after the move, the inquirer plans to have an "open house" celebration. At this celebration the inquirer plans to have a raffle in which any attendee, without obligation, will receive a free ticket. The raffle prizes will mainly consist of promotional items (such as umbrellas, coffee mugs and the like) from the various insurance companies that you represent, as well as some items that the inquirer plans to purchase from some of the inquirers existing clients, such as a floral arrangement from a client florist. The inquirer states that some of the latter type items may exceed $15.00 in value.
Analysis
N.Y. Ins. Law § 2324 (McKinney Supp. 2003) prohibits the use of inducements or rebates in connection with property/casualty insurance sales. 1 That section provides, in pertinent part, as follows:
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.
As is evident from the statute, the law expressly prohibits an agent from giving gifts valued in excess of $15.00 that are tied to the purchase or solicitation of an insurance product. In the case the inquirer describes, however, the raffle is described as one in which participation is not limited only to customers that purchase insurance or individuals that seek insurance quotes. Because of this distinction, the raffle that the inquirer proposes does not violate the insurance law. 2 Thus, the value of the prizes that may be offered to the raffle winners is immaterial to this analysis.
For further information you may contact Supervising Attorney Michael Campanelli at the New York City Office.
1 N.Y. Ins. Law § 4224 (McKinney Supp. 2003) sets forth a similar rule in the context of life, accident and health insurance.
2 The permissibility of "open" raffles has previously been expressed by the Department. See Office of General Counsel Opinion (July 5, 1989) and Office of General Counsel Opinion (November 22, 1991).