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 July 18, 2003, representing the position of the New York State Insurance Department.

Re: Advertisement of Health Insurance Policy

Question Presented:

Is the advertisement proposed to be issued by the ABC Group in compliance with the New York Insurance Law (McKinney 2000 and 2003 Supplement) and other relevant statues?

Conclusion:

No, all sales activities by an unlicensed entity, the ABC Group, are in violation of the New York Insurance Law.

Facts:

An insurance agent (the "Agent") licensed pursuant to New York Insurance Law § 2103(a) (McKinney 2000) is employed by the ABC Group, which is not licensed by this Department in any capacity. The ABC Group is a subsidiary or affiliate of the ABC Agency, which is licensed as an insurance agent pursuant to New York Insurance Law § 2103(a) and (b), as an insurance broker pursuant to New York Insurance Law § 2104 (McKinney 2000), as an excess line broker pursuant to New York Insurance Law § 2105 (McKinney 2000), and as an insurance consultant pursuant to New York Insurance Law § 2107 (McKinney 2000).

The Agent, on behalf of the ABC Agency, intends to mail a brochure to a number of small businesses in Westchester County describing the benefits and premiums under policies issued by two insurers and indicating that the policies in question are available through the ABC Group. The names of the insurers that purportedly offer these policies will not be included in the brochure. The brochure, however, includes the following disclaimer: "The above rates are for discussion and estimation purposes only and are not valid without approval from the insurance carriers. Final rates must be based on insurance carrier confirmation and final enrollment."

Analysis:

New York Insurance Law § 2101 (McKinney 2000) defines:

(a) In this article, ‘insurance agent’ means any authorized or acknowledged agent of an insurer . . .or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or procurement or making of, an insurance, health maintenance organization . . . contract, other than as a licensed insurance broker . . . .

. . .

(c) In this article, ‘insurance broker’ means any person, firm, association or corporation who or which for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance . . . contract or in placing risks or taking out insurance, on behalf of an insured other than himself or itself or on behalf of any licensed insurance broker . . . .

New York Insurance Law § 2102 provides:

(a)(1) No person, firm, association or corporation shall act as an insurance agent, insurance broker . . . in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter. . . .

(b) (1) Unless licensed as an insurance agent, insurance broker or insurance consultant, no person, firm, association or corporation shall in this state identify or hold himself or itself out to be an insurance advisor, insurance consultant or insurance counselor. . . .

Since this Department does not license the ABC Group in any capacity, it may not, with respect to insurance, sell or offer to sell insurance, including through advertisements, or call attention to itself, or have the ABC Agency call attention to it, which prohibited action would take place in the proposed brochure.

In addition, New York Insurance Law § 2122(b) (McKinney 2000) provides:

Every agent of any insurer and every insurance broker shall, in all advertisements, public announcements, signs, pamphlets, circulars and cards, which refer to an insurer, set forth therein the name in full of the insurer referred to and the name of the city, town or village in which it has its principal office in the United States.

Since the proposed brochure alludes to specific coverage to be provided by specific insurers, it must state the name of the insurer and the other information required by New York Insurance Law § 2122(b).

New York Insurance Law § 2123 (McKinney 2000 and 2003 Supplement) provides:

(a) (1) No agent or representative of any insurer or health maintenance organization authorized to transact . . .accident or health insurance or health maintenance organization business in this state and no insurance broker, and no other person, firm, association or corporation, shall issue or circulate or cause or permit to be issued or circulated, any illustration, circular, statement or memorandum misrepresenting the terms, benefits or advantages of any policy or contract of . . . accident or health insurance. . . any health maintenance organization contract, delivered or issued for delivery or to be delivered or issued for delivery, in this state . . . .

(b) Any comparison of the policies or contracts of any such insurer, insurers or health maintenance organization shall be deemed to be an incomplete comparison if it does not conform to all the requirements for comparisons established by regulation.

The Department, in order to effectuate New York Insurance Law § 2123, promulgated Regulation 34, N.Y. Comp. Codes R. & Regs. tit. 11, Part 215 (1998). The Regulation, N.Y. Comp. Codes R. & Regs. tit. 11, § 215.3(a) (1998), defines: "(a) An advertisement for the purpose of this Part shall include: (1) printed and published material . . . and similar displays . . . ."

The Regulation, N.Y. Comp. Codes R. & Regs. tit. 11, § 215.5 (1998), further provides:

(a) The format and content of an advertisement of an accident and health insurance policy shall be sufficiently complete and clear to avoid deception or the capacity or tendency to mislead or deceive. Whether an advertisement has a capacity or tendency to mislead or deceive shall be determined by the superintendent from the overall impression that the advertisement may be reasonably expected to create upon a person of average education and intelligence, unique to the particular type of audience to which the advertisement is directed, and whether it may be reasonably comprehended by the segment of the public to which it is directed.

In addition, the Regulation, N.Y. Comp. Codes R. & Regs. tit. 11, § 215.6(a) (1995) provides:

(a) Deceptive words, phrases or illustrations prohibited. (1) No advertisement shall omit information or use words, phrases, statements, references or illustrations if the omission of such information or use of such words, phrases, statements, references or illustrations has the capacity, tendency or effect of misleading or deceiving purchasers or prospective purchasers as to the nature or extent of any policy benefit payable, loss covered or premium payable. The fact that the policy offered is made available to a prospective insured for inspection prior to consummation of the sale or an offer is made to refund the premium if the purchaser is not satisfied, does not remedy misleading statements. . . .

Finally, the proposed brochure would have to comply with N.Y. Comp. Codes R. & Regs. tit. 11, § 215.7 (1995) provides:

When an advertisement refers to either a dollar amount or a period of time for which any benefit is payable, or the cost of the policy, or specific policy benefit, or the loss for which such benefit is payable, it shall disclose the provisions relating to renewability, cancellability and termination and any modification of benefits, losses covered or premiums because of age or for other reasons, in a manner which shall not minimize or render obscure the qualifying conditions.

Since copies of the policies in question have not been provided, the Department cannot indicate all the areas in which the brochure might be misleading. It is noted, however, that all the information required by N.Y. Comp. Codes R & Regs. tit. 11, § 215.7 is not supplied, that the explanation of co-insurance implies that, depending on the plan, the insured pays between 60% and 90% of the bill after the deductible (rather than the insurer paying the greater portion), and the listing of a hospital deductible for one plan is confusing.

If the ABC Group should use the advertisement, or in any was attempt to sell insurance, it would be in violation of New York Insurance Law § 2102, which violation might result in action being taken against the ABC Agency.

For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.