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 September 9, 2003, representing the position of the New York State Insurance Department.

Re: Compensation for Purchase of Customer Lists

Question Presented:

Does the purchase by a licensed property/casualty insurance agent of a customer list from a real estate agent constitute a referral, as that term is used in N.Y. Ins. Law § 2115(a)(1) (McKinney Supp. 2003), because compensation for such list is made dependent upon the sale of homeowner’s insurance?

Conclusion:

The mere purchase by a licensed property/casualty insurance agent of a customer list from a real estate agent does not constitute a referral, as that term is used in N.Y. Ins. Law § 2115(a)(1) (McKinney Supp. 2003), although compensation for such list is made dependent upon the sale of homeowner’s insurance. The provision of a customer list by a non-licensee to a licensed insurance agent or broker, whereby the non-licensee does not refer or recommend such agent or broker to a customer, does not constitute a referral as that term is used in N.Y. Ins. Law § 2115(a)(1).

Facts:

An authorized insurance agent, who plans to "purchase client lists from real estate agents, with the payment for said lists being contingent on the sale of homeowner’s insurance to the homeowners on such lists," inquired as to whether N.Y. Ins. Law § 2115(a)(1) prohibits this kind of compensation arrangement.

Analysis:

N.Y. Ins. Law § 2115(a)(1) 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. (emphasis added)

The provision of a customer list by a non-licensee to a licensed insurance agent or broker, whereby the non-licensee does not refer or recommend such agent or broker to a customer, does not constitute a referral as that term is used in N.Y. Ins. Law § 2115(a)(1). The Department has taken this position in previous opinions. See OGC Op. 4/29/02; OGC Op. 3/21/01; OGC Op. 3/19/01.

Furthermore, the Department’s Circular Letter No. 5 (2001) states, "the New York Insurance Law does not prohibit licensees from purchasing lists of customer names and related information from non-licensees for the purposes of soliciting insureds. The compensation payable to non-licensees for such lists may be contingent upon the successful placement by the licensee of the insurance and may be a percentage of the insurance commission the licensee earned from placing the business."

Thus, the mere purchase by a licensed property/casualty insurance agent of a customer list from a real estate agent does not constitute a referral, as that term is used in N.Y. Ins. Law § 2115(a)(1) (McKinney Supp. 2003), where the real estate agent does not refer or recommend the agent to a customer, although compensation for such list is made dependent upon the sale of homeowner’s insurance.

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