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

Re: Referrals to Agents and Brokers by Non-Licensees

Over the past year the Department has issued several opinions interpreting N.Y. Ins. Law §§ 2114, 2115 and 2116 (McKinney Supp. 2003) with respect to referrals to agents and brokers by non-licensees.

N.Y. Ins. Law § 2114(a)(4) (McKinney Supp. 2003) provides:

(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 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.

N.Y. Ins. Law § 2115(a)(1) (McKinney Supp. 2003) provides:

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.

N.Y. Ins. Law § 2116 (McKinney Supp. 2003) provides:

No insurer authorized to do business in this state, and no officer, agent or other representative thereof, shall pay any money or give any other thing of value to any person, firm, association or corporation for or because of his or its acting in this state as an insurance broker, unless such person, firm, association or corporation is authorized so to act by virtue of a license issued or renewed pursuant to the provisions of section two thousand one hundred four of this article. For the purposes of this section, "acting as insurance broker" 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.

In opinion letters dated January 16, 2003 and February 6, 2003, the Office of General Counsel opined that although an insurance agent or insurance broker may provide a non-licensee with compensation for referrals if the non-licensee does not discuss specific insurance policy terms and conditions with the prospective insured and the compensation is not based on the purchase of insurance by such person, a non-licensee may not initiate contact with a prospective insured to make appointments for the prospect to either meet or speak on the telephone with the licensee. These letters stated that once a non-licensee makes appointments for the licensee it is no longer a referral and the non-licensee would have to become licensed as an insurance agent or insurance broker or he or she would be in violation of N.Y. Ins. Law § 2102(a)(1) (McKinney 2000).

The Department has since reexamined its position and now would consider a transaction to be a referral where a non-licensee makes an appointment for the licensee to either meet or speak on the telephone with the prospective insured, provided that the non-licensee does not discuss specific insurance policy terms and conditions with the prospective insured and the compensation is not based on the purchase of insurance by such person. Importantly, the non-licensee may not engage the prospect in a discussion of or give advice about the prospect’s specific insurance needs. The non-licensee may not compare various plans or policies. In determining whether the transaction constitutes a referral or whether licensing is required, the Department will look at the totality of the conduct.

Licensees should be aware that there are additional restrictions on communications that apply to Medicare supplement insurance. Accordingly, Regulations 62 and 145 must be complied with. N.Y. Comp. Codes R. & Regs. tit. 11, § 52.22(i)(2)(iii) prohibits cold lead advertising. It forbids directly or indirectly using any method of marketing which fails to disclose in a conspicuous manner that a purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or insurance company. N.Y. Comp. Codes R. & Regs. tit. 11, § 52.22(f)(1) provides that applications for Medicare supplement insurance "may not contain any questions dealing with the health or health history of the applicant . . . ." N.Y. Comp. Codes R. & Regs. tit. 11, § 52.22(k)(1) requires that policies must be issued at any time without regard to the health status or claims experience of the individual. N.Y. Comp. Codes R. & Regs. tit. 11, § 360.5(a)(7) prohibits the underwriting practice of using medical underwriting information obtained from other sources with regard to an insurer’s decision whether or not to offer or accept health insurance applications.

For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.