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 March 3, 2004, representing the position of the New York State Insurance Department.

Re: Insurance Agents and Brokers Donating Profits to Charities

Question Presented:

May a New York licensed insurance agent or broker donate a portion of his commissions and fees (earned from the sale of life, and accident and health insurance products) to charities and publicize such donations to prospective clients?

Conclusion:

A New York licensed insurance agent or broker may donate a portion of his commissions and fees (earned from the sale of life, and accident and health insurance products) to charities and publicize such donations to prospective clients if: prospective clients and insureds have no direct or indirect influence over the choice of which charities receive donations; no donations are made in the name of an insured or prospective client, or are otherwise made on behalf of an insured or prospective client; and no applicable tax deductions for such charitable contributions, or any other benefits - whether tangible or intangible, direct or indirect - stemming from such donations, inure to an insured or prospective client.

Facts:

No facts are presented.

Analysis:

N.Y. Ins. Law § 4224(c) (McKinney Supp. 2004) prohibits rebating and discrimination in life, and accident and health insurance contracts1    by providing that:

(c) No such life insurance company and no such savings and insurance bank and no officer, agent, solicitor or representative thereof and no such insurer doing in this state the business of accident and health insurance and no officer, agent, solicitor or representative thereof, and no licensed insurance broker and no employee or other representative of any such insurer, agent or broker, shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of life insurance or annuity contract or policy of accident and health insurance, any stocks, bonds, or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract.

N.Y. Ins. Law § 4224(c) prohibits insurers, brokers, agents and others from directly or indirectly paying, allowing or giving, or offering to pay, allow or give any valuable consideration or inducement in connection with life, and accident and health insurance policies or contracts when such valuable consideration or inducement is not specified in such insurance policies or contracts.

The Insurance Department has opined that an agent’s donation to a charity, which is selected by the agent’s prospective client, confers an intangible benefit or consideration to the prospective client, and acts as an inducement for the prospective client to place insurance through such agent in violation of N.Y. Ins. Law § 2324 (McKinney Supp. 2004) or N.Y. Ins. Law § 4224 (McKinney 2004), or both. Office of General Counsel Opinions 02-12-03, 00-03-12, 92-123.

However, a New York licensed insurance agent or broker may donate a portion of his commissions and fees (earned from the sale of life, and accident and health insurance products) to charities and publicize such donations to prospective clients if: prospective clients and insureds have no direct or indirect influence over the choice of which charities receive donations; no donations are made in the name of an insured or prospective client, or are otherwise made on behalf of an insured or prospective client; and no applicable tax deductions for such charitable contributions, or any other benefits - whether tangible or intangible, direct or indirect - stemming from such donations, inure to an insured or prospective client.

For further information you may contact Senior Attorney Kristian Earl Lynch at the New York City Office.


1  N.Y. Ins. Law § 2324(a) (McKinney Supp. 2004) likewise prohibits rebating and discrimination in contracts of property/casualty insurance by providing that:

(a) 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.