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 May 25, 2004, representing the position of the new York State Insurance Department.

RE: Licensing Inquiry

Question Presented:

Do the services that ABC, Inc. provides constitute the kinds of activities that require licensing by the New York State Insurance Department as an insurance agent, broker, or adjuster?

Conclusion:

Based on the information provided to us, the services that ABC, Inc. provides do not constitute the kinds of activities that require licensing as an insurance agent, insurance broker or adjuster because the activities are not those described in N.Y. Ins. Law § 2101(a), (c) or (g).

Facts:

A consulting firm wrote to the Department about a client of theirs, ABC, Inc. Based on the information that was provided, the services that ABC provides are the administration of employee flexible spending accounts, COBRA premium reconciliation, and ERISA-based employee benefit programs. It was stated that ABC does not adjust insurance claims, handle premiums, write insurance policies, or provide administrative services to insurance carriers. It was also stated that ABC, Inc. is not compensated based on premium dollars or as a percentage of premium dollars.

It was stated:

[ABC, Inc.] provides services for employers related to flexible spending accounts1 and benefit eligibility administration2. . . Typically, [ABC, Inc.] obtains a payroll file from its employer-client, sends informational materials to employees, employees enroll in benefit programs, and [ABC, Inc.] transmits payroll deduction information back to the employer-client and transmits eligibility information to carriers. [ABC, Inc.] reconciles bills and provides reports to employer-clients regarding amounts the employer must pay, but the employer is the one that actually receives premium from the employee and pays the premium to the carrier. (Footnotes added.)

In addition, the consulting firm responded to the Department’s inquiries that ABC does not discuss terms and/or conditions of insurance policies with their client-employers or employees, assist the client-employers or employees in choosing an insurer, discuss benefits a client-employer or employee should purchase, or refer the client-employers or employees to any insurers.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney 2000), as amended by Chapter 687 of the Laws of New York 2003, states:

No person, firm, association or corporation shall act as an insurance producer or insurance adjuster 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.

N.Y. Ins. Law § 2101 (McKinney 2000), as amended by Chapter 687 of the Laws of New York 2003, defines insurance producer and insurance adjuster, in relevant part, as follows:

(a) In this article "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society 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 sale of an insurance, health maintenance organization or annuity 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 selling any insurance or annuity contract or in placing risks or taking out any insurance, on behalf of an insured other than himself, herself, or itself or on behalf of any licensed insurance broker[.]

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(g) In this article, "adjuster" means any "independent adjuster" or "public adjuster" as defined below:

(1) The term "independent adjuster" means any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster. . . .

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(2) "Public adjuster" means any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts or aids in any manner on behalf of an insured in negotiating for, or effecting, the settlement of a claim or claims for loss or damage to property of the insured in this state caused by, or resulting from, any of the risks as enumerated in paragraphs four, five, six, seven, eight, nine and ten and subparagraphs (B) and (C) of paragraph twenty of subsection (a) of section one thousand one hundred thirteen of this chapter, not including loss or damage to persons under subparagraph (B) of paragraph twenty of subsection (a) of such section or who, or which, advertises for, or solicits employment as an adjuster of such claims, and shall also include any person who, for money, commission or any other thing of value, solicits, investigates, or adjusts such claims on behalf of any such public adjuster. . . .

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(k) In this article, "insurance producer" means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance. . . .

Based on the information provided to us, the services that ABC, Inc. provides do not constitute the kinds of activities that require licensing as an insurance agent, insurance broker or adjuster because the activities are not those described in N.Y. Ins. Law § 2101(a), (c) or (g).

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


1 A flexible spending account is one in which an employee sets aside funds from his or her wages on a pre-tax basis that are used to pay, among other things, qualified, out-of-pocket health care expenses. One of the services ABC, Inc. provides is to cut reimbursement checks to employees for such qualified expenses.

2 For example, the COBRA reconciliation, which, as it was described, is the collection of COBRA payments by employees and the depositing of such payments into ABC’s clients’ accounts (such clients being the employers), or forwarding of employee payments to the client-employers. The client-employer pays the insurer directly.