New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

The Office of General Counsel issued the following opinion on July 23, 2004, representing the position of the New York State Insurance Department.

Re: Broker Offer to Buy "Biggest Steak in Town" as an Inducement under N.Y. Ins. Law § 4224

Question Presented:

May a New York licensed insurance broker advertise its services by utilizing a direct-mail marketing campaign whose main theme is: "If we can’t show you ways to save you money on your health insurance we will buy you the biggest steak in town"?

Conclusion:

No. The campaign’s theme, which is an offer to buy prospective clients "the biggest steak in town" if the broker cannot save money on the health insurance costs of the prospective clients, constitutes valuable consideration and an improper inducement in violation of New York Insurance Law § 4224.

Facts:

A licensed New York insurance broker plans to conduct a direct-mail marketing campaign aimed at small New York businesses. The main theme of the campaign is: "If we can’t show you ways to save you money on your health insurance we will buy you the biggest steak in town."

Analysis:

N.Y. Ins. Law § 4224(c) (McKinney Supp. 2004) prohibits rebating and discrimination in life, and accident and health insurance contracts 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.

Thus, 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.

Here, in connection with the accident and health insurance policies that the broker sells, the broker is offering to give prospective clients "the biggest steak in town" if the broker cannot show prospective clients how to save money on their health insurance costs. This offer constitutes valuable consideration and an inducement for the prospective clients to place accident and health insurance through the broker when such valuable consideration and inducement are not specified in the accident and health insurance policies and contracts that the broker sells. Accordingly, the broker may not use the marketing campaign theme because it violates § 4224 of the New York Insurance Law.

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