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 July 27, 2004 representing the position of the New York State Insurance Department.

RE: Compensation for Insurance Referrals

Question Presented:

Based upon the language in OGC Opinion Number 96-70, do the amendments to N.Y. Ins. Law §§ 2115(a)(1) and 2116 (McKinney Supp. 2004), pursuant to Chapter 418 of the Laws of 2000, only apply to situations where the unlicensed individual making a referral raises the subject of insurance without discussing any particular product or policy as opposed to a situation where the prospective purchaser of insurance raises the subject of insurance and the unlicensed individual provides a referral?

Conclusion:

No. The amendments to N.Y. Ins. Law §§ 2115(a)(1) and 2116, pursuant to Chapter 418 of the Laws of 2000, do not distinguish between referrals precipitated by unlicensed individuals as opposed to the prospective purchaser of insurance and apply to both situations. In either case, an unlicensed individual may only make the referral and be compensated if the referral does not include a discussion of specific insurance policy terms and conditions and where the compensation is not dependent upon the sale of an insurance product.

Facts:

No specific facts were provided.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney 2000), concerning the licensing of agents, brokers, reinsurance intermediaries and adjusters, states:

No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary 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 § 2115(a)(1) (McKinney Supp. 2004) 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 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.1

As stated in N.Y. Ins. Law § 2115(a)(1) (McKinney Supp. 2004), non-licensees may be compensated for referrals so long as it does not include a discussion of specific insurance policy terms and conditions and where the compensation is not dependent upon the sale of an insurance product. The law was due to expire on September 10, 2003, but has been extended to September 10, 2007.

The amendments to N.Y. Ins. Law §§ 2115 and 2116, pursuant to Chapter 418 of the Laws of 2000, do not distinguish between referrals precipitated by unlicensed individuals making referrals as opposed to the prospective purchaser of insurance and apply to both situations. Therefore, for purposes of N.Y. Ins. Law §§ 2115 and 2116, it does not matter who raises the issue of insurance.

It is important to note that the New York State Insurance Department continues to take the position that the amendments to N.Y. Ins. Law §§ 2115 and 2116, do not prohibit licensees from purchasing lists of customer names from non-licensees that will be used by the licensee for soliciting insurance, because such conduct does not constitute a referral or solicitation. Therefore, the compensation payable to non-licensees for providing such lists may be made contingent upon the successful placement of insurance by the licensee and may be a percentage of the insurance commission earned by the licensee. (See Circular Letter No. 5 of 2001).

For further information you may contact Special Counsel Athan M. Shinas at the Albany Office.


1 N.Y. Ins. Law § 2116 (McKinney Supp. 2004) applies to insurance brokers. N.Y. Ins. Law § 2114 (McKinney Supp. 2004) applies to life, accident and health insurance agents.