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

RE: Promotional Discounts N.Y. Ins. Law § 2324

Question Presented

May a licensed agent give a $15 gift certificate toward the cost of a 6-hour defensive driving class or a $5 gas card to insureds or prospective insureds?

Conclusion

No. The gift certificate and the gas card would constitute unlawful inducements in violation of N.Y. Ins. Law § 2324 (McKinney Supp. 2004).

Facts

The inquirer’s agency proposes to offer a $15 gift certificate to subsidize the cost of a defensive driving class or a free $5 gas card. The gas card the inquirer proposes to offer would not have the agency’s name, address, and telephone number on the card but would be placed inside the agent’s note card and envelope with such identifying information.

Analysis

N.Y. Ins. Law § 2324 (McKinney Supp. 2004), entitled "Rebating and discrimination," is applicable to property or casualty insurance and provides in pertinent part as follows:

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 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. . .(emphasis added).

Thus, in accordance with the express language of N.Y. Ins. Law § 2324(a) (McKinney Supp. 2004), insurers, brokers, agents and their employees and representatives are prohibited from directly or indirectly offering inducements or valuable consideration, other than an article of merchandise not exceeding $15 in value in connection with the sale of insurance, when such inducements or valuable consideration are not specified in the insurance policy.

In the present case, the offer of the free gift certificate or gas card violates N. Y. Ins. Law § 2324(a) (McKinney Supp. 2004) because it clearly induces insureds or prospective insureds to procure insurance or obtain an insurance rate quote through the inquirer’s agency by offering the added benefit of receiving a free gift certificate or gas card, which is not specified in the insurance policy.

Moreover, the gift certificate for a driving class price reduction and a gas card are not articles of merchandise within the meaning of N. Y. Ins. Law § 2324(a) (McKinney Supp. 2004). The article of merchandise that § 2324(a) contemplates is a "keepsake," not exceeding $15 in retail value, which conspicuously bears the agency’s name and is designed to keep the agency’s name before the customer through the conspicuous stamp or printing thereof. Inasmuch as the gift certificate or the card being offered is not a "keepsake" within the meaning of the statute but is expected to be used shortly after receipt and then be discarded, it would not fall under the "keepsake" exception of N.Y. Ins. Law § 2324(a) even if the agency name was placed on it.

For further information one may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.