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 24, 2004, representing the position of the New York State Insurance Department.

Re: Proposed Direct-Mail Campaign

Question Presented:

May a New York licensed insurance broker advertise its services to small business group health insurance prospects by utilizing a direct-mail marketing campaign that offers a free customized report that illustrates various methods to lower the health insurance costs of such businesses?

Conclusion:

Yes. Under the presented facts, the broker may offer the free customized report in its marketing campaign to various small business prospects if the broker does not require any prospect to purchase insurance, receive an insurance quote, or fulfill any other condition to receive the report (i.e., other than providing the broker with the data necessary to generate the report for the prospect).

Facts:

A New York licensed insurance broker plans to advertise its services to small business group health insurance prospects by utilizing a direct-mail marketing campaign that offers a "free customized report detailing all your cost cutting options in an easy to read and understand format." The prospects will provide the broker with the information (e.g., employee census data and current health insurance coverage) necessary to generate the customized report, which will provide the prospects with various options and strategies to reduce their health insurance costs.

The broker will not require any prospect to purchase insurance, receive an insurance quote, or fulfill any other condition to receive the report (i.e., other than providing the broker with the data necessary to generate the report for the prospect).

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 a life insurance policy, an accident and health insurance policy or an annuity contract when such valuable consideration or inducement is not specified in such insurance policy or contract.

Under the presented facts, the broker’s offer to give the free customized report in its marketing campaign does not constitute a violation of § 4224(c) because the broker will neither limit the offer to a particular small business group health insurance prospect, nor require any prospect to purchase insurance, receive an insurance quote or fulfill any other condition to receive the report (i.e., other than providing the broker with the data necessary to generate the report for the prospect).

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