The Office of General Counsel issued the following opinion on September 22, 2004, representing the position of the New York State Insurance Counsel.
Re: Licensing Requirements for Unauthorized Insurer that Performs Underwriting Services on Behalf of Authorized Insurer via Computer from Locations Outside of New York
What license, if any, is an unauthorized life insurer required to obtain in order to perform underwriting services, as specified below, on behalf of an authorized life insurer, via computer, from locations outside of New York?
No license is required to perform the services as described below.
The inquirer states that ABC Life Insurance Company ("ABC") is an unauthorized insurer and a third party underwriter ("TPU") that has entered into a business arrangement with XYZ Life Insurance Company ("XYZ"), an authorized insurer. Pursuant to the arrangement, ABC agrees to provide, on a contract basis, underwriting services to XYZ, via computer, from locations outside of New York.
Under the arrangement, XYZ, acting through its licensed insurance agents, will solicit, negotiate and sell its insurance policies to New York residents. Before issuing policies, XYZ will send the prospects applications, including medical information, to ABC via computer. ABC will then utilize XYZs underwriting criteria and guidelines to evaluate each application. After such evaluation, ABC will issue a recommendation to XYZ.
The inquirer states that ABC will not solicit, negotiate, or sell insurance to New York residents. In addition, ABC will not collect premiums, deliver policies, adjust claims or investigate claims. Further, ABC will not encourage or recommend the purchase of insurance products to New York residents and will not have any contact with New York residents or insureds.
The inquirer would like to know if ABC needs a license to perform these services.
As a preliminary matter, the inquirer referred to ABC as a third party underwriter. However, New York Insurance Law does not have a third party underwriter or third party administrator license. Instead, on a case by case basis, the Department examines the activities of a person or entity to determine whether the activities engaged in fall within any of the other licensing requirements.
Under the arrangement in question, ABC, an unauthorized insurer, will perform underwriting services from a computer network located outside of New York. It will do so on behalf of XYZ, an authorized insurer. ABC will not solicit, negotiate or sell insurance policies. These functions will be performed by XYZ, through its licensed insurance agents. XYZ will then send the prospects applications and medical information, via computer, to ABC
for evaluation and, ultimately, recommendations. In evaluating the applications and making its recommendations, ABC will use XYZs underwriting criteria.
The inquirer has assured us that, as noted above, ABC will not solicit, negotiate or sell insurance. Neither will it collect premiums, deliver policies, encourage or recommend the purchase of insurance products to New York residents. In addition, there will not be any contact with New York residents or insureds. The inquirer also states that ABC will not engage in the adjustment or investigation of claims, activities that would require licensing as an independent adjuster under N.Y. Ins. Law § 2101(g)(1), as amended by Chapter 692 of the Laws of 2003 and Chapter 385 of the Laws of 2004.
For these reasons, it does not appear that ABC would be violating N.Y. Ins. Law § 2102(a)(1), as amended by Chapter 687 of the Laws of 2003, which prohibits any person, firm, association or corporation from acting as, among other things, an insurance agent or insurance adjuster in New York without a license. Thus, ABC will not have to be licensed as an insurance agent or adjuster in New York to perform the specified underwriting services. In addition, it does not appear that ABC will be acting as an insurer and/or doing an insurance business and, accordingly, need not be licensed pursuant to N.Y. Ins. Law § 1102 (McKinney Supp. 2004).1 Further, pursuant to N.Y. Ins. Law § 2122(a)(2) (McKinney 2000), ABCs name may not appear on any documents or policies issued to New York insureds.
As a final matter, notwithstanding any prior opinions to the contrary, this opinion is controlling and is limited to the specific facts outlined herein. In addition, this opinion addresses the licensing requirements under New York Insurance Law, thus, no opinion is rendered herein regarding the licensing requirements under any other laws of this state or any other state laws.
For further information you may contact Associate Attorney D. Monica Marsh at the New York City Office.
1 However, please note that provisions of Article 15 of the Insurance Law would apply to such transactions/arrangements if done within a holding company system.