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 informal opinion on October 15, 2004, representing the position of the New York State Insurance Department.

Re: Non-Resident Broker Placing of Brochures at Automobile Dealerships in New York

Question Presented:

May a New York licensed non-resident broker pay an auto dealership group to place the broker’s brochures that solicit automobile insurance via a toll-free telephone number in its dealerships, refer its customers to the brochures, and assist customers by allowing them access to dealership telephones to speak with a broker and fax machines to fax documents between the customer and broker?

Conclusion:

Yes. A New York licensed non-resident broker may pay an auto dealership group to place the broker’s brochures that solicit automobile insurance via a toll-free telephone number in its dealerships, refer its customers to the brochures, and assist customers by allowing them access to dealership telephones to speak with a broker and fax machines to fax documents between the customer and broker, provided that the auto dealer does not discuss specific insurance policy terms and conditions, and where the compensation for the referral is not dependent upon the sale of an insurance policy.

Facts:

A California insurance broker, that is a New York licensed non-resident broker, wishes to enter into an agreement with a large auto dealership group with a number of dealerships in New York. The broker would pay the auto dealer to place the broker’s brochures in their dealerships. The brochures solicit the immediate sale of automobile insurance via a toll-free telephone number that dealer customers would call to purchase automobile insurance before leaving the dealership. The brochures would be placed in the automobile dealer’s finance office and on tables throughout the dealership facilities. If customers advise dealership staff that they need automobile insurance, dealership staff would refer customers to the closest brochures. Customers would call the toll free telephone number on the brochure from a telephone in the automobile dealership’s finance office or from a salesman’s office. The broker would negotiate the sale of automobile insurance over the telephone under its New York license and place business only through New York authorized insurance companies. The broker would then fax its applications for insurance to the dealership using the dealerships fax for the customers’ signature and for confirmation of insurance coverage to the dealership.

The broker would receive payment by credit card or by customer check mailed to the broker in a pre-paid business reply envelope that is part of the brochure. No dealership staff would be involved with the sale of insurance other than the possible referral of customers to the brochures and providing assistance with the use of telephones and fax machines. Dealership staff would not receive or handle any customer funds, or be paid any commissions from the sale of insurance.

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 § 2116 (McKinney Supp. 2004) states:

No insurer authorized to do business in this state, and no officer, agent or other representative thereof, shall pay any money or give any other thing of value to any person, firm, association or corporation for or because of his or its acting in this state as an insurance broker, unless such person, firm, association or corporation is authorized so to act by virtue of a license issued or renewed pursuant to the provisions of section two thousand one hundred four of this article. For the purposes of this section, "acting as insurance broker" 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 person1.

Based upon the facts provided, the placement of insurance broker brochures in an auto dealership by the auto dealer and referral by dealership staff to the brochures would be considered to be a referral by the auto dealer to the insurance broker. We assume, for the purposes of this opinion letter, that the auto dealer is not licensed as an agent or broker.

As stated in N.Y. Ins. Law § 2116 (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 insurance. This law is due to expire on September 10, 2007.

Accordingly, a California insurance broker that is a New York licensed non-resident broker may pay an auto dealership group to place the broker’s brochures in its dealerships, refer its customers to the brochures, and assist customers by allowing them access to dealership telephones to speak with a broker and fax machines to fax documents between the customer and broker, provided that the auto dealer does not discuss specific insurance policy terms and conditions, and where the compensation for the referral is not dependent upon the sale of an insurance policy.

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


1 N.Y. Ins. Law § 2115 (McKinney Supp. 2004) applies to property/casualty insurance agents. N.Y. Ins. Law § 2114 (McKinney Supp. 2004) applies to life, accident and health insurance agents.