New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following informal opinion on February 23, 2005 representing the position of the New York State Insurance Department.

RE: Internet Sales by Insurers

Question Presented:

Does an employee of an insurance company who processes applications received via the Internet, including underwriting and issuing the policy, require a license under the Insurance Law?

Conclusion:

No. An employee of an insurance company who processes insurance applications received via the Internet, including underwriting and issuing the policy, does not require a license under the Insurance Law provided that the employee does not solicit or accept applications while outside the insurer’s office and does not receive any compensation directly that is dependent on the amount of business done.

Facts:

An insurance company wishes to sell insurance via the Internet. Employees of the insurance company would process the application, including underwriting and issuing the policy, but no solicitation would take place between the company’s employee and the consumer.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney Supp. 2005) provides as follows:

(a)(1) No person, firm, association or corporation shall act as an insurance producer 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.

An insurance producer is defined in N.Y. Ins. Law § 2101(k) (McKinney Supp. 2005) as "an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance."

N.Y. Ins. Law § 2101(a) (McKinney Supp. 2005), defines an insurance agent, in relevant part, as follows:

(a) In this article, "insurance agent" means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to article forty-four of the public health law, and any sub-agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker, except that such term shall not include:

(1) any regular salaried officer or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance agent, who does not solicit or accept from the public, outside of an office of such insurer, health maintenance organization or agent, applications or orders for any such contract, if such officer or employee does not receive a commission or other compensation for his services which commission or other compensation is directly dependent upon the amount of business done; (emphasis added)

Therefore, the employees may engage in the specified activities, including underwriting and issuing such policies, provided they do not solicit or accept applications outside an office of the insurer and they do not receive any compensation that is directly dependent upon the amount of business done.

Under the facts presented, the persons who will process insurance applications received through the insurer’s website, are employees of the insurer. Since they would be acting on behalf of the insurer and not on behalf of the insureds or another broker, a broker’s license under these particular facts is not necessary.

In addition, N.Y. Ins. Law § 2102(b)(4)(C) (McKinney Supp. 2005) which prohibits a person, firm, association or corporation from holding himself, herself or itself out as an insurance advisor, insurance consultant or insurance corporation unless licensed as an insurance agent, insurance broker or insurance consultant, also exempts the following persons from the licensing requirements:

(C) regular salaried officers or employees of an insurer who devote substantially all of their services to activities other than the rendering of consulting services to the insuring public while acting in their capacity as such in discharging the duties of their employment.

Finally, Department Circular Letter No. 5 (2001) and Department Circular Letter No. 33 (1999) provide additional guidance on doing an insurance business on the Internet. Both are available on the Department’s website.

For further information you may contact Assistant Counsel Brenda M. Gibbs at the Albany Office.