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

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on May 24, 2005, representing the position of the New York State Insurance Department.

Re: Unlicensed Insurance Agent & Unauthorized Health Insurer

Question Presented:

Under the facts presented, may an unlicensed New York company solicit Russian nationals in New York to purchase health insurance from an unauthorized Russian health insurer if all insured risks are located in Russia?

Conclusion:

No. Notwithstanding the fact that all insured risks are located in Russia, the company may not solicit health insurance on behalf of the unauthorized health insurer in New York because such solicitation would violate N.Y. Ins. Law §§ 2101(c)(7) & 2117(a) (McKinney Supp. 2005).

Facts:

An unlicensed New York company ("Company") plans to have its unlicensed agents solicit, in New York, Russian nationals (who reside in New York and who have Russian family members living in Russia) to purchase health insurance from a Russian health insurer that is not authorized as an insurer in New York. The Company currently plans to work exclusively for the Russian insurer. Only those Russian family members who reside in Russia will receive health insurance coverage (i.e., the Company will not offer insurance coverage to persons residing in New York, or New York residents abroad); and all health services for such family members will be performed in Russia.

Lastly, the Russian insurer will pay the Company a commission for soliciting its health insurance policies; and the Company will use the commission to pay the salaries and commissions of its employees.

Analysis:

N.Y. Ins. Law § 2102(a)(1) (McKinney Supp. 2005) provides that: "[n]o 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." N.Y. Ins. Law § 2101(k) (McKinney Supp. 2005) defines an insurance producer as, inter alia, an insurance agent or insurance broker.

N.Y. Ins. Law § 2101(a) (McKinney Supp. 2005) provides the following definition of an insurance agent and the following exception, among others, to its definition of an insurance agent, whereby eliminating the requirement of an insurance agent’s license for certain specified activities:

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:

. . . .

(8) a person whose activities in this state are limited to advertising without the intent to solicit insurance in this state through communications in printed publications or other forms of electronic mass media whose distribution is not limited to residents of the state, provided that the person does not sell, solicit or negotiate insurance that would insure risks residing, located or to be performed in this state . . . .

Please note that § 2101(c) (McKinney Supp. 2005) provides the definition of an insurance broker, and that § 2101(c)(7) (McKinney Supp. 2005) excepts the same activities from § 2101(c)’s definition of an insurance broker as the above-quoted § 2101(a)(8).

Under the presented facts, the Company’s proposed activities do not appear to meet any listed § 2101(a) or (c) exception. Please note that §§ 2101(a)(8) and (c)(7) are inapplicable because the Company’s activities in New York are not limited to advertising. Therefore, the Company would need to become licensed as an insurance agent or broker in New York to perform those activities that fall within § 2101(a)’s insurance agent or 2101(c)’s insurance broker definitions.

But even if the Company were to become licensed as an insurance agent or broker, N.Y. Ins. Law § 2117 (McKinney Supp. 2005) prohibits, inter alia, any person from soliciting or in any way effectuating any insurance for an unlicensed or unauthorized insurer. § 2117(a) (McKinney Supp. 2005) provides:

(a) No person, firm, association or corporation shall in this state act as agent for any insurer or health maintenance organization which is not licensed or authorized to do an insurance or health maintenance organization business in this state, in the doing of any insurance or health maintenance organization business in this state or in soliciting, negotiating or effectuating any insurance, health maintenance organization or annuity contract or shall in this state act as insurance broker in soliciting, negotiating or in any way effectuating any insurance, health maintenance organization or annuity contract of, or in placing risks with, any such insurer or health maintenance organization, or shall in this state in any way or manner aid any such insurer or health maintenance organization in effecting any insurance, health maintenance organization or annuity contract.

§ 2117 also provides several exceptions to the general prohibition against aiding an unlicensed or unauthorized insurer, but such exceptions are not applicable here.

Therefore, notwithstanding the fact that all insured risks are located in Russia, the company may not solicit health insurance on behalf of the unauthorized health insurer in New York because such solicitation would violate N.Y. Ins. Law §§ 2102 & 2117(a).

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