The Office of General Counsel issued the following informal opinion on July 13, 2005, representing the position of the New York State Insurance Department.
Re: Offering free administrative services in connection with the sale of health insurance
In connection with the sale of group health and/or life insurance policies to employers for the purpose of their employees becoming members of such group policies, may an insurance broker or agent provide at no additional charge, administrative services to such insured employers for use both by the employers and by their member employees? The proposed administrative services would include, among other features, allowing employees of a group insurance policyholder or the policyholder to directly access the insurance company over the internet to enroll and terminate coverage for the employees under the group insurance policy, and update the status of employees covered by the group insurance policy regarding marriage and number of eligible dependents receiving benefits. The insurance agent or broker would contract with an outside internet service provider that would provide the services through the website of the insurance broker or agent.
Yes, but the licensee must provide the same such insurance related services to all similarly situated insureds, or in the case of groups, to all similarly situated group members and group policyholders, and may not negotiate with prospective insureds or group policyholders to provide services that may be more or less valuable.
The inquirer is a licensed life and health insurance agent. The inquirer sells group health and life insurance to corporations for the benefit of the employees of such corporations. Currently, the inquirer manually provides the following services to such insureds: enrollment; education regarding the benefits; annual plan reviews; funding alternatives; claim problem intervention; and responding to questions regarding the policies.
The inquirer would like to enhance the services that the inquirer currently provides by contracting with an internet service provider that could be accessed by the inquirers insureds and their employees through the inquirers website. As an example of the services that would be available using this internet service, employees of a group insurance policyholder could directly access the insurance company to enroll and terminate employees under the corporation's group insurance policy, and update the status of employees covered by the corporation's group insurance policy regarding marriage and number of eligible dependents receiving benefits. The employees of the corporation's group insurance policy would also have access to programs to assist with compliance of government rules and regulations regarding health and life insurance benefits.
The inquirer would provide this service for no additional fee beyond the normal premium to all of the inquirers applicants and current insureds. The inquirer would pay the internet service provider a fee of $1.00 per employee per month for the service, and this fee would not be passed along to the inquirers insureds. The inquirer wants to know whether New York Insurance Law allows this. Further, the inquirer claims that many insurance agencies and companies currently operate in this fashion, and if it is not allowed by the New York Insurance Law, the inquirer wants to know if these other companies are in violation, or will exceptions be made for those who already do it.
N.Y. Ins. Law § 4224(c) (McKinney's Supp. 2005) states:
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.
Pursuant to N.Y. Ins. Law § 4224(c) (McKinney's Supp. 2005), neither an insurance company, its authorized agent or a broker, may provide ". . . as an inducement to any person . . . any valuable consideration or inducement whatever not specified in such policy or contract; . . . " in connection with the sale of health and/or life insurance. Therefore, neither an insurance company, its authorized agent or a broker selling health and/or life insurance may personally, or through a third party, provide any administrative services beyond those that are normally provided by an insurance company, its agent or a broker, that are not specified on the contract, to an insured because this service would constitute valuable consideration and would be an unlawful inducement in violation of N.Y. Ins. Law § 4224(c) (McKinney Supp. 2005).
In this case, an insurance agent or broker may provide the above specified proposed administrative services to the member employees of the employers who are insured, and to their insured employers. It is not controlling whether these services are performed directly by the licensee or contracted out to a third party, as here; rather, the licensee must provide the same such insurance related services to all similarly situated insureds, or in the case of groups, to all similarly situated group members and group policyholders, and may not negotiate with prospective insureds or group policyholders to provide services that may be more or less valuable.
For further information one may contact, Susan Dess, Senior Attorney at the New York City Office.