New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
ONE COMMERCE PLAZA
ALBANY, NEW YORK 12257

George E. Pataki
Governor

Howard Mills
Superintendent

The Office of General Counsel issued the following opinion on September 1, 2005 representing the position of the New York State Insurance Department.

RE: Insurance Sales on the Internet

Question Presented

May an unlicensed person, firm or association (hereinafter "nonlicensee"), acting from within New York, for a fee based upon sales, market health insurance for an unauthorized insurer on the Internet?

Conclusion

The insurance may not be offered in New York and the nonlicensee may not receive fees based upon New York sales since the insurer is not authorized in New York and, as a result, such sales would violate the Insurance Law.

A nonlicensee may maintain a passive website on which the insurance is advertised or maintain a link to the insurer’s website with certain conditions as discussed below. However, the website or the particular advertisement on the website must contain a conspicuous disclaimer stating that the insurance is not available in New York State and such insurance may not be offered or sold in New York State. The website may not include mention of the policy terms and conditions or any recommendations, endorsements or promotions; or solicitation, negotiation or selling of the insurance of the unauthorized insurer.

Whether the insurance may be offered and sold to residents of other states or other jurisdictions depends upon the laws of such jurisdictions. The Department can offer no opinion on that question.

Facts

The inquirer operates a marketing company. Through the inquirer’s company, the inquirer would like to market health insurance to travelers going overseas to Israel on the inquirer’s website. The customers may be New York residents or residents of another jurisdiction.

The inquirer has not yet designed the website, so the inquirer does not have details available as to the specific content of the site. However, the inquirer states that the inquirer would like to provide information about the available product with a link to the insurer’s website. A potential customer could click on that link and apply for the insurance through the insurer’s website. The insurer would handle all the application, approval and billing processes. The inquirer company would receive a commission based upon the insurer’s sales.

The insurer is licensed in Israel but not in New York State. Neither the inquirer nor the inquirer’s company is licensed as an insurance agent or broker.

The inquirer has asked if there are any legal issues relevant to the inquirer’s proposal of which the inquirer should be aware.

Analysis

The New York Insurance Law applies to the sale of all insurance in New York State, whether done in person or on the Internet and regardless of where the risk is located. See Opinion of General Counsel No. 04-05-21 (May 24, 2004).

N.Y. Ins. Law § 1102 (McKinney Supp. 2005) prohibits a person, firm, association, corporation or joint stock company from doing an insurance business in this state unless authorized by a license or exempted from such requirement. N.Y. Ins. Law § 1101 (McKinney Supp. 2005) defines the doing of an insurance business in this state and specifies exemptions for certain transactions engaged in by mail, none of which are applicable to the inquirer’s proposal.

Thus, since the insurer is not authorized to do an insurance business in New York, the insurance may not be offered or sold in New York. The prohibition applies to Internet transactions as well as transactions by other means.

N.Y. Ins. Law § 2102 (McKinney Supp. 2005) prohibits any person, firm, association or corporation from acting as an agent or broker without a license. An insurance agent is defined by N.Y. Ins. Law § 2101(a) (McKinney Supp. 2005) and provides, 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:

(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; (emphasis added)

An insurance broker is defined in N.Y. Ins. Law § 2101(c) (McKinney Supp. 2005), in relevant part, as follows:

(b) In this article, "insurance broker" means any person, firm, association or corporation who or which for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or selling, any insurance or annuity contract or in placing risks or taking out insurance, on behalf of an insured other than himself, herself or itself or on behalf of any licensed insurance broker . . . (emphasis added)

(7) 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; (emphasis added)

Therefore, according to the definitions of insurance agent and insurance broker, including the limited exception for advertising in certain circumstances, and N.Y. Ins. Law § 2102 (McKinney Supp. 2005), any person, firm, association or corporation engaged in the selling, soliciting or negotiating of insurance must be licensed as an insurance agent or an insurance broker. Furthermore, regardless of whether the insurance is sold to residents of other jurisdictions and/or whether the policies are to be delivered or issued for delivery in other jurisdictions, a person, firm, association or corporation acting within this state to sell, solicit or negotiate insurance without the proper license would be in violation of N.Y. Ins. Law § 2102. See Opinion of General Counsel No. 97-56 (NILS).

Since the insurer is unauthorized to do an insurance business in this State, the inquirer should also be aware of N.Y. Ins. Law §§ 2117 (McKinney Supp. 2005) and 2122 (McKinney 2000). N.Y. Ins. Law § 2117 (McKinney Supp. 2005) specifically prohibits any person, firm, association or corporation in this State from aiding the sale of insurance by an unauthorized insurer. N.Y. Ins. Law § 2122 (McKinney 2000) prohibits any insurance agent, insurance broker or other person from calling attention to an unauthorized insurer by advertisements or public announcements in this state whether via the Internet or other means.

Department Circular Letter No. 5 (2001) provides guidance on the application of the Insurance Law, including the aforementioned sections of the Insurance Law, to passive advertisements, referrals and solicitations of insurance on the Internet. A passive website does not require an insurance agent or insurance broker license. A passive website is one on which there is no solicitation, negotiation or sale of insurance and which does not contain recommendations, endorsements or promotions of the insurance. Examples of the type of link that the Department would consider to be an advertisement is one that just contains the name of the insurance company, or states "Insurance" or "Interested in Insurance? Opinion of General Counsel No. 03-02-15. See Department Circular Letter No. 5 (2001), which is available on our website at www.ins.state.ny.us, for more information.

As we stated in the Circular Letter, if a website passively advertises insurance, ". . . a non-licensee hosting such advertisements on its website may receive compensation calculated in any manner, including flat fees for such advertisements or fees that are based upon the amount of insurance business produced as a result of such advertisements." However, if the insurer is not authorized in New York, compensation may not be based on New York sales since such sales would violate the Insurance Law.

The Department also stated in the Circular Letter, in relevant part, with respect to passive advertisements of insurance offered by an unauthorized insurer that:

[i]f the insurance products or services are not being offered by a New York authorized insurer, the advertisements or the web sites upon which the advertisements appear must contain a clear and conspicuous disclaimer indicating that the advertised products or services are not available in New York State, and such products and services cannot, in fact, be made available in New York. For example, a disclaimer stating "not available in all states" would be sufficient.

Therefore, pursuant to the requirements of the New York Insurance Law, the inquirer’s website may contain only an advertisement by the insurers with no mention of specific policy terms and conditions; or recommendations, endorsements or promotions; or solicitation, negotiation or selling of the insurance of or by the unauthorized insurer. These restrictions apply, regardless of whether the insurance is sold to residents of other jurisdictions and/or whether the policies are to be delivered or issued for delivery in other jurisdictions, since the inquirer will be acting within New York.

This opinion is limited to an interpretation of the New York State Insurance Law. The Department offers no opinion regarding the inquirer’s proposal with respect to any other New York State laws or the laws of any other state, or federal or foreign jurisdiction which may be applicable to the inquirer’s proposal.

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