The Office of General Counsel issued the following opinion on September 19, 2005, representing the position of the New York State Insurance Department.
Re: Non-resident Third Party Administrator
What kind of license is required of a third party administrator ("TPA") that, on behalf of an insurer that writes group accidental death and dismemberment coverage, administers direct mail, processes enrollments, issues certificates, bills and collects premiums, and pays commission?
The New York Insurance Law does not provide for the licensing of "third party administrators" as so denominated. However, depending on the activities of the TPA, it may require another license pursuant to statute.
A TPA incorporated in California holds an administrators certificate from its place of domicile. The TPA plans to conduct business in New York on behalf of an insurer that writes group accidental death and dismemberment coverage. The TPA will perform the following activities for the insurer pursuant to contract: "primarily administer direct mail, direct response accidental death and dismemberment group insurance which is marketed through financial institution account holders process the enrollments, issue certificates, bill and collect premiums, pay commission and remit to the insurer[.]"
It is not clear whether by "administering direct mail" the TPA is actually soliciting insurance. The Department would need additional information to make that determination.
It was not stated whether the insurer with whom the TPA has contracted to do business is a licensed insurer that is authorized to do an insurance business in New York. It is assumed in our response herein that the insurer is so licensed.
It is also not stated whether the TPA will also adjust claims on behalf of the insurer.
The New York Insurance Law does not provide for the licensing of "third party administrators" as so denominated. However, depending on the activities conducted, another license may be required pursuant to statute.
N.Y. Ins. Law § 2101(a) (McKinney 2005) states in pertinent part:
(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,
Insurance agents must be licensed pursuant to N.Y. Ins. Law § 2102(a)(1) (McKinney Supp. 2005), which states: "No person, firm, association or corporation shall act as an insurance producer1 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."
It was not stated whether the TPA will also adjust claims on behalf of the insurer. N.Y. Ins. Law § 2101(g) (McKinney Supp. 2005) states in pertinent part:
(g) In this article, "adjuster" means any "independent adjuster" . . .
(1) The term "independent adjuster" means any person, firm, association or corporation who, or which, for money, commission or any other thing of value, acts in this state on behalf of an insurer in the work of investigating and adjusting claims arising under insurance contracts issued by such insurer and who performs such duties required by such insurer as are incidental to such claims and also includes any person who for compensation or anything of value investigates and adjusts claims on behalf of any independent adjuster, except that such term shall not include:
* * * *
(E) any licensed agent of an authorized insurer who adjusts losses for such insurer solely under policies issued through his or its agency, provided the agent receives no compensation for such services in excess of fifty dollars per loss adjusted;
Thus, if the TPA will also adjust claims on behalf of the insurer with whom it has contracted, the TPA may be required to become licensed as an insurance adjuster pursuant to N.Y. Ins. Law § 2102(a)(1), supra, depending upon whether the exception contained in subparagraph (E) applies.
We suggest a reading of N.Y. Comp. Codes R. & Regs. tit. 11, Part 33 (Regulation 120) to determine whether the TPAs functions are those of a managing general agent, in which case Regulation 120 would also apply.
For further information you may contact Associate Attorney Sally Geisel at the New York City Office.
1 N.Y. Ins. Law § 2101(k) (McKinney Supp. 2005) states in relevant part: In this article, insurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess line broker, or any other person required to be licensed under the laws of this state to sell, solicit, or negotiate insurance.