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 informal opinion on November 15, 2005, representing the position of the New York State Insurance Department.

Re: On-Line Insurance Referral Service

Question Presented

May a national consulting firm make available a website that allows prospective insureds who need vehicle liability insurance to obtain federal and state trucking licenses to post their names and contact information on a website in order to obtain referrals to insurance companies, agents and brokers some of whom may not be licensed in New York State?

Conclusion

The national consulting firm may only allow New York licensed agents and brokers to access the website pursuant to N.Y. Ins. Law § 2115 (McKinney’s Supp. 2005).

Facts

The inquirer is a self-described "Transportation Practitioner" licensed by the United States Department of Transportation, (hereinafter DOT). According to the inquirer, the application process for a federal and state trucking license requires a motor carrier to secure vehicle liability and cargo insurance. The inquirer operate a national consulting firm, that assists truck drivers from different states across the country to launch their own trucking business by guiding the truckers through the federal and state trucking license application process.

The inquirer is not licensed in New York State, or in any other state, to sell or procure insurance of any kind, including liability and cargo insurance, which is required for truck drivers to obtain trucking licenses. In the inquirer’s inquiry, and on the inquirer’s website, the inquirer gives the impression that referrals are only made to licensed insurance brokers; however, when a representative of the Department spoke with the inquirer on the telephone, the inquirer repeatedly stated that insurers currently use the inquirer’s "Insurance Quote Board," even though the inquirer’s website only appears to be addressed to insurance brokers. The inquirer explained the mechanics of the "Insurance Quote Board" on which the truck licensee applicants notify insurers that they are seeking to buy insurance. The inquirer stated that the truck licensee applicants would complete an "on-line" computerized form that requires them to enter information that would be posted on a screen containing the following categories: "Date Posted; Name of Prospective Client; State; Number of Trucks and Contact Information." This screen would be accessible to anyone on the website.

In order to obtain information about how to contact truck licensee applicants that posted their names on the electronic "Insurance Quote Board" at the website, the insurer, insurance agent or broker would pay a flat rate membership fee that would be the same for each insurance agent, broker or insurer who would then complete a registration form that would require submission to the inquirer of a copy of a valid license to sell insurance. Based on the inquirer’s current model, insurance agents, brokers and insurers would self-police as to whether they are selling insurance to residents of states in which such insurance agent, broker or insurer is licensed. The inquirer wants to know whether the inquirer can establish in New York State an "Insurance Quote Board" as it is described above.

Analysis

N.Y. Ins. Law § 1102(a) (McKinney’s Supp. 2005) states, in relevant part that "[n]o person, firm, association, corporation or joint-stock company shall do an insurance business in this state unless authorized by a license in force pursuant to the provisions of this chapter, . . ." N.Y. Ins. Law § 2101 (McKinney’s Supp. 2005) is the definition section of Article 21, and subsection (a) defines, in relevant part, an insurance agent as ". . . any authorized or acknowledged agent of an insurer, . . . who acts as such in the solicitation of, negotiation for, or sale of, an insurance, . . . contract , . . ." N.Y. Ins. Law § 2101(c) (McKinney’s Supp. 2005) defines, in relevant part, an insurance broker as:

. . . 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 . . .

"Solicitation" is defined in N.Y. Ins. Law § 2101(o) (McKinney’s Supp. 2005) in relevant part as " . . . attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular licensed insurer, . . . "N.Y. Ins. Law § 2102(a)(1) (McKinney’s Supp. 2005) states, in relevant part, that "[n]o person, firm, association or corporation shall act as an insurance producer . . . 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 § 2102(b)(1) (McKinney’s Supp. 2005) states, in relevant part, that "[u]nless licensed as an insurance agent; insurance broker . . . no person, firm, association or corporation shall in this state identify or hold himself or itself out to be an insurance advisor, insurance consultant or insurance counselor."

If the website would be used only to make referrals of New York prospective insureds to New York licensed insurance agents and/or brokers, and there would be no discussion of specific insurance policy terms and conditions and the compensation for each referral would not be based upon the purchase of insurance, the proposal would constitute a permissible referral pursuant to N.Y. Ins. Law § 2115 (McKinney’s Supp. 2005) and N.Y. Ins. Law § 2116 (McKinney’s Supp. 2005), and the national consulting firm would not need to be licensed as an insurance agent or broker pursuant to N.Y. Ins. Law § 2102(a)(1) (McKinney’s Supp. 2005). But, if a referral would be made through the inquirer’s website to an unlicensed insurance agent and/or broker, the inquirer would be in violation of N.Y. Ins. Law § 2102(a)(1) (McKinney’s Supp. 2005).

Currently, the inquirer’s website only addresses insurance brokers; however, during a telephone discussion between a representative of the Department and the inquirer, the inquirer mentioned that insurance companies might also use this website. Referrals may only be made to licensed insurance agents or brokers and not to insurance companies, even if the referral is to a New York authorized insurance company, pursuant to N.Y. Ins. Law § 2115 (McKinney’s Supp. 2005) and N.Y. Ins. Law § 2116 (McKinney’s Supp. 2005). A referral to an insurer would constitute a violation of N.Y. Ins. Law § 2102 (McKinney’s Supp. 2005).

Additionally, there are no safeguards against aiding unauthorized insurers. N.Y. Ins. Law § 2117 (McKinney’s Supp. 2005), which is entitled "[a]cting for or aiding unlicensed or unauthorized insurers . . . ". N.Y. Ins. Law § 2117 (McKinney’s Supp. 2005) states in the relevant part:

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

The potential for a violation of N.Y. Ins. Law § 2117 (McKinney’s Supp. 2005) exists because insurance companies that are not authorized in New York would have access to potential New York insureds. Therefore, through the inquirer’s website, the inquirer could be aiding unauthorized or unlicensed insurers to conduct an insurance business in New York. In order to avoid a violation of N.Y. Ins. Law § 2117 (McKinney’s Supp. 2005) and N.Y. Ins. Law § 2102 (McKinney’s Supp. 2005), would need to build into the system a way to ensure that no insurance company, even if it is a New York authorized insurance company, or anyone other than a New York licensed insurance agent or broker, could access the referral program.

For further information one may contact Senior Attorney Susan A. Dess at the New York City Office.