The Office of General Counsel issued the following opinion on December 5, 2005, representing the position of the New York State Insurance Department.
RE: Mail Order Exemptions.
May an unauthorized insurer selling accident and health insurance policies transact business in New York through the mail, internet, or phone?
An unauthorized health and accident insurer may conduct transactions by mail or by e-mail, pursuant to the mail order exemptions contained in N.Y. Ins. Law § 1101(b)(2), so long as the master policy is issued outside of New York and the policy is issued to a group that falls into one of the defined groups found in N.Y. Ins. Law § 4235(c)(1). However, an unauthorized insurer may not conduct transaction by phone or through an internet web page.
The inquirer is employed by an insurance company authorized to do business in every state but New York. He sells accident and health insurance policies. The inquirer has certain contracts with employee union or groups and trade associations, where some members reside in New York. The master policies are issued and delivered outside of New York. The inquirer would like to know whether the company may transact business by phone, internet, or mail with the members residing in New York.
N.Y. Ins. Law § 1101(b) (McKinney 2000 & 2005 Supp.) provides:
Except as provided in paragraph two, three or three-a of this subsection, any of the following acts in this state, effected by mail from outside this state or otherwise, by any person, firm, association, corporation or joint-stock company shall constitute doing an insurance business in this state and shall constitute doing business in the state within the meaning of section three hundred two of the civil practice law and rules:
However, N.Y. Ins. Law § 1101(b)(2)(B) (McKinney 2000 & 2005 Supp.) provides in relevant part.
(2) Notwithstanding the foregoing, the following acts or transactions, if effected by mail from outside this state by an unauthorized foreign or alien insurer duly licensed to transact the business of insurance in and by the laws of its domicile, shall not constitute doing an insurance business in this state, but section one thousand two hundred thirteen of this chapter shall nevertheless be applicable to such insurers:
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(B) transactions with respect to group life, group annuity, group accident and health or blanket accident and health insurance (other than any transaction with respect to a group annuity contract funding individual retirement accounts or individual retirement annuities, as defined in section four hundred eight of the Internal Revenue Code, funding annuities in accordance with subdivision (b) of section four hundred three of such code or providing a plan of retirement annuities under which the payments are derived wholly from funds contributed by the persons covered):
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(II) the following subparagraphs of paragraph (1) of subsection (c) of section four thousand two hundred thirty-five of this chapter:
(aa) subparagraph (A), (B), (C) or (D);
(bb) subparagraph (E), if, with respect to those credit transactions entered into in this state, the policy fully conforms with the requirements of sections three thousand two hundred one, three thousand two hundred twenty-one and four thousand two hundred thirty-five of this chapter;
(cc) subparagraphs (F), (G) and (H).
(ii) where the master policies or contracts were lawfully issued without this state in a jurisdiction where the insurer was authorized to do an insurance business
Thus, where the master policy has been issued and delivered outside of this state, in a jurisdiction where the insurer is authorized to do business, and the insurer issues accident and health insurance policies to groups as defined in § 4235, which includes certain employee, union, and association groups, then an insurer may transact business by mail to the New York members of such groups. The Department has previously opined that e-mail communications fall within the scope of the exemption.
However, there are no exemptions for insurance business done through an internet web page or via telephone communications. Therefore, if an unauthorized insurer did business through the internet or phone it would constitute doing an insurance business in violation of § 1102 of the Insurance Law and would require that the company be licensed by the Department as an insurer in New York. The inquirer was referred to the Department Circular Letter 5 of 2001, which provides further guidance concerning solicitations by unauthorized insurers on the internet. It is available on our website at www.ins.state.ny.us.
For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.