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 opinion on August 3, 2006, representing the position of the New York State Insurance Department.

Re: Insurance Referrals

Question Presented

May a licensed insurance agent pay referral fees to non-licensees, including certified public accountants ("CPA") or attorneys, in New York State?

Conclusion

A non-licensee may make a referral to a licensed insurance agent or broker if there is no discussion of specific insurance policy terms and conditions with the prospective insured and compensation for the referral is not based upon purchase of insurance by the prospective insured.

Facts

The inquirer states that he is the president of ("ABC"), which is a national worksite marketing enrollment firm. The inquirer’s entity sells voluntary benefits to employees on a payroll deduction basis. The inquirer states that he is licensed as an insurance agent in all 50 states including New York State. In many of these states the inquirer is referred to many prospective clients by accountants ("CPA") or attorneys. He inquires as to whether he may pay referral fees to non-licensees, including certified public accountants ("CPA") or attorneys, in New York State. The inquirer also states that the referrer would not be explaining or discussing the insurance coverage.

Analysis

N.Y. Ins. Law § 2115(a)(1) (McKinney Supp. 2006) states in pertinent part regarding a property/casualty insurance agent:

For the purposes of this section, "acting as insurance agent" shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.

N.Y. Ins. Law § 2114(a)(4) (McKinney Supp. 2006) states in pertinent part regarding insurance agents and brokers licensed to sell life, annuity, accident and health insurance:

Services of the kind specified in this subsection shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.

N.Y. Ins. Law § 2116 (McKinney Supp. 2006) applicable to insurance brokers states in pertinent part:

For the purposes of this section, "acting as insurance broker" shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.

N.Y. Ins. Law §§ 2114, 2115 and 2116 (McKinney Supp. 2006) prohibit an insurer or any agent of an insurer from compensating an unlicensed person or entity for acting as an insurance agent or insurance broker. However an insurer, its agents or an insurance broker may compensate an unlicensed person for a referral to the agent or broker provided that there is no discussion by the unlicensed person of specific insurance policy terms and conditions, and the compensation to the non-licensee for the referral is not based upon the purchase of insurance by the referred person. If there is a discussion of specific policy terms and conditions or if compensation is based upon sale, then a non-licensee would be acting as an insurance agent or broker without a license in violation of § 2102(a)(1) (McKinney 2006).

The rules applicable to referrals by CPA's or attorneys are no different than for other non-licensee referrers. The inquirer should also be aware of OGC Opinion Number 03-03-11 (March 17, 2003), which concluded that where a CPA's activities included attendance at meetings with a licensed insurance agent and the prospective insured in which insurance issues would be discussed, the CPA's activities appeared to go beyond merely making referrals. OGC Opinion Number 02-04-33 (April 29, 2002) also addressed referrals by an attorney.

The Department offers no opinion about what work arrangements are permissible under any laws or guidelines applicable to CPAs or attorneys.

For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.