The Office of General Counsel issued the following informal opinion on January 26, 2007, representing the position of the New York State Insurance Department.
Re: Discount Coupon for an Accident Prevention Course as a Rebate
Is a $20 discount coupon for an
accident prevention course issued by a property/casualty insurance broker, advertised
to both clients and the general public, and held in the insurance broker's office,
considered a rebate proscribed by the Insurance Law?
The $20 discount coupon is not considered a rebate so long as the accident prevention course is open to the public without regard to insured status, and so long as no obligation is imposed upon attendees to apply for or purchase insurance through the insurance broker or the insurance broker's agency.
The inquirer is a property/casualty insurance broker and would like to advertise a $20 discount, with the submission of the inquirer's coupon, on an accident prevention course to be held in the inquirer's office. The discount would be offered to both clients and the general public, and would be taught by members of the inquirer's staff who are licensed to teach such a class.
N.Y. Ins. Law § 2324(a) (McKinney 2006), which applies to property/casualty insurance, states in pertinent part that:
(a) No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding fifteen dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker (emphasis added).
According to the express language of § 2324(a), insurers, insurance agents, insurance brokers, and their representatives are prohibited from directly or indirectly offering rebates or inducements, other than an article of merchandise not exceeding $15 in value, in connection with the sale of property/casualty insurance, when such rebates or inducements are not specified in the insurance policy or contract.
In the circumstances that the inquirer presents, the $20 discount coupon for an accident prevention course held in the inquirer's office would not violate the Insurance Law, provided that the course is open without regard to insured status, and no obligation is imposed upon attendees to apply for or purchase insurance through the inquirer or the inquirer's agency. See OGC opinion letter dated April 26, 2001.
For further information you may contact Associate Attorney Pascale Jean-Baptiste at the New York City Office.