The Office of General Counsel issued the following opinion on June 26, 2007, representing the position of the New York State Insurance Department.
Re: Giveaways and Raffles
1) May a life and health insurance agent hold a raffle at a home and garden trade show that is open to all attendees and where no insurance sales are permitted?
2) May such an agent distribute small keepsake items, such as pens, key chains and flashlights valued at $2 or less to all attendees at a home and garden trade show that is open to the general public?
1) Yes. A life and health insurance agent may hold a raffle that is open to the general public, so long as entry into the raffle is not tied to the sale or solicitation of insurance.
2) Yes. It is not a violation of N.Y. Ins. Law § 4224(c) (McKinney 2006), which generally proscribes inducements tied to the sale or solicitation of insurance, for an insurer or an insurance agent or broker to distribute small keepsake items to any and all attendees, provided that they are not tied to the sale or solicitation of insurance.
The inquirer reports that as a life and health insurance agent, the inquirer would like to hand out small keepsake items from a booth at a home and garden trade show at which no sales of insurance are permitted. These items (pens, keychains, flashlights) will be valued at $2 or less and will feature the insurance company’s name and logo. Additionally, the inquirer would like to hold a raffle that would be open to all attendees of the trade show. The item being raffled would be a $25 gift certificate for use at the establishment of a local merchant.
With respect to life insurance, accident and health insurance and annuities, Insurance Law § 4224(c) discusses unlawful rebates and illegal inducements. The statute provides:
No such life insurance company and no such savings and insurance bank and no officer, agent, solicitor or representative thereof and no such insurer doing in this state the business of accident and health insurance and no officer, agent, solicitor or representative thereof, and no licensed insurance broker and no employee or other representative of any such insurer, agent or broker, shall pay, allow or give, or offer to pay, allow or give, directly or indirectly, as an inducement to any person to insure, or shall give, sell or purchase, or offer to give, sell or purchase, as such inducement, or interdependent with any policy of life insurance or annuity contract or policy of accident and health insurance, any stocks, bonds or other securities, or any dividends or profits accruing or to accrue thereon, or any valuable consideration or inducement whatever not specified in such policy or contract; nor shall any person in this state knowingly receive as such inducement, any rebate of premium or policy fee or any special favor or advantage in the dividends or other benefits to accrue on any such policy or contract, or knowingly receive any paid employment or contract for services of any kind, or any valuable consideration or inducement whatever which is not specified in such policy or contract. (Emphasis added.)
Here, the inquirer states that the raffle will be open to the public, and that entrants who participate would do so without any pressure to purchase insurance. Under these circumstances, the raffle would not be considered an unlawful rebate that would violate § 4224, because it neither serves as an inducement nor is otherwise tied to the solicitation or purchase of insurance.
The inquirer’s second question asks about the lawfulness of keepsake items, such as pens and keychains, that have a value of less than $2 each. Whereas Insurance Law § 2324 (McKinney 2006), which applies to property/casualty insurance agents, prohibits rebates and inducements but permits a distribution of keepsake items with a value of $15 or less under certain conditions, Insurance Law § 4224 does not set forth any such exception.
Under the circumstances presented, life insurance agents may not distribute promotional keepsake items that serve as inducements or that are otherwise tied to the solicitation, purchase, or sale of insurance. However, if such items are freely distributed to the general public and not tied to any sale or solicitation, then there would be no violation of § 4224. Since the inquirer states that it will distribute the promotional keepsake items to the general public, and not solely to prospective customers of insurance or those interested in purchasing insurance, the inquirer will not run afoul of § 4224.
For further information one may contact Principal Attorney Paul A. Zuckerman at the New York City Office.