The Office of General Counsel issued the following opinion on January 28, 2008, representing the position of the New York State Insurance Department.
RE: Licensed Agent Opening Insurance Agency
1. Does an incorporated insurance agency established by a licensed insurance agent require a separate license to transact business?
2. Is Insurance Department approval required of the name of an incorporated insurance agency?
3. Does an insurance agency require a bond?
1. Yes. An incorporated insurance agency established by a licensed insurance agent requires a separate license to transact business pursuant to Article 21 of the N.Y. Insurance Law (McKinney 2006).
2. Yes. The Insurance Department must approve the name of an incorporated insurance agency pursuant to Insurance Law § 2102(f) and N.Y. Business Corporation Law § 301(B) (McKinney 2003).
3. No. Neither the Insurance Law nor the regulations promulgated thereunder require either an insurance agent or an insurance agency to be bonded.
It is reported that a licensed mortgage broker, and a licensed Life & Health and Property & Casualty insurance agent intends to sell insurance at the same location as the brokerage, but as an incorporated agency named “XYZ Insurance Agency, Inc.”
Neither the Insurance Law nor the regulations promulgated thereunder require Insurance Department authorization of insurance agency incorporation. However, the Department does authorize the name and licensing of corporate insurance agencies.
Insurance Law § 2102(a)(1) is relevant to the inquiry. It provides that “[n]o person, firm, association or corporation shall act as an insurance producer1 or insurance adjuster 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.”
Insurance Law § 2103 sets forth agent licensing requirements, which includes persons, firms and corporations. It states, in pertinent part, as follows:
(a) The superintendent may issue a license to any person, firm or corporation who or which has complied with the requirements of this chapter, authorizing such licensee to act as an insurance agent with respect to the lines of authority for life insurance, variable life and variable annuity products, or accident and health insurance and sickness or any other line of authority deemed to be similar by the superintendent, including for this purpose, health maintenance organization contracts, legal services insurance, or with respect to any combination of the above, as specified in such license, on behalf of any insurer, fraternal benefit society or health maintenance organization, which is authorized to do such kind of kinds of insurance or health maintenance organization business in this state.
(b) The superintendent may issue a license to any person, firm, association or corporation who or which has complied with the requirements of this chapter, authorizing the licensee to act as an agent of any authorized insurer, other than an insurer specified in subdivision (b) of section two thousand one hundred fifteen of this article, with respect to the lines of authority for accident and health or sickness, property, casualty, personal lines or any other line of authority granted other than life, and variable life and variable annuity products, which such insurer is authorized to do in this state.
(c) Any such license issued to a firm or association shall authorize only the members thereof, named in such license as sub-licensees, to act individually as agents thereunder, and any such license issued to a corporation shall authorize only the officers and directors thereof, named in such license as sub-licensees, to act individually as agents thereunder. Every sub-licensee, acting as insurance agent pursuant to such license shall be authorized so to act only in the name of the licensee.
An applicant seeking a corporate license must submit a written application to the Insurance Department’s Licensing Bureau to obtain a license to transact business under the incorporated agency name.2 Pursuant to Insurance Law § 2103(d) and § 2104(c)(1), any licensee that is not a natural person must have one or more sublicensees, all of whom must be natural persons of at least eighteen years of age. For a corporation, the sublicense must be an officer or director. See Office of General Counsel (“O.G.C.”) Opinion No. 03-04-26 (April 17, 2003). Presumably, the inquirer would appoint himself as a sublicensee of the proposed corporation. The inquirer may maintain his individual license as well but, if all future business transactions will be in the agency’s name, and on its behalf, the inquirer need not maintain a separate individual license.
An individual or other entity must use only the licensed name when transacting business. If insurance business is conducted by a corporation, it must use only the corporate name that appears on the license; otherwise, that entity would be conducting an insurance business without a license in violation of Insurance Law § 2102(a). That could provide a basis for the Superintendent of Insurance to revoke such license pursuant to Insurance Law §§ 2110(a)(3) and (4). See O.G.C. Opinion No. 20-40-31 (April 3, 2002).3
In response to the second query, Insurance Law § 2102(f) provides that “[e]very licensee shall notify the superintendent upon changing his, her or its legal name. Except for an individual licensee’s own legal name, no licensee shall use any name, in conducting a business regulated by the article that has not been previously approved by the superintendent.”
Pursuant to Business Corporation Law § 301(B), the name of a corporation may not include the term “insurance” without approval from the Superintendent of Insurance attached to the certificate of incorporation. The proposed name in the fact pattern, “XYZ Insurance Agency, Inc.” requires such approval.
Therefore, the Department’s Licensing Bureau must approve the name of a prospective incorporated insurance agency, prior to the incorporation. Correspondence to the Licensing Bureau should be addressed to: Licensing Bureau, New York State Insurance Department, One Commerce Plaza, Albany, NY 12257. If the proposed agency name is not similar to an already licensed name and is not confusing or misleading in any manner, the Licensing Bureau may approve the name. See O.G.C. Opinion No. 05-06-22 (June 21, 2005). Once the applicant receives approval of the prospective corporate name, the applicant may incorporate the agency pursuant to Business Corporation Law Article 4. Procedurally, the name approval and incorporation should take place prior to the application for the agency’s license.
In response to the third query, neither the Insurance Law nor the regulations promulgated thereunder require either an insurance agent or agency to be bonded.4
For further information you may contact Associate Counsel Alexander Tisch at the New York City Office.
1 Pursuant to Insurance Law § 2101(k), an “insurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the laws of this state to sell, solicit or negotiate insurance.”
2 Insurance Law § 2103(e) states that “[b]efore any original insurance agent’s license is issued there shall be on file in the office of the superintendent an application by the prospective licensee in such form or forms and supplements, and containing information the superintendent prescribes and for each business entity, the sub-licensee or sub-licensees named in the application shall be designated responsible for the business entity’s compliance with the insurance laws, rules and regulations of this state.”
3 An unincorporated licensee may use a trade name with either a new license or by amending the name on an existing license. See O.G.C. Opinion No. 05-06-22 (June 21, 2005).
4 Insurance Law § 2108(l)(1) requires a bond for adjuster license applicants. Insurance Law § 6802(j) requires a qualifying bond for bail bond license applicants.