New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
ONE COMMERCE PLAZA
ALBANY, NEW YORK 12257

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

OGC Op. No. 09-03-07

The Office of General Counsel issued the following opinion on March 17, 2009, representing the position of the New York State Insurance Department.

Re: Recordkeeping Responsibilities for Licensed Insurance Agents

Question Presented:

Under the facts presented, do the New York Insurance Law and regulations promulgated thereunder impose any recordkeeping responsibilities on the licensed agent?

Conclusion:

No. The recordkeeping requirements set forth in the Insurance Law and regulations promulgated thereunder do not pertain to the activities in which the licensed agent proposes to engage.

Facts:

The inquirer reports that a foreign corporation proposes to employ and compensate “wholesalers” who are licensed insurance agents appointed by a New York-licensed insurer. The Delaware corporation plans to engage these agents as wholesalers to promote insurance offered by the insurer to various licensed insurance brokers located within New York State. The Delaware corporation would not interact with insureds or potential insureds. Rather, only the brokers would interact with insureds and potential insureds; write and process insurance applications; and forward the documentation directly to the insurer. The insurer would compensate the Delaware corporation based on the business secured by the brokers. The Delaware corporation will apply to the Department for an insurance agent’s license.

The inquirer asks whether the arrangement described comports with the Insurance Law and regulations promulgated thereunder.

Analysis:

Neither the Insurance Law nor regulations promulgated thereunder require an insurance agent or broker to retain copies of insurance policies or applications, and related correspondence, unless the agent or broker maintains records on behalf of the insurer. In such a case, the agent or broker must maintain the records in accordance with the Insurance Department’s record retention regulation, 11 NYCRR § 243.2(d) (Regulation 106), which reads as follows:

An insurer shall require, by contract or other means, that a person authorized to act on its behalf in connection with the doing of an insurance business, including a managing general agent, an administrator, or any other person or entity, shall comply with the provisions of this Part in maintaining records that the insurer would otherwise be required to maintain. Notwithstanding the above, the insurer shall be responsible if the person or entity fails to maintain the records in the required manner.

The only record retention requirements specifically applicable to insurance agents are set forth in Insurance Law § 2119 which relates to consulting agreements, and N.Y. Comp. Codes R. & Regs. tit. 11, § 20.4 of Regulation 29, which pertains to the maintenance of books and records of a premium account. See Opinion of Office of General Counsel (“OGC Opinion) No. 06-04-03 (April 3, 2006).

Insurance Law § 2119 (a)(1) and (a)(2) provide as follows:

(a)(1) No person licensed as an insurance agent, broker or consultant may receive any fee, commission or thing of value for examining appraising, reviewing or evaluating any insurance policy, bond, annuity or pension or profit-sharing contract, plan or program or for making recommendations or giving advice with regard to any of the above, unless such compensation is based upon a written memorandum signed by the party to be charged and specifying or clearly defining the amount or extent of such compensation.

(2) A copy of every such memorandum or contract shall be retained by the licensee for not less than three years after such services have been fully performed.

With respect to fiduciary funds received by an insurance agent or broker and held pursuant to 11 NYCRR § 20.4, the agent or broker using a premium account must maintain a book or other permanent account record that shows all receipts and disbursements of money, and that sets forth the details as described therein. 11 NYCRR § 20.4(c)(2) requires that a record to be kept by the agent or broker pursuant to § 20.4 “shall be preserved for at least the three-year preceding the most recent fiscal year-end of the licensee.”

After the applicable record retention period has elapsed, neither the Insurance Law nor the regulations promulgated thereunder impose a duty on an agent or broker to continue maintaining those records. Nevertheless, the Department recommends that an agent make prudent business decisions regarding the destruction of its insurance records. See OGC Opinion No. 07-09-07 (September 11, 2007). As stated in OGC Opinion No. 07-05-13 (May 23, 2007): “[T]he Department recommends that licensees retain the records for a period of time sufficient to satisfy applicable statutes of limitations and, where an action or claim is pending, for such period of time until the matter is resolved.”

For further information you may contact Associate Counsel Bradley F. Rice at the Albany Office.