New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

David A. Paterson
Governor

James J. Wrynn
Superintendent

OGC Op. No. 09-12-05

The Office of General Counsel issued the following opinion on December 28, 2009, representing the position of the New York State Insurance Department.

Re: Educational Lectures

Questions Presented:

1. Would the insurance agent’s proposed educational seminars on retirement planning constitute insurance consulting services within the meaning of N.Y. Ins. Law § 2102(b)(3) (McKinney 2006)?

2. If the proposed educational seminars do not constitute consulting, then would the agent’s offset of a fee charged to a person attending the seminar against compensation paid for insurance subsequently purchased by that person violate Insurance Law § 4224(c)?

Conclusions:

1. No. Presenting an educational seminar on retirement planning does not come within the definition of consulting provided in Insurance Law § 2102(b)(3), which includes examining, appraising, reviewing or evaluating any policy, or making recommendations or giving advice on any policy.

2. Yes. The agent’s fee offset for a person attending the seminar against compensation paid for insurance subsequently purchased by that person would violate Insurance Law § 4224(c).

Facts:

The inquirer reports that the inquirer works as the compliance officer for a New York licensed insurance agency that markets group health, dental, life, disability, and Medicare supplement insurance. The inquirer’s firm would like to present educational seminars on retirement planning to potential insureds. At these seminars, the agents will focus on the universal qualities of generic insurance products, rather than examining, appraising, reviewing or evaluating any particular policy, or making recommendations or giving advice on any particular policy sold by the inquirer’s agency. For this service, the inquirer’s firm will charge the potential insureds a fee. The inquirer proposes to offset the fee against commissions earned if the potential insured subsequently purchases insurance from the inquirer’s agency. The inquirer asks whether this arrangement conforms to Insurance Law § 2119(a)(1), and if the inquirer’s firm may include this arrangement in a Service Fee Engagement Memorandum.

Analysis:

I. Consulting services.

The inquirer’s inquiry specifically asks about Insurance Law § 2119(a) and (b), which requires any licensed agent, broker or consultant who examines, appraises, reviews or evaluates any insurance policy, bond or contract, for a fee or other thing of value, to reduce to writing the agreement on which the compensation is based. Insurance Law § 2119(b)(2) permits an insurance agent, broker or consultant to offset compensation paid for such services against any compensation paid to such consultant as agent or broker as a result of the sale of insurance connected to such consulting services. However, Insurance Law § 2119(a) and (b) is not relevant to the situation about which the inquirer inquires, because the inquirer’s agency is not providing a consulting service within the meaning of Insurance Law § 2102(b)(3).

That statute reads in relevant part as follows:

(b)(1) Unless licensed as an insurance agent, insurance broker or insurance consultant, no person, firm, association or corporation shall in this state identify or hold himself or itself out to be an insurance advisor, insurance consultant or insurance counselor.

(2) No person, firm, association or corporation shall use any other designation or title which is likely to mislead the public or shall hold himself or itself out in any manner as having particular insurance qualifications other than those for which he may be otherwise licensed or otherwise qualified.

(3) Unless licensed as an insurance agent, insurance broker or insurance consultant with respect to the relevant kinds of insurance, no person, firm, association or corporation shall receive any money, fee, commission or thing of value for examining, appraising, reviewing or evaluating any insurance policy, annuity or pension contract, plan or program or shall make recommendations or give advice with regard to any of the above.

The generic educational seminars that the inquirer describes does not constitute examining, appraising, reviewing or evaluating any particular policy, or making recommendations or giving advice on any particular policy or contract, that would require licensing as an insurance agent, broker or consultant or an agreement entered into pursuant to Insurance Law § 2119(a). Therefore, although the inquirer’s agency may charge a fee to someone who attends this seminar, it may not then waive any amount of the seminar fee, and reduce the premium amount of any insurance subsequently purchased from the inquirer’s firm by the amount of the waived seminar fee, because that would constitute a rebate in violation of Insurance Law § 4224(c). That statute is discussed below.

II. Rebating and inducements.

Insurance Law § 4224(c) applies to life, accident and health insurance, and it prohibits rebates in connection with the sale of such insurance. The statute reads as follows:

Except as permitted by section three thousand two hundred thirty-nine of this chapter, 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.

Further, Insurance Law § 2602(a) specifically prohibits any person from receiving rebates on life insurance policies:

No person shall knowingly receive any rebate or allowance or deduction from any premium, or any valuable thing, special favor or advantage whatever not specified in the policy, as an inducement to take any policy of life insurance.

Insurance Law § 4224(c) clearly prohibits offering an insured an inducement or any valuable consideration that the insurance contract does not provide. Because the proposed educational seminars do not constitute a consulting service, then any offset of the fee would violate Insurance Law § 4224(c).

For further information, one may contact Senior Attorney Susan A. Dess at the New York City office.