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

David A. Paterson
Governor

James J. Wrynn
Acting Superintendent

OGC Op. No. 10-01-08

The Office of General Counsel issued the following opinion on January 26, 2010 representing the position of the New York State Insurance Department.

Re: Insurance Producers Receiving Compensation for Hyperlink “Clicks”

Question Presented:

May a licensed insurance agent or broker (“producer”) receive compensation from a provider of an online accident prevention course (taking such a course qualifies insureds for a insurance premium discount) for displaying the course provider’s logo on the producer’s website as a link to the course provider’s website, where the compensation is based on the number of persons who visit the course provider’s website having accessed it from the link on the producer’s website?

Conclusion:

Yes, a licensed insurance producer may receive compensation from a course provider for displaying the course provider’s logo on the producer’s website as a link to the course provider’s website, where the amount of the compensation is based on the number of persons who visit the course provider’s website having accessed it from the link on the producer’s website. However, the producer should fully disclose the arrangement to the insured or potential insured.

Facts:

The inquirer writes on behalf of several insurance producers, who have received a business proposition from a provider of an online driver safety course approved by the New York State Department of Motor Vehicles. The provider proposes that a producer agree to place the course provider’s logo as a hyperlink on the producer’s website so that when a visitor “clicks” on it, the visitor is directed to the course provider’s website. In return, the course provider would pay the producer an agreed-upon amount for each person who visits the provider’s website by clicking on the logo on the producer’s website. The compensation to the producer will not be based upon an insured purchasing an online driver safety course. The inquirer states that the producers are “aware that some referral payments to insurance producers are illegal (i.e., N.Y. Insurance Law § 322, which prohibits referral payments from auto repair shops to producers).” The producers ask whether this proposed arrangement is similarly proscribed by the Insurance Law or regulations promulgated thereunder.

Analysis:

As the inquirer notes, referral payment arrangements under which an insurance producer receives compensation for referring its clients to a glass repair provider are proscribed by N.Y. Ins. Law § 322 (McKinney 2006). See Opinion of Office of General Counsel (“OGC”) No. 06-12-17 (December 22, 2006). Insurance Law § 322 provides that “no licensed insurance agent, licensed insurance broker, licensed adjuster, authorized insurer or representative of such insurer shall directly or indirectly request, procure or accept any payment from a motor vehicle repairer for referring any motor vehicle repair business to such repairer.”

Nothing in Insurance Law § 322 proscribes the arrangement about which the inquirer asks. Nor is there any other provision of the Insurance law or the regulations promulgated thereunder that proscribes the arrangement.

Nevertheless, the producer should inform insureds or potential insureds on the website that the producer will receive compensation from the course provider each time a visitor to the website clicks on the link. The producer may also wish to include language on its website that informs all visitors that the purchase of an online driver safety course from the course provider whose link appears on the website is entirely optional on the visitor’s part. In addition, the producer should take reasonable steps to ensure that neither the link appearing on its website, nor other information on the producer’s website, contains incorrect or misleading information about the driver safety course. To do otherwise could lead the Superintendent of Insurance to conclude that a producer that fails to adequately disclose any such arrangement to an insured or potential insured is “untrustworthy” within the meaning of Insurance Law § 2110(a).

This opinion is limited to an interpretation of the New York Insurance Law, and does not address whether the proposed arrangement may run afoul of any other law.

For further information you may contact Senior Attorney Brenda M. Gibbs at the Albany Office.