The Office of General Counsel issued the following informal opinion on March 17, 2000, representing the position of the New York State Insurance Department.
Advertising Charitable Contribution by Agent
Question presented:
May an insurance agent or broker make a contribution to a charity of the insureds choice for each new insurance policy written?
Conclusion:
No, the contribution would constitute an improper inducement in violation of N.Y. Ins. Law Sections 2324 and 4224 (McKinney 1985).
Facts:
An insurance agent who occasionally put advertisements in journals for charitable dinners for non-profit groups would like to state in such advertisements that: "For every new policy written, we will make a donation to the [synagogue, church] (or to any other charity of your choice)." The advertisement for health insurance, might go further and state that: "For every new health insurance policy, we will donate $25 per employee to the [synagogue, church] (or to any other charity of your choice)."
The agent would not advertise any percent of commission nor refund money to his clients.
Analysis:
With respect to property or casualty insurance, N.Y. Ins. Law Section 2324(a)(McKinney 1985) provides in relevant part:
No authorized insurer, no licensed insurance agent, no licensed insurance broker, and no employee or other representative of any such insurer, agent or broker shall make, procure or negotiate any contract of insurance other than as plainly expressed in the policy or other written contract issued or to be issued as evidence thereof, or shall directly or indirectly, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or to any employee of the insured, either as an inducement to the making of insurance or after insurance has been effected, any rebate from the premium which is specified in the policy, or any special favor or advantage in the dividends or other benefit to accrue thereon, or shall give or offer to give any valuable consideration or inducement of any kind, directly or indirectly, which is not specified in such policy or contract, other than any article of merchandise not exceeding five dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker. . . .(emphasis added).
With respect to life, accident and health insurance, the prohibition is contained in N.Y. Ins. Law Section 4224(c)(McKinney 1985), and states:
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).
According to the express language of N.Y. Ins. Law Section 2324, insurance agents and brokers are prohibited from directly or indirectly offering rebates or inducements other than an article of merchandise not exceeding $5 in value, in connection with the sale of insurance, when such rebates or inducements are not specified in the policy or contract of insurance. N. Y. Ins. Law Section 4224 prohibits an agent or broker from offering any inducement directly or indirectly.
In this instance, although the insured would receive no direct benefit inasmuch as the donations would go to charity, the very nature of the proposal would amount to a benefit (albeit indirectly) to a prospective insured to induce him to place his insurance business through your company.
The advertising of a charitable contribution as incentive for new insurance business constitutes an improper inducement in violation of N.Y. Ins. Law Sections 2324 and 4224 (McKinney 1985).
For further information you may contact Attorney Meredith S. Katz at the New York City Office.