The Office of General Counsel issued the following informal opinion on September 13, 2002, representing the position of the New York State Insurance Department.
Re: Use of Credit Card to Pay Insurance Premium
May an insured use a credit card to pay the premium on a long-term care insurance policy?
There is no prohibition in the New York Insurance Law against the use of a credit card to pay the premium on a long-term care insurance policy.
MedAmerica Insurance Company of New York provides for payment of premium on a long-term care policy by credit card. The credit card that the insured uses provides "perks" such as frequent flyer miles.
There is no prohibition in the New York Insurance Law against an insured charging insurance premiums on a credit card. O.G.C. Opinion 90-73 dated August 1990 (NILS).
With respect to the offering of "perks" by the credit card company, N.Y. Ins. Law § 4224(c) (McKinney 2000) provides:
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.
This section prohibits a life insurer, an accident and health insurer, a savings and insurance bank, their agents, brokers, solicitors and employees from offering inducements or rebating premium. Although the frequent flyer program could be seen as an inducement or rebate from premium, it is not being offered by any of the parties referenced in the statute. Rather, it is being offered by the credit card company. Accordingly, the credit card companys frequent flyer miles program would not come within this prohibition.
For further information you may contact Supervising Attorney Joan Seigel at the New York City Office.