The Office of General Counsel issued the following opinion on February 6, 2003, representing the position of the New York State Insurance Department.
Re: Insurance Brokerage Arrangement.
Question Presented:
May a licensed life and accident and health insurance producer compensate a non-licensee telemarketer for soliciting prospective insureds and setting up appointments for the licensee?
Conclusion:
No. A licensed life, accident and health insurance producer may not compensate a non-licensee for soliciting prospective insureds and setting up appointments for the licensee.
Facts:
Mr. A stated that he would like guidance for non-licensee telemarketers representing a life and accident and health insurance producer. He further stated that it is his understanding that the telemarketer may be paid only by the number of calls made and not based upon any sales. The telemarketer would speak generally regarding the agency and would set up appointments for the licensed agents, but would not give advice or compare plans. It is unclear from the inquiry whether the telemarketers would be acting on behalf of licensed agents or brokers; however, the analysis would be the same.
Analysis:
N.Y. Ins. Law § 2114 (McKinney Supp. 2003) applies to life, accident and health insurance agents and brokers and provides as follows:
(a)(1) No insurer or fraternal benefit society doing business in this state shall pay any commission or other compensation to any person, firm or corporation, for any services in obtaining in this state any new contract of life insurance or any new annuity contract, except to a licensed life insurance agent of such insurer or of such society or to an insurance broker licensed under subparagraph (A) of paragraph one of subsection (b) of section two thousand one hundred four of this article, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.
(2) No agent or other representative of any such life insurer or fraternal benefit society shall pay any commission or other compensation to any person for any services of the kind specified in paragraph one hereof, except to a licensed life insurance agent of such insurer or of such society as the case may be.
(3) No insurer, fraternal benefit society or health maintenance organization doing business in this state and no agent or other representative thereof shall pay any commission or other compensation to any person, firm, association or corporation for services in soliciting or procuring in this state any new contract of accident or health insurance or any new health maintenance organization contract, except to a licensed accident and health insurance agent of such insurer, such society or health maintenance organization, or to a licensed insurance broker of this state, and except to a person described in paragraph two or three of subsection (a) of section two thousand one hundred one of this article.
(4) Services of the kind specified in this subsection shall not include the referral of a person to a licensed insurance agent or broker that does not include a discussion of specific insurance policy terms and conditions and where the compensation for referral is not based upon the purchase of insurance by such person.
N.Y. Ins. Law § 2116 (McKinney Supp. 2003) in regard to insurance brokers and N.Y. Ins. Law § 2115 (McKinney Supp. 2003), in regard to property/casualty insurance agents contain similar provisions.
N.Y. Ins. Law § 2114(a)(4) (McKinney Supp. 2003) specifically excludes from the services specified therein referrals that do not include a discussion of specific insurance policy terms and conditions and where the compensation for referrals is not based on the purchase of insurance. Therefore, an insurance agent or broker may provide a non-licensee with compensation for referrals if the non-licensee does not discuss specific insurance policy terms and conditions with the prospective insured and the compensation is not based on the purchase of insurance by such person.1
However, it appears from the facts presented that the proposed activities are not limited to referrals since the non-licensee is soliciting prospective insureds and making appointments for the licensee. N.Y. Ins. Law § 2101(c) (McKinney 2000) defines the term "insurance broker" as follows:
(c) [A]ny person, firm, association or corporation who or which for any compensation, commission or other thing of value acts or aids in any manner in soliciting, negotiating or procuring the making of any insurance or annuity contract or in placing risks or taking out insurance on behalf of an insured other than himself or itself or on behalf of any licensed insurance broker . . . 2(emphasis added)
N.Y. Ins. Law § 2102(a)(1)(McKinney 2000) provides, in relevant part, as follows:
(a)(1) No person, firm, association or corporation shall act as an insurance agent, insurance broker, reinsurance intermediary or insurance adjuster in this state without having authority to do so by virtue of a license issued and in force pursuant to the provisions of this chapter.
The Department considers activities such as making appointments for a licensee to fall within the above provisions. Thus, the non-licensee must become licensed as an insurance agent or broker to be compensated for performing such activities.
For further information you may contact Senior Attorney Pascale Joasil at the New York City Office.
1 It should also be noted that this Department has opined that N.Y. Ins. Law §§ 2114, 2115 and 2116 (McKinney Supp. 2003) do not prohibit licensees from purchasing lists of customer names from non-licensees that will be used by the licensee for soliciting insurance, because the sale of the list does not constitute a referral or solicitation. Therefore, the compensation payable to non-licensees for providing such lists may be made contingent upon the successful placement of insurance by the licensee and may be a percentage of the insurance commission earned by the licensee. See Circular Letter No. 5 of 2001.
2 N.Y. Ins Law § 2101(c) (McKinney 2000) contains exceptions to this licensing requirement, none of which are applicable to this inquiry.