The Office of General Counsel issued the following informal opinion on November 19, 2003, representing the position of the New York State Insurance Department.
Re: Referrals to Insurers
Question Presented:
May an employee of D&T Corporation ("D&T"), who is not a licensed insurance agent, give clients seeking to purchase life insurance a list of life insurers from which the client could review and choose an insurer?
Answer:
No. Although the Insurance Law permits an unlicensed individual to make a referral to a licensed insurance agent or broker, provided that there is no discussion of specific insurance policy terms and conditions, direct referrals to insurers are prohibited.
Facts:
D&T accounting consultants would like to establish a list of life insurance companies that they could offer to their clients who desire to purchase life insurance. The D&T employee is not a licensed agent and D&T is not an insurance company. D&T would be paid by the insurance company to be included on the list. D&T would not permit an insurer to appear on list prior to a D&T employee performing a due diligence on the insurer. Clients would be given the list and allowed to choose and contact the insurer that they want to purchase life insurance from.
Analysis:
N.Y. Ins. Law § 2114 (McKinney 2003) applies to life insurance referrals and commissions 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.
Pursuant to N.Y. Ins. Law § 2114, referrals by non-licensees to New York State licensed insurance agents or brokers for life insurance are permitted provided there is no discussion of specific insurance policy terms and conditions, and the compensation to the non-licensee for the referral is not based upon the purchase of insurance by the referred person. However, the express language of the statute does not allow referrals directly to insurers.
For further information, you may contact Special Counsel Athanasios Shinas at the Albany Office.