OGC Opinion No. 06-09-04

The Office of General Counsel issued the following opinion on September 6, 2006, representing the position of the New York State Insurance Department.

Re: Referrals

Question Presented:

May an insurance broker solicit business from automobile dealerships, by advertising a "special referral rewards program," whereby the insurance broker would compensate the dealership for referring clients to him, not contingent on the actual sale of the insurance?


The offer of a free gift and special referral rewards program to an automobile dealership, which is not contingent upon a sale of insurance but only upon a referral to the insurance producer, are permissible pursuant to N.Y. Ins. Law §§ 2115 and 2116, provided that there is no discussion of specific insurance policy terms and conditions.


Inquirer is a licensed insurance broker in New York who sells automobile insurance and would like to set up an advertising campaign to automobile dealerships so that they will recommend inquirer's company to purchasers of automobiles. Inquirer's advertisement would state "Free gift to the first 50 callers." Inquirer described the gift to be a small promotional item of up to $10 in value to be given to the dealerships, with the inquirer's agency's name and information on it. No purchase of insurance by any of the automobile dealership's customers is necessary for the dealership to receive this gift.

Inquirer also wants to advertise and create a referral rewards program whereby the inquirer will compensate automobile dealerships for giving purchasers of automobiles the inquirer's company's name and information. The dealership will not discuss coverage and will be paid for any referral whether or not it results in the purchase of insurance. Additionally inquirer plans on putting an expiration date of January 1, 2009 on this advertisement.


N.Y. Ins. Law § 2116 (McKinneys 2006) states:

No insurer authorized to do business in this state, and no officer or other representative thereof, shall pay any money or give any other thing of value to any person, firm, association for or because of his or its acting in this state as an insurance broker unless such person, firm, association or corporation is authorized so to act by virtue of a license issued or renewed pursuant to the provisions of section two thousand one hundred four of this article. For the purposes of this section "acting as an insurance broker" 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.1

Pursuant to the above statute, an insurance broker may compensate a dealership with a free gift and a referral rewards program as long as no person in the automobile dealership discusses any specific insurance policies or conditions with the person being referred or receive compensation dependent upon the sale of insurance. Please note that the above exception will expire on Sept 10, 2007 unless the Legislature extends it.

In conclusion an insurance broker may advertise a program offering a free gift and a compensatory reward for any dealership that refers an automobile purchaser to his/her insurance agency in accordance with N.Y. Ins. Law § 2116. However, if the gift and referral reward are contingent upon a sale of insurance or there is a discussion of terms and conditions by the unlicensed individuals, then the proposal would be prohibited by N.Y. Ins. Law § 2102, which states that:

No person, firm, association or corporation shall act as an insurance producer 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.

For further information you may contact Principal Attorney Paul A. Zuckerman at the New York City Office.

1 See N.Y. Ins. Law §§ 2114 and 2115 which contain similar provisions with respect to insurance agents.