OGC Opinion No. 06-12-23

The Office of General Counsel issued the following opinion on December 29, 2006 representing the position of the New York State Insurance Department.

Re: Insurance as a Membership benefit

Question Presented:

Would it be considered a rebate for an insurance agency that is owned by a bank to provide quotes for auto or home insurance to customers of the bank that owns the insurance agency, if those customers would then receive a discount on bank service fees for bank products?


Yes. The insurance agency would violate N.Y. Ins. Law § 2324(a) (McKinney 2006), which prohibits rebating in connection with the sale of property/casualty insurance.


You work for a bank that owns an insurance company. The bank wishes to offer to its customers, quotes for auto or home insurance from an insurance agency that the bank owns. If a bank customer obtains such an insurance quote, the bank will provide bank discounts on bank service fees for bank products to such customer. The discount on bank fees would not be tied to the purchase of insurance from the bank owned insurance agency that provided the quote.


With respect to property/casualty insurance, N.Y. Ins. Law § 2324(a) (McKinney 2006) states in the 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, or 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, . . . pay or allow or offer to pay . . . 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 fifteen dollars in value which shall have conspicuously stamped or printed thereon the advertisement of the insurer, agent or broker, or shall give, sell or purchase, or offer to give, sell or purchase, as an inducement to the making of such insurance or in connection therewith, any stock, bond or other securities or any dividends or profits accrued thereon, . . . (Emphasis added.)

Section 2324 allows an insurance agent or broker subject to its provisions to distribute a "keepsake" item that does not exceed $15.00 in value. The article of merchandise that Section 2324(a) contemplated is a "keepsake" that does not exceed $15.00 in value, and is designed to conspicuously keep the name of the insurer or producer before the customer by embossing the insurer's or producer's name on the item. Section 2324(a) prohibits both direct and indirect inducements that are not specified in the insurance contract.

Even if no insurance is sold to those bank customers who receive an insurance quote, the resulting bank discounts on fees for bank products is valuable consideration, and it is not an article of merchandise within the meaning of the Insurance Law. The proposed discount is clearly not a "keepsake" within the plain language of the above cited section. Therefore, the proposed discount would be a rebate that would violate N.Y. Ins. Law § 2324(a) (McKinney 2006). N.Y. Ins. Law § 4224 (McKinney Supp. 2007) contains a similar prohibition with respect to life and accident and health insurance and annuities.

For further information one may contact Senior Attorney Susan Dess at the New York City Office.