OGC Opinion No. 08-09-06
The Office of General Counsel issued the following opinion on September 22, 2008, representing the position of the New York State Insurance Department.
RE: Gifts From Producers
Questions Presented:
1. May an insurance agent or broker give a book –“Insurance for Dummies”– to insureds and prospective insureds if the retail price of the book is $21.99 but its wholesale price is less than $15?
2. May an agent or broker give the book to insureds or prospective insureds if the insurer purchases it?
3. Does the New York Insurance Law prohibit the book’s publisher from advertising the book to insurance agents and brokers as a prospecting tool?
Conclusions:
1. No. An insurance agent or broker may not give to insurance clients or prospective clients any inducement or valuable consideration not specified in the policy, except, with respect to property/casualty insurance, where the item is a “keepsake” with a retail price of less than $ 15.
2. Regardless of whether the insurer or the agent or broker purchases the book, if it is an inducement for valuable consideration not specified in the policy, then neither the insurer nor the agent nor the broker may distribute it to insureds or potential insureds.
3. Nothing in the Insurance Law prohibits a publisher from advertising the sale of the book to insurance agents or brokers as a prospecting tool.
Facts:
The inquirer asks about an advertisement in which a publisher advertises “Insurance for Dummies” as a prospecting tool. The advertisement states: “[s]taple your business card to this book, send it to a prospect, and watch how fast they become a client!” The inquirer reports that the retail price of the book is $21.99, and that the price to an insurance agent or broker purchasing in bulk may be lower than $15.
Analysis:
Because the inquiry does not reference whether the insurance in question is property/casualty insurance policies or life, accident and health insurance policies, this opinion addresses both scenarios.
Question 1:
a. Property/Casualty Insurance
Insurance Law § 2324(a) prohibits the offering of inducements in connection with the purchase of most kinds of insurance, including most property/casualty insurance. The express language of § 2324 precludes insurers, brokers, agents and their employees and representatives from directly or indirectly offering inducements or valuable consideration (other than an article of merchandise, or “keepsake”, not exceeding $15 in value), in connection with the offer of insurance, unless the inducement or valuable consideration is specified in the insurance policy. See Office of General Counsel (“OGC”) Opinion 07-07-10 (July 18, 2007). That statute reads in pertinent part as follows:
(a) 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, 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, by giving or sharing a commission or in any manner whatsoever, pay or allow or offer to pay or allow to the insured or any employee of the insured, 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 of inducement of any kind directly or indirectly, which is not specified in such policy or contract, other than any article or merchandise not exceeding fifteen dollars in value which shall have conspicuously stamped or printed thereon, the advertisement of the insurer, agent or broker. N.Y. Ins. Law § 2324(a) (McKinney 2006).
The “article of merchandise” that the statute contemplates is a “keepsake,” not exceeding $15 in retail value, designed to keep the name of the insurer or producer before the customer through the embossing, conspicuous printing or stamping of the insurer, producer, agent or broker’s name. OGC Opinion No. 02-05-17 (May 14, 2002); OGC Opinion 06-12-07 (December 8, 2006). Further, the relevant price of the articles of merchandise is the retail value to the person receiving the article of merchandise – not the cost to the licensee. See, e.g., OGC Opinion 04-02-07 (December 9, 2004).
“Insurance for Dummies” is not a “keepsake” within the meaning of the statute. The book’s retail value of $21.99 exceeds the $15 statutory limit. Also, stapling a business card to the cover of a book does not emboss, print or stamp the insurer or producer’s name. Accordingly, the book would be an unlawful inducement under Insurance Law § 2324.
b. Life, Accident and Health Insurance
Insurance Law § 4224(c) applies to life insurance, accident and health insurance, and annuity contracts. The statute prohibits, among other things, an insurer, insurance agent or insurance broker from offering an insured or potential insured an inducement or valuable consideration not specified in the insurance policy. See OGC Opinion 07-07-17 (July 23, 2007). Insurance Law § 4224(c) reads as follows:
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.
An insurer, or insurance agent or broker, or a representative thereof, with respect to life, annuities, and accident and health may not offer an inducement or valuable consideration of any kind that is not specified in the insurance policy. There is no indication that “Insurance for Dummies” is a specified inducement contained in the insurance policies. Further, in contrast to property/casualty insurance, there are no “keepsake” exceptions for life insurance, accident and health insurance or annuity contracts.
Question 2. Provided by Insurer, Distributed by Agent/Broker
As noted above, the plain meaning of the statutory text of § 2324 proscribes insurers, brokers, agents and their representatives from directly or indirectly offering inducements or valuable consideration not specified in the insurance policy. Thus, irrespective of whether the insurer or some other party purchases the book, if the book is not specified in the policy, and cannot be properly characterized as a keepsake (in the case of a property/casualty policy), then an insurer, insurance agent or insurance broker may not give the book to insureds and prospective insureds.
Question 3. Advertising by the Publisher
Nothing in the Insurance Law prohibits the publisher from advertising the sale of the book to insurance agents or brokers as a prospecting tool. It is the responsibility of agents and brokers to be cognizant of whether the law constrains their activities. The Department will not opine on whether such an advertisement may run afoul of any other law.
For further information you may contact Senior Attorney Brenda Gibbs at the Albany Office.