The Office of General Counsel issued the following informal opinion on October 2, 2002, representing the position of the New York State Insurance Department.
Re: Use of Credit Cards to Pay Insurance Premiums
Question Presented:
If an insurer accepts credit cards as a method of payment for premiums, must all credit cards be accepted?
Conclusion:
No. An insurer is free to choose which credit cards it is willing to accept.
Facts:
No facts were presented. The inquiry is general in nature.
Analysis:
The Department has long held that insurance premiums may be paid by credit card. Credit card transactions must be treated in the same manner as checking transactions and must be dealt with by the insurance agent or insurance broker that receives such payment in accordance with the fiduciary responsibility and premium account provisions contained in N.Y. Ins. Law § 2120 (McKinney 2000) and N.Y. Comp. Codes R. & Regs. tit. 11, § 20.3 (1996).
The Department has historically held that the method of premium payment is a benefit under the insurance policy. Articles 23 and 42 of the Insurance law prohibit rate and benefit discrimination. Therefore, when an insurer or agent agrees to accept payment by credit card, it cannot accept it from some insureds but not from others when all parties are within the same general class. Thus, it would not be acceptable for an insurer or agent to accept payment by credit card for new policies but not for renewals or to accept credit cards for the cash down payment on financed policies but not for the payment of premium on non-financed policies. The company could, however, limit credit card use to the payment of only a certain percentage of premium, provided that the percentage is the same for all members of the same general class.
Although the use of a credit card as a method of payment is a benefit under the insurance policy and must be applied equally to all parties within the same general class, it is the insurers decision which credit card program or programs it chooses to participate in. However, once that determination is made, payment with that credit card must be accepted in accordance with the above.
For further information you may contact Supervising Attorney Joan Siegel at the New York City Office.