The Office of General Counsel issued the following opinion on June 27, 2003, representing the position of the New York State Insurance Department.

Re: Record Retention Requirements for Agents & Brokers

Question Presented:

Pursuant to the facts presented, under the Insurance Law and Insurance Department Regulations promulgated thereunder, must the licensed insurance agents and the licensed insurance broker (1) specifically retain customer records for policies that are "lapsed," "declined" or "not taken out" and (2) generally retain any records?

Conclusion:

There is no general prescription for record retention by insurance agents and brokers under the New York State Insurance Law or Insurance Department Regulations promulgated thereunder that are specific to such agents and brokers other than N.Y. Ins. Law § 2119(a) & (c) (McKinney 2000) (copy enclosed) and N.Y. Comp. Codes R. & Regs. tit. 11, § 20.4(b) & (c) (1991) (Regulation 29) (copy enclosed), that provide record retention requirements for customer records of insurance agents and insurance brokers. However, to the extent such agents and brokers are maintaining records on an insurer's behalf, they are subject to the record retention requirements applicable to insurance companies in New York State. N.Y. Comp. Codes R. & Regs. tit. 11, Part 243 (1996) (Regulation 152) (copy enclosed) addresses the required minimum time for retention of customer records by authorized insurers, and certain other entities including Public Health Law Article 44 Health Maintenance Organizations.

Facts:

ABC Inc. is licensed as an insurance agent for life insurance, accident & health insurance, and variable annuities. XYZ Agency is licensed as an insurance agent for life insurance, accident & health insurance, and variable annuities. The insurance agents are active in New York State. XYZ Agency is also licensed as an insurance broker for any and every kind of insurance except life insurance and annuities. The insurance broker has not been active in New York State. Nonetheless, information is sought with regard to record retention requirements for the insurance broker if it were to become active in New York State.

No insurer and insured require that the insurance agents retain customer records related to marketing of insurance. The requirements for record retention by the insurance broker, should it become active, are assumed to be the same as well.

Compensation to the insurance agents is solely by commission from insurers. Thus, the insurance agents do not receive consulting fees and service fees from insureds. The same is also assumed to be true concerning compensation to the insurance broker should it become active.

The insurance agents do not have a premium account because there is immediate remittance of funds to insurers and insureds for such funds received by the insurance agents in their fiduciary capacity. The same is also assumed to be true concerning the absence of a premium account by the insurance broker should it become active.

Analysis:

Record retention requirements for authorized insurers, and certain other entities including Public Health Law Article 44 Health Maintenance Organizations, are contained in N.Y. Comp. Codes R. & Regs. tit. 11, Part 243 (1996) (Regulation 152), which is entitled "Standards of Records Retention by Insurance Companies". Section 243.2(d) of Regulation 152 states:

Under the facts presented the insurance agents and the insurance broker are not required by the insurer to maintain a policy record on the insurer's behalf.

The remainder of this letter concerns whether the insurance agents have and the insurance broker would have any general record retention requirements under the Insurance Law and Insurance Department Regulations promulgated thereunder.

N.Y. Ins. Law § 2119(a) (McKinney 2000) requires that an insurance agent or broker consulting for a fee, that does not include procurement of the insurance policy, retain a copy of the memorandum therein described signed by the party to be charged and specifying or clearly defining the amount or extent of such compensation, for not less than three years after such services have been fully performed. N.Y. Ins. Law § 2119(c) (McKinney 2000) requires that an insurance broker charging a fee for services therein described, that include procurement of the insurance policy, retain a copy of the memorandum therein described signed by the party to be charged and specifying or clearly defining the amount or extent of such compensation, for not less than three years after such services have been fully performed.¹ However, since under the facts presented the insurance agents receive only commissions from insurers as compensation, and the same is assumed to be true for the insurance broker if it were to become active, these provisions do not appear to be applicable.

N.Y. Comp. Codes R. & Regs. tit. 11, § 20.4(b) & (c) (1991) (Regulation 29) sets forth requirements for insurance agents and brokers who maintain a premium account to maintain books, records, and accounts in connection with their business. Section 20.4(c)(2) of Regulation 29 states: "Where this section requires a record to be kept by a licensee, it shall be preserved for at least the three-year period preceding the most recent fiscal year-end of the licensee." However, under the facts presented the insurance agents make immediate remittance of funds to insurers and insureds for such funds received in their fiduciary capacity, and the same is assumed to be true concerning the insurance broker if it were to become active. Pursuant to Section 20.3(b)(2) of Regulation 29: "An agent or broker who makes immediate remittance to insurers and assureds of such funds need not maintain a premium account for such funds." Thus, the insurance agents do not maintain a premium account and the insurance broker would not maintain a premium account, and therefore, under the facts presented Regulation 29 does not require record retention by the insurance agents and the insurance broker.

For further information you may contact Senior Attorney Robert Freedman at the New York City Office.

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¹

An insurance agent may not charge such a service fee.