OGC Opinion No. 06-03-02
The Office of General Counsel issued the following opinion on March 2, 2006, representing the position of the New York State Insurance Department.
Re: Employee Benefit Statements
Question Presented:
In connection with the sale of group health and/or life insurance policies to an employer, may a broker or agent provide at no extra cost to the covered employees an employee benefits statement?
Conclusion:
No, such a service, provided free of charge, would constitute an improper rebate in violation of N.Y. Ins. Law § 4224(c) (McKinney Supp. 2006).
Facts:
The inquirer represents an insurance agent or broker who is offering group health and or life insurance policies to employers. The inquirer would like to know whether the agent or broker can provide an employee benefits statement to the covered employees at no charge. An employee benefits statement will list all benefits provided to the employee by the employer, including salary, vacation, sick time, etc.
Analysis:
The following section of Insurance Law is relevant to this issue. N.Y. Ins. Law § 4224(c) (McKinney's Supp. 2006) states:
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.
Pursuant to N.Y. Ins. Law § 4224(c) (McKinney's Supp. 2006), neither an insurance company, its authorized agent or a broker may provide ". . . as an inducement to any person . . . any valuable consideration or inducement whatever not specified in such policy or contract; . . . " in connection with the sale of health and/or life insurance. Therefore, neither an insurance company, its authorized agent or a broker selling health and/or life insurance may personally, or through a third party, provide any administrative services beyond those that are normally provided by an insurance company, its authorized agent or a broker, which are not specified in the contract, to an insured because the services would constitute valuable consideration and would be an unlawful inducement in violation of N.Y. Ins. Law § 4224(c) (McKinney Supp. 2006).
However, an insurance broker may do so for a separate fee obtained in accordance with Section 2119 of the Insurance Law. It is not controlling whether these services are performed directly by the licensee or contracted out to a third party.
For further information you may contact Principal Attorney Paul Zuckerman at the New York City Office.