The Office of General Counsel issued the following informal opinion on August 17, 2001, representing the position of the New York State Insurance Department.
Re: Insurance Consultant Definition and Annuities
Question Presented:
Is a consultants license required in order for a company that specializes in the review and analysis of financial plans prepared by other planners, to review and analyze a variable annuity or variable life policy owned by one of its clients?
Conclusion:
No. A consultants license is not required in order for a company that specializes in the review and analysis of financial plans prepared by other planners, to review and analyze a variable annuity or variable life policy owned by one of its clients
Facts:
A company was formed to provide financial planning and litigation support services to the public, the legal profession and financial planning firms. It does not produce financial plans but "simply (1) analyze[s] plans that have been prepared by other planners to let them know if the plans and any recommendations are appropriate given the clients indicated investment parameters and goals and (2) verif[ies] that the data and assumptions which were used in the planning process are historically accurate and reasonable." The consulting services help financial planning firms to set up compliance/quality assurance programs and perform compliance/ quality assurance audits of those firms.
In addition, the following was stated by the company:
The companys services are purely analytical and securities compliance oriented.
Neither the company nor its employees will ever sell any securities or insurance products.
The companys reviews will be based primarily on securities and financial planning related issues, especially consistency and suitability.
The companys reviews will not involve the review or analysis of terms of insurance policies or comparative analyses of insurance policies. The only way that insurance will be involved in its reviews will be if the clients current or proposed portfolio included a variable product such as a variable annuity or a variable life policy.
The company offers an asset allocation/portfolio optimization analysis which would include any variable subaccounts that the client has or is considering to purchase. It will use the information regarding the type of subaccount (i.e. growth, growth and income, aggressive growth) and the amount invested in the subaccount. The company will not be providing any analysis of the underlying insurance product.
The company reviews all data and assumptions used in generating the plans and recommendations to make certain they are accurate and reasonable given the current market conditions.
If the company determines that inconsistency and/or suitability issues exist, it will state its findings and advise the client.
All staff will either be attorneys or people with a securities compliance background.
The company seeks an opinion as to whether the services provided would be considered acting as an insurance consultant and therefore would require a consultants license.
Analysis:
N.Y. Ins. Law § 2102(b)(1) (McKinney 2000) prohibits a person, firm, association or corporation from identifying or holding himself or itself out as an insurance advisor, consultant or counselor in New York State without a proper license.
N.Y. Ins. Law § 2102(b)(3) (McKinney 2000) prohibits a person or firm from accepting compensation for examining, appraising, reviewing, evaluating, recommending or advising on an insurance policy in New York State unless licensed as an agent, broker or consultant.
Section 2102(b)(3) states:
Unless licensed as an insurance agent, insurance broker or insurance consultant with respect to the relevant kinds of insurance, no person, firm, association or corporation shall receive any money, fee, commission or thing of value for examining, appraising, reviewing or evaluating any insurance policy, annuity or pension contract, plan or program or shall make recommendations or give advice with regard to any of the above.
The company stated that it will "not be providing any analysis of the underlying insurance product," and that its "reviews will not involve the review or analysis of terms of insurance policies or comparative analyses of insurance policies." Accordingly, because the company would be reviewing or analyzing the information regarding the type and the amount of the subaccount and not reviewing or analyzing the specific insurance product that is owned or planning to be owned by the client, the company would not be "examining, appraising, reviewing or evaluating any insurance policy, annuity or pension contract, plan or program" or making recommendations or giving advice with regard to any of the above. Therefore, the company would not need to be licensed as an insurance agent, insurance broker, or insurance consultant pursuant to N.Y. Ins. Law § 2102(b)(3) (McKinney 2000).
For further information, you may contact Senior Attorney Meredith S. Kaufer at the New York City Office.